– निश्चल ढुङ्गेल

यो लेख १७ मार्च २०२३ को नयाँ पत्रिकामा प्रकाशित भएको थियो। मूल लेख यहाँ पढ्नुहोस्

बदलिँदो आर्थिक र राजनीतिक परिस्थितिका कारण आधुनिक विश्वव्यापीकरण इकोसिस्टम प्रणालीले सार्वजनिक ऋण बढाएको छ । सरकारले स्वदेशी वा विदेशबाट ऋण लिने अवस्थालाई सार्वजनिक ऋण भनिन्छ । आर्थिक जटिलता र महामारीका कारण हालै सरकारी खर्च राजस्व आर्जन गर्ने क्षमताभन्दा छिटो बढेको छ । ब्याजदर वृद्धि हुँदै गर्दा बढ्दो ऋणले विकासोन्मुख राष्ट्रको सरकारी बजेटलाई असर गर्छ, जसले गर्दा यस्ता अर्थतन्त्रमा लगानी गर्नुपर्छ ।

आर्थिक र राजनीतिक परिस्थिति सन्तुलन र सार्वजनिक ऋण व्यवस्थापन एकसाथ जान्छ । मुख्य ऋणदाताबीच सहमति हुन नसक्दा श्रीलंका आर्थिक र सामाजिक कठिनाइबाट गुज्रिरहेको छ । तसर्थ, श्रीलंका भूराजनीतिक विचारको चपेटामा पर्दा सार्वभौम ऋण पुनर्संरचना हुन सकेको छैन ।

श्रीलंकाको सार्वजनिक ऋण कुल गार्हस्थ्य उत्पादन (जिडिपी) अनुपात २०१८–२१ बीच ९१ बाट ११९ प्रतिशत बढेको थियो । यस्तै, सार्वजनिक ऋण जिडिपी अनुपात २०२२ मा १२२ प्रतिशत थियो । यसमध्ये जिडिपीको ७० प्रतिशत विदेशी मुद्रामा निहित छ ।

श्रीलंकाको संकट बाह्य आर्थिक झट्का र नीतिगत गलत कदमको संयोजनले भएको हो । उसले लिएको सार्वजनिक ऋण न्यून प्रतिफलका पूर्वाधार आयोजनामा लगानी गर्दा सदुपयोग हुन सकेन । सार्वजनिक ऋण सन्तुलनमा नराख्दा, थप ऋण व्यवस्थापन गर्न देश कसरी भूराजनीतिक विचारको जटिलतामा फस्न सक्छ भन्ने ज्वलन्त उदाहरण श्रीलंका हो । नेपाल र श्रीलंकाको सार्वजनिक ऋणको अवस्था फरक भए पनि नेपालले केही पाठ भने सिक्न जरुरी छ ।

नेपालले सन् १९५१ मा बजेट ल्याउन थालेको थियो र बजेट अभ्यास सुरु भएको ११ वर्षपछि ऋण लिन थालेको थियो । हाम्रो सार्वजनिक ऋणको इतिहास धेरै पुरानो छैन । सरकारले सन् १९६२ मा स्वदेशी ऋण लिन थालेको थियो भने वैदेशिक ऋण सन् १९६३ मा मात्रै स्वीकृत भएको थियो । भूकम्पपछि संघीय सरकारमा परिणत भएपछि नेपालको सार्वजनिक ऋण विगत केही वर्षदेखि बढेर आर्थिक वर्ष सन् २०१९–२० मा कुल जिडिपीको ४२.२ प्रतिशत पुगेको छ ।

 आव २०१६–१७ मा सार्वजनिक ऋण जिडिपीको २५ प्रतिशत थियो भने २०१९–२० मा भएको उल्लेखनीय सार्वजनिक ऋण वृद्धिका लागि कोभिड महामारीको प्रभाव र प्रतिक्रिया जिम्मेवार छन् । आव २०२०–२१ मा नेपालको ऋण जिडिपी अनुपात ३९ प्रतिशत छ ।

नेपालले बहुपक्षीय संस्था र विदेशी मुलुकबाट सहुलियतपूर्ण विदेशी सहायता (अनुदान वा लामो चुक्ता अवधिको २ प्रतिशतभन्दा कम ऋण) मा पहुँच भएका कारण नेपालले उच्च ब्याजदरमा ठूला व्यावसायिक वैदेशिक ऋण लिने आवश्यकता कम छ । विश्व बैंकका अनुसार नेपालको ऋण संकट जोखिम बाह्य र कुल ऋण दुवैमा न्यून छ । अन्तर्राष्ट्रिय विकास सहयोग नीति (२०१९) ले नेपाललाई वैदेशिक व्यावसायिक ऋण लिन अनुमति दिएको भए पनि नेपालले यो अवसरलाई सदुपयोग गर्न सकेको छैन । नेपालले उच्च ब्याजदरमा ठूला व्यावसायिक वैदेशिक ऋण लिँदा होसियार हुनुपर्छ । 

उच्च ब्याजको व्यावसायिक ऋणले प्रभावकारी प्रतिफल दिन्छ कि दिँदैन भन्ने विश्लेषण गर्नुपर्छ । ताराप्रसाद उपाध्याय र टोनिक पुनले सन् १९७८–२०२० सम्मको तथ्यांक प्रयोग गरी गरेको नेपालको आर्थिक वृद्धिमा सार्वजनिक ऋण प्रभावको अध्ययनले नेपालको सार्वजनिक ऋणको स्तर र देशको आर्थिक विस्तारबीच कुनै स्पष्ट सम्बन्ध नभएको संकेत गर्छ । राजस्वका सीमित स्रोतका कारण सरकारी राजस्वभन्दा सरकारी खर्च द्रुत गतिमा बढेको छ । 

सरकारले मुख्यतया कमजोर क्षेत्रका लागि ऋण लिएको छ । राजस्व अभावले अघिल्लो ऋण तिर्न र अर्काे ऋण लिन बाध्य पारेको छ । हालको पुँजी ऋणको केही रकम सेयर बजार र जग्गामा छ । अपर्याप्त आन्तरिक स्रोत परिचालन, अत्यधिक वित्तीय घाटा, निर्यात–आयातको असन्तुलन र राजस्व र खर्चको अन्तरका कारण वैदेशिक ऋण झनै बढेको छ । तसर्थ, केही लेखकले दिगो आर्थिक वृद्धि र लगानीलाई हतोत्साहित गर्नुको सट्टा प्रोत्साहन गर्ने सम्भावना रहेसम्म घाटा वित्तपोषणलाई ध्यानमा राख्नुहुँदैन भनी तर्क गर्छन् । यसबाहेक, ऋण चुक्ता गर्ने क्षमतामा कुनै सुधार हुन सकेको छैन, अझै बाँकी रहेको सार्वजनिक ऋणको कुल रकम र ब्याजमा वृद्धि भएको छ ।

विदेशी मुद्रा सञ्चितिको आधारमा देशको ऋण अवस्थाको विश्लेषण गर्नु पनि महत्वपूर्ण छ । अमेरिकी डलरको तुलनामा नेपाली रुपैयाँ कमजोर हुँदा स्थानीय मुद्रामा नेपालको ऋण दायित्व बढेको छ । विदेशी मुद्रा सञ्चिति घट्दै गएको र विदेशी ऋणदाताबाट सरकारी उधारो बढिरहेका वेला विदेशी मुद्रा ऋण भुुक्तानी अझ चुनौतीपूर्ण हुन सक्छ ।

नेपालको प्रत्यक्ष वैदेशिक लगानी (एफडिआई) जिडिपीको ०.५ प्रतिशत दक्षिण एसियामा सबैभन्दा कम हो । एफडिआई थ्रेसहोल्ड एनपिआर दुई करोडमा घटाउँदा एफडिआईको प्रवाहमा थप कमी आउँछ । थप पुँजी प्रवाह प्रतिबन्धले जिडिपीमा नकारात्मक प्रभाव पार्न सक्छ, तर एफडिआईले राष्ट्रको ऋण नबढाउने र विदेशी मुद्रा सञ्चितिमा तनाव कम गर्ने अतिरिक्त लाभ प्रदान गर्दछ । 

सरकारले लामो समयदेखि ढिलाइ भएको एफडिआईमा सुधार ल्याउनुपर्छ । जस्तै, नियामक स्वीकृति प्रक्रियालाई सरल बनाउने, जसले विदेशी मुद्रा प्रवाह निम्त्याउने र विकासलाई बढावा दिन पुँजी र प्रविधिको स्थानान्तरणलाई प्रोत्साहित गर्ने । सरकारले अहिले मुलुकको विदेशी मुद्रा सञ्चिति बढाउन विभिन्न प्रयास गरिरहेको छ ।

बढ्दो ऋण रोक्न नयाँ पारित सार्वजनिक ऋण व्यवस्थापन ऐनले जिडिपीको एकतिहाइमा बाह्य ऋणको सीमा तोकेको छ । यो उपाय सरकारलाई लापरबाहीपूर्वक ऋण लिनबाट रोक्न र भविष्यमा थप पैसा उधारो गर्न समय तालिकामा ऋण तिर्न उत्प्रेरित गर्नका लागि हो । नेपालले विदेशी मुद्रा सञ्चिति घट्न नदिन विलासिताका सामानको आयातमा प्रतिबन्ध लगाउने विभिन्न उपाय पनि ल्यायो र विदेशी मुद्रा सञ्चिति बढेपछि प्रतिबन्ध हटायो । यी अन्तर्निहित विशेषताले हालको विश्वव्यापी उथलपुथलको बढ्दो मूल्य, रेमिट्यान्समा प्रभाव र फराकिलो व्यापार असन्तुलनप्रति नेपालले कस्तो प्रतिक्रिया देखाउँछ भन्ने कुरालाई निरन्तरता दिनेछ ।

आव ०७९/८० माघ मसान्तको पहिलो ६ महिनाको राजस्व संकलन गत वर्षको तुलनामा १५ प्रतिशतले घटेको छ । प्रक्षेपणअनुसार राजस्व उठाउन नसक्दा अर्थ मन्त्रालयले संघीय सरकारको बजेट २० प्रतिशतले घटाएको छ ।पारिश्रमिक, निवृत्तिभरण, सामाजिक सुरक्षा र रासायनिक मल र विपद् व्यवस्थापनमा दिइने अनुदानको बढ्दो दायित्वले सरकारको चालू खर्चमा बाधा पुगेको छ । स्वदेशी तथा अन्तर्राष्ट्रिय ऋणको ब्याज सरकारले तिर्नुपर्छ । अमेरिकी डलरको तुलनामा नेपाली रुपैयाँको अवमूल्यनले वैदेशिक ऋण तिर्न महँगो साबित हुनेछ ।

चालू आर्थिक वर्षको बजेटमार्फत ८ प्रतिशत आर्थिक वृद्धि हासिल गर्ने लक्ष्य लिएको सरकारले ४.५ प्रतिशत मात्रै पुग्ने बताएको छ । चालू आवमा लिएको महत्वाकांक्षी लक्ष्य पूरा नहुने देखिएको छ । बाह्य क्षेत्रको दबाब र आर्थिक चुनौतीलाई बेवास्ता गरी निर्धारण गरिएका यस्ता लक्ष्यले सरकारलाई संसद्प्रति वित्तीय जवाफदेही बनाउँदैन । सरकारले विगत सात महिनामा सिद्धान्तविपरीत थप रकम परिचालन गरेको छ । अर्थ मन्त्रालयको विज्ञप्तिअनुसार मंसिरमा भएको संघीय र प्रदेशको निर्वाचनलाई लक्षित गरी असोजमा रकम वितरण गरिएको उल्लेख छ । 

अर्थ मन्त्रालयले जारी गरेको विवरणअनुसार पछिल्लो सात महिनामा ८५ अर्ब ६० करोडभन्दा बढी बजेट सिद्धान्तविपरीत परिचालन भएको छ । बजेट जनप्रतिनिधिमूलक सर्वाेच्च संस्था संसद्बाट पारित गरिन्छ । सरकारले गर्ने आय–व्ययको हरहिसाब संसद्ले अनुमोदन गरेपछि मात्रै निर्धारण हुन्छ । देश विकासको नारा लगाउँदै सरकारमा बस्ने राजनीतिक नेतृत्वले चुनावमा मतदाता रिझाउने गरी पैसा बाँड्न ढुकुटी दोहन गर्नु कत्तिको जायज छ ?

नेपालका राज्य संस्थामा ‘चेक एन्ड ब्यालेन्स’ समस्या भइरहेका छन् । सुशासनका लागि उत्कृष्ट नेतृत्वको अलावा पारदर्शिता, जवाफदेहिता, चेक एन्ड ब्यालेन्स आवश्यक छ । सरकारले ०२३ मा कर छली रोक्न र आफ्नो राजस्वको आधारलाई फराकिलो बनाउन, सार्वजनिक उधारोका लागि देशको आवश्यकता बढाउन संघर्ष गर्नेछ । नयाँ सरकार आएसँगै वित्तीय र मौद्रिक नीतिलाई ‘सिंक्रोनाइज’ गर्दै उत्पादनशील क्षेत्रमा लगानी बढाउन तरलता अभावलाई कम गर्नुपर्छ । 

संरचनात्मक अवरोध सम्बोधन

पूर्वउपलब्धिको निर्माण र संरचनात्मक अवरोधलाई सम्बोधन गर्नाले विकासलाई गति दिन, निजी लगानी आकर्षित गर्न, उत्पादकत्व बढाउन र अल्पविकसित देशको स्थितिबाट सफलतापूर्वक उत्तीर्ण हुन र सन् २०२६ सम्म निम्नमध्यम आयको स्थिति हासिल गर्न जलवायु अनुकूलता विकास गर्न मद्दत गर्नेछ । आर्थिक वृद्धिका लागि नेपालको योजना र कसरी व्यापार, पूर्वाधार, विनिमय दर र अन्य आर्थिक नीतिले आर्थिक विकासमा सहयोग पु‍¥याउँछ भन्ने अझै स्पष्ट छैन ।

व्यापार र प्रत्यक्ष वैदेशिक लगानीलाई प्रोत्साहन गर्ने वातावरण, वित्तीय क्षेत्रको वृद्धि, मानव पुँजी निर्माण र सुशासन अभिवृद्धि गरी विकासको सम्भावना बढाउनुपर्छ । राष्ट्रले ऋण लिएको रकम उत्पादनशील क्षेत्रमा उपयोग गरी सरकारको ऋण न्यूनीकरणमा सहयोग गर्ने कार्यक्रम बनाउनुपर्छ । नेपालले सन् २०२६ मा एलडिसी समूहबाट बाहिरिने योजना बनाएकाले ऋण चुक्ता गर्न उच्च दक्षता स्तर भएका उत्पादक क्षेत्रमा लगानी गरेर दिगो अर्थतन्त्र निर्माण गर्न ऋण लिएको रकमको लामो समयमा चुक्ता गर्ने अवधिसहित कम ब्याजदरको फाइदा उठाउनु महत्वपूर्ण हुन्छ ।

– निश्चल ढुङ्गेल

यो लेख १६ फेब्रुअरी २०२३ मा प्रकाशित भएको थियो। मूल लेख यहाँ पढ्नुहोस्

जलवायु परिवर्तनमा नवीकरणीय ऊर्जाले गति लिइरहँदा विश्वको ध्यान नवीकरणीय ऊर्जा स्रोतलाई दोब्बर बनाउनेतर्फ केन्द्रित छ । सन् १९६५ मा ९४१ टेरावाट घन्टाबाट सन् २०२१ मा ७,९३१ टेरावाट घन्टामा नवीकरणीय स्रोतको उत्पादनमा उल्लेखनीय वृद्धि भयो । यस सन्दर्भमा धेरै नदी र खोला भएको नेपाल दक्षिण एसियाका लागि ऊर्जा सुरक्षाको आधारशिला बन्न सक्छ । देशको अप्रयुक्त जलविद्युत्ले भविष्यको ऊर्जा आपूर्तिमा महत्वपूर्ण भूमिका खेल्न सक्छ । साथै, भारत र बंगलादेशको कार्बन फुटप्रिन्टलाई पनि कम गर्न सक्छ ।

ऊर्जा विकासको मार्गचित्र कार्यान्वयन गर्न नेपालले ऊर्जा तथा जलस्रोत दशक (२०१८–२८) घोषणा गरेको छ । नेपाल अहिले विद्युत् उत्पादनमा आत्मनिर्भर छ । सन् २०१३ मा ४,२५८ गिगावाटबाट ०२२ मा ११,०६४ गिगावाट उत्पादनका साथ उल्लेखनीय वृद्धि भएको छ । अरुण चौथो (क्षमता ४९०.२ मेगावाट), पश्चिम सेती (७५० मेगावाट), अरुण तेस्रो (९०० मेगावाट) र तल्लो अरुण (७६९ मेगावाट) प्रमुख जलविद्युत् आयोजना हुन्, जसले सन् २०३० देखि०३५ सम्म वितरण सुरु गर्नेछन् । ऊर्जा उत्पादन र निर्यातमा वृद्धि र ऊर्जा आयात घटेको छ । हामीले यो अतिरिक्त ऊर्जा कहाँ प्रयोग गर्ने ?

आदर्श जवाफ यो परम्परागत वा गैरनवीकरणीय ऊर्जा प्रतिस्थापन गर्न प्रयोग हुनेछ । भारतले दक्षिण एसियामा व्यापार विस्तार गर्ने लक्ष्य राखेको इन्डियन इनर्जी एक्सचेन्जमा सहभागी हुने नेपाल दक्षिण एसियाकै पहिलो देश बनेको छ । आज देशको कुल आयातको १४.१ प्रतिशत पेट्रोलियम पदार्थको हुन्छ । यसलाई विद्युत्ले सजिलै प्रतिस्थापन गर्न सकिन्छ । नेपालको जलविद्युत्ले दक्षिण एसियाको एकतिहाइ भागलाई गैरनवीकरणीयबाट नवीकरणीय ऊर्जा उपभोगमा परिणत गर्न सक्छ । यसो गर्दा सन् ०४० सम्म विश्वभर हुने कुल हरितगृह ग्यास उत्सर्जनको झन्डै ३.५ प्रतिशत घट्नेछ ।

नयाँ विद्युत् ऐन कहिले पारित होला ? :  डेढ दशक बितिसक्दा पनि नेपाल सरकारले नयाँ विद्युत् ऐन ल्याउन सकेको छैन । कानुन निर्माणमा भएको ढिलासुस्तीले देशको ऊर्जा क्षेत्रको अपेक्षित विकासमा बाधा पु¥याएको छ । अहिले विद्युत् ऐन–१९९२ संशोधन गर्ने विधेयक राष्ट्रिय सभाको कार्यक्षेत्रमा छ । विद्युत् ऐन–१९९२ लाई संशोधन गर्ने विधेयकमा विद्यमान विद्युत् ऐनलाई परिमार्जन र एकीकृत गर्ने परिकल्पना गरिएको छ ।

निजी क्षेत्रलाई देशभित्र र बाहिर विद्युत्को व्यापार गर्न लाइसेन्स दिने प्रावधान राखेको छ । तर, विधेयक संसद्मा टुंगो लाग्न सकेको छैन । सम्बन्धित ऐन नहुँदा नेपाल विद्युत् प्राधिकरणले नयाँ विद्युत् खरिद सम्झौता गर्न नसकेको, निजी क्षेत्रले विद्युत् व्यापारको स्वीकृति लिन नसकेको र मुलुकले विद्युत् बजार विस्तार गर्न दुवै पक्ष असफल भएको छ । देशको ऊर्जा क्षेत्रमा रहेका विद्यमान समस्या समाधानका लागि नयाँ सरकारले प्रभावकारी भूमिका खेल्न अपरिहार्य छ ।

हाइड्रोजन ऊर्जाको उत्कृष्ट उपयोग :  नेपालले जलविद्युत् र हाइड्रोजन ऊर्जाको उपयोग गर्नतिर ध्यान दिनुपर्छ, जुन ऊर्जा व्यापारमा तुलनात्मक लाभ छ । हरित हाइड्रोजन पानीलाई हाइड्रोजन र अक्सिजनमा विभाजन गरी नवीकरणीय ऊर्जा र इलेक्ट्रोलाइजर भनिने प्रविधि प्रयोग गरेर उत्पादन गरिन्छ । जलविद्युत्को रूपमा नवीकरणीय ऊर्जाको प्रचुर मात्रामा भएकाले नेपाल हाइड्रोजन उत्पादनका लागि अनुकूल अवस्थामा छ ।

सार्वजनिक र निजी निकायबाट प्राप्त प्रतिवेदनअनुसार नेपालमा सन् २०३० सम्म कम्तीमा १० हजार मेगावाट जलविद्युत्को माग  हुनेछ । ०४० सम्म कुल क्षमता ३९ हजार मेगावाट हुने अपेक्षा गरिएको छ । यसरी, अतिरिक्त जलविद्युत्लाई प्रतिस्पर्धी मूल्यमा हरित हाइड्रोजन उत्पादन गर्नका लागि च्यानल गर्न सकिन्छ । ०५० सम्ममा हरित हाइड्रोजन उत्पादनको लागत प्रतिकिलोग्राम एक डलरभन्दा कम हुने अनुमान गरिएको छ ।

अतिरिक्त स्रोतको उपयोग गर्नुका साथै हरित हाइड्रोजनलाई इन्धनको प्राथमिक स्रोतको रूपमा प्रयोग गर्दा नेपालले आफ्नो आर्थिक विकासको कथालाई परिवर्तन गर्न अनुमति दिनेछ । किनकि, हरित हाइड्रोजनको व्यावसायिक प्रयोगले रासायनिक उद्योग, यातायात, ऊर्जा–सघन उद्योगहरू (फलाम र स्टिल) का साथै आवासीयजस्ता विभिन्न क्षेत्रलाई समेट्छ । यद्यपि, सम्बन्धित क्षेत्रमा हरित हाइड्रोजन ल्याउनुअघि पूर्वाधार र प्राविधिक बाधालाई ध्यान दिनु आवश्यक छ । युरियालगायत अमोनियममा आधारित मल उत्पादन गर्न रासायनिक उद्योगमा हरियो हाइड्रोजन प्रयोग गर्न सकिन्छ ।

आपूर्तिभन्दा तीन गुणा माग बढेसँगै नेपालमा रासायनिक मलको अभाव दीर्घकालीन समस्या बनेकाले आगामी दिनमा हरियो हाइड्रोजनको व्युत्पन्न रूपमा रासायनिक मल उत्पादनमा केन्द्रित हुनुपर्छ । उदाहरणका लागि तीन हजार मेगावाटको अतिरिक्त जलविद्युत्बाट करिब २१ लाख ५० हजार टन हरियो युरिया उत्पादन गर्न सकिन्छ ।

नेपालले आर्थिक वर्ष २०२१–२२ मा एक लाख ८० हजार टन अमोनियममा आधारित रासायनिक मल आयात गरेको थियो, जसमा ६० प्रतिशत युरिया हो । तसर्थ, रासायनिक उद्योगमा हरियो हाइड्रोजनको तत्काल प्रयोगले रासायनिक मलको बहुप्रतीक्षित स्वदेशी उत्पादनको थालनी गर्नेछ । साथै, नेपाल सरकारमाथिको वित्तीय भार पनि घटाउनेछ । सन् २०२१ मा सरकारले मल अनुदान कार्यक्रमका लागि १५ अर्ब रुपैयाँ विनियोजन गरेको थियो ।

हरियो हाइड्रोजनको आवासीय प्रयोग, विशेषगरी तताउन र खाना पकाउन दीर्घकालीन सम्भावना छ । आवश्यक टेक्नोलोजी अझै प्रारम्भिक चरणमा छ । हाइड्रोजनलाई घरेलु प्रयोगार्थ सम्भावित इन्धनका रूपमा परीक्षण गर्ने परियोजना विश्वव्यापी रूपमा सञ्चालनमा छन् । नेपालले पनि विश्वव्यापी प्राविधिक विकासका आधारमा घरेलु प्रयोगका लागि इन्धनको स्रोतको रूपमा हरित हाइड्रोजन प्रयोग गर्न सक्छ । प्राविधिक अवरोधबाहेक, हालको पूर्वाधार, आवासीय भवनहरू जस्तै, हाइड्रोजन अत्यधिक ज्वलनशील इन्धन भएकाले सुरक्षा चिन्ताको कारणले हाइड्रोजन प्रयोगलाई समर्थन गरिँदैन ।

जलवायु वित्त :  जलवायु परिवर्तनका प्राथमिकता र रणनीति सरकारी योजना र बजेट प्रक्रियामा समावेश भए पनि प्रत्यक्ष सरकारी लगानी निकै कम छ । कानुनी र व्यावहारिक अवरोधले प्रत्यक्ष वैदेशिक लगानी, निजी क्षेत्रको लगानी र द्विपक्षीय एवं बहुपक्षीय सहयोगमा असर पार्छ । 

आर्थिक वर्ष २०२०–२१ को मार्चसम्म ऊर्जासँग सम्बन्धित उद्योगले ५९.७ प्रतिशत लगानी प्रतिबद्धता पाए पनि वास्तविक लगानी ३५ प्रतिशत मात्रै आएको छ । जीवन्त ऊर्जा क्षेत्रमा थप विदेशी लगानी भित्र्याउन कानुनी अवरोधहरू खुकुलो पार्दै अनुकूल वातावरण सिर्जना गर्न आवश्यक छ ।

जलवायु उद्देश्य पूरा गर्न वित्तीय आवश्यकता ठूलो छ । हाल प्राथमिक जलवायु कोष सरकार, बहुपक्षीय कोष एजेन्सी र साना निजी क्षेत्रको योगदानबाट आउँछ । जलवायु बजेट २०१७–०१८ मा ३.७५ बिलियन डलरबाट २०२१–०२२ मा ४.६६ बिलियन पुगेको छ । सन् २०१० देखि नेपालले जलवायु परिवर्तनसम्बन्धी संयुक्त राष्ट्र फ्रेमवर्क कन्भेन्सनबाट मात्रै अन्तर्राष्ट्रिय जलवायु कोषमा  ३० करोड डलरभन्दा बढी प्राप्त गरेको छ ।

पछिल्लो तथ्यांकअनुसार सन् २०१५–०२० को बीचमा नेपालले अन्तर्राष्ट्रिय विकास बैंकबाट जलवायु वित्तमा २.५९ अर्ब डलर प्राप्त गरेको छ, जसमा सन् २०२० मा १.२ अर्ब डलर (समन तथा अनुकूलन कोषबाहेक) हुन आउँछ । अधिकांश स्वदेशी बैंकले स्थानीय मुद्रा ऋणमा जलविद्युत् आयोजनालाई वित्तपोषण गर्छन् । तर, ठूलो मात्रामा ऋण दिने उनीहरूको क्षमता सीमित छ । 

नेपालको ऊर्जा क्षेत्रमा सन् २०१० देखि २०१७ सम्म वार्षिक औसतमा ५२ करोड ७० लाख डलरको लगानी आएको थियो । ऊर्जा उत्पादन क्षेत्रले धेरैजसो रकम (७० प्रतिशतभन्दा बढी) प्राप्त गरेको छ । यसमध्ये लगभग सबै जलविद्युत् आयोजनामा गएको छ । जलविद्युत् उत्पादनमा लगानीका आधारमा स्थानीय स्वतन्त्र ऊर्जा उत्पादक र नेपाल विद्युत् प्राधिकरण क्रमशः दोस्रो र तेस्रो मा पर्दछन् । सन् २०१८–२०४० को अवधिमा विद्युत् क्षेत्रमा कुल २९ देखि ४६ अर्ब डलर लगानी आवश्यक पर्ने अपेक्षा गरिएको छ । ठूलो रकम भए पनि वार्षिक आवश्यकता पूरा गर्न अपर्याप्त छ ।

ऊर्जामा लगानी :  यसबाहेक, निर्यातकेन्द्रित जलविद्युत् परियोजना वार्षिक रूपमा ०.५–१.० अर्ब डलरको वृद्धिशील लगानी चाहिन्छ । धेरै आशावादी अनुमानअन्तर्गत पनि वित्तीय क्षेत्रका क्षमता सीमित छन् र थप लगानी आवश्यक छ । निर्यातमुखी परियोजनाको अन्तर्निहित अर्थशास्त्र र ऊर्जा वाणिज्यका लागि ठोस संस्थागत र नियामक वातावरणको सृजनाले राष्ट्रिय अर्थतन्त्रमा योगदान पु‍र्‍याउन लगानीको सफलता निर्धारण गर्नेछ । विकास साझेदार पहिले नै बोर्डमा छन् ।  विश्व बैंक, मिलेनियम च्यालेन्ज कोअपरेसन कम्प्याक्टका साथै भारत र चीन पनि ऊर्जा लगानीमा आकर्षित नभएका होइनन् ।

सरकारले  ऊर्जा लगानीमा गति बढाउनुपर्छ र अन्तर्राष्ट्रिय समुदायबाट थप समर्थन प्राप्त गर्नुपर्छ । साथै, अन्तर्राष्ट्रिय समुदायले यस क्षेत्रको दीर्घकालीन जलवायु लक्ष्यमा योगदान पु‍र्‍याउन सक्ने नेपालको अप्रयुक्त ऊर्जा क्षमतालाई बुझ्न जरुरी छ । आगामी वर्षमा लगातार बढ्दो विद्युत् उत्पादनको उपभोग गर्न घरेलु खपत (औद्योगिक र घरायसी) मात्र पर्याप्त हुनेछैन ।

भारत र बंगलादेशले विशेष गरी क्षेत्रीय ऊर्जा जडानलाई छलफल, प्रतिबद्धता र सहकार्यको केन्द्रमा ल्याएर यस क्षेत्रलाई ऊर्जा गरिबीबाट बाहिर निकाल्न र वातावरणीय उद्धारतर्फ औंल्याउने नेपालको प्रचुर ऊर्जा क्षमतामा चासो राखेको देखिन्छ । तसर्थ, नेपाल सरकारले ऊर्जा व्यापारलाई ध्यानमा राखी यसलाई बढावा दिनुपर्ने देखिन्छ । 

– NISCHAL DHUNGEL

The opinion piece originally appeared in The Kathmandu Post on 21 February 2023. Please read the original article here.

The Nepal Rastra Bank (NRB), the central bank of Nepal, took an accommodating policy stance during the pandemic to support households and businesses. The average inflation rate in fiscal year (FY) 2020/21 stood at 3.6 percent and doubled to 6.32 percent in FY 2021/22. For the first six months of the current FY 2022/23, it stands at 7.2 percent. Inflation has significantly increased due to the detrimental effect of the supply chain post-Covid19 pandemic and the Russia-Ukraine war. Rising inflation raised the cost of fuel and raw materials, causing production costs to skyrocket. As a result, the output capacities of both small and large-scale industries have decreased. The government imposed an import ban to safeguard the diminishing foreign exchange reserves, but it lifted the ban recently as the demand for goods and services increased amidst economic recovery.

These factors contributed to the first half of the current fiscal year’s revenue collection falling short of expectations. The revenue collection for the first six months of mid-January 2023 decreased by 15 percent compared to last year. The Finance Ministry reduced the federal government’s budget by 20 percent because of its inability to generate revenue as projected. The increased liabilities for wages, pension, social security, and subsidies for chemical fertiliser and disaster management have strained ongoing government expenses. The government needs to pay the interest on international and domestic loans. The depreciation of the Nepali rupee versus the US dollar will prove expensive to re-pay foreign loans.

World Bank and IMF support

The International Monetary Fund (IMF) approved $395.9 million as part of the Extended Credit Facility (ECF) Arrangement for Nepal. The ECF provides financial support to nations with a persistent balance of payments issues. This arrangement would help the government lessen the pandemic’s effects on people’s health and economic activity, safeguard vulnerable populations, maintain macroeconomic and financial stability, and promote long-term growth and poverty reduction. The program will encourage significant funding from Nepal’s development partners and help reduce funding shortfalls. These actions supported a subsequent credit boom by cutting loan rates early in the pandemic. To aid Nepal’s tenacious recovery from the Covid-19 pandemic and promote sustainable growth, the World Bank approved a $150 million development policy credit. The Nepal Programmatic Fiscal Policy for Growth, Recovery, and Resilience Initiative, funded by the World Bank, will work to enhance the country’s institutions and laws, especially those governing debt management, public capital investment, and tax and customs systems.

Effect of monetary policy

At the beginning of FY22, NRB monetary policy aimed to strike a balance between tightening needed for economic and financial stability and assistance for the nascent economic recovery. The NRB’s main policy targets are maintaining the policy floor of foreign exchange reserves covering seven months of imports and setting the inflation ceiling at 7 percent for the year FY 2022/23. The goal of monetary policy is to limit total credit to the private sector by 12.6 percent and total money supply by 12 percent for FY 2022/23. NRB raised the cash reserve ratio (CRR) from 3 percent to 4 percent. As a result of the credit boom, imports peaked in the first half of FY22, and foreign exchange reserves declined. The NRB increased its policy repo rate targeting both credit demand and supply. A change in monetary policy was in response to worries about faster-than-expected credit expansion, the growing import bill, dwindling reserves, and rising inflation as loan growth soared beyond estimates in the first half of FY22. To bring down inflation and discourage credit lending, the NRB increased the interest rates. The weightage average interest rate for inter-bank rose from 4.76 percent in mid-January 2021 to 7.48 percent in mid-January 2022. Similarly, weightage average interest rates for lending increased from 9.44 percent in mid-January 2021 to 12.79 percent in mid-January 2022.

A credit constraint occurred as the additional liquidity injections weren’t enough to make up for the drop in loanable funds. By the end of FY22, private sector credit had fully returned to FY21 levels as a proportion of GDP due to the higher lending interest rates offered by commercial banks to borrowers, which increased from 8.5 percent to 11.6 percent between mid-July 2021 and mid-July 2022. Credit to the private sector stabilised at comparatively higher prices, falling from 102 percent of GDP at the end of FY21 to 101.5 percent of GDP at the end of FY22. The NRB injected a total of Rs3094.76 billion in liquidity until mid-January 2023. NRB provided Rs318.09 billion through a repo, Rs83.85 billion through an outright buy auction, and Rs2692.83 billion through a standing liquidity facility (SLF).

The NRB introduced a merger and acquisition policy with the aim of strengthening financial stability. After the mergers of the commercial banks, the number of commercial banks decreased from 27 in mid-July to 22 in mid-January 2023. Micro-finance institutions decreased from 70 in mid-July to 64 until mid-January 2023. The central bank of Nepal mandates that banks maintaining higher paid-up capital help reduce the number of banks and financial institutions. Bank and financial institutions’ (BFIs) private sector credit increased by Rs137.33 billion (3 percent) during the first six months of FY 2022/23 compared to a growth of Rs492.63 billion (12.1 percent) during the same time last year. Out of the total outstanding credit held by BFIs until mid-January 2023, 67.2 percent went to real estate and 12.2 percent to current assets (such as goods used in agriculture and non-agriculture).

BFI soundness

Despite liquidity restrictions, indicators of BFI soundness were high. The average capital-to-risk-weighted assets ratio, which measures the sufficiency of bank capital, remained more elevated than the legal requirement of 11 percent. After massive credit expansion, NRB raised interest rates which is also the byproduct of the misuse of loans. In addition, due to the lengthening of loan repayment schedules as part of the central bank’s response to Covid-19, the overall number of BFIs’ nonperforming loans (NPL), defined as loans that are past due by 90 days or more, also marginally decreased. As of mid-July 2022, commercial banks had an NPL ratio of 1.3 percent, development banks had an NPL ratio of 1.5 percent, and finance businesses had an NPL ratio of 7 percent. Even though these numbers are encouraging, some swift forbearance measures should be in place to assess the asset quality in the banking sector. Banks are issuing fresh disbursements to reduce the level of nonperforming assets.

Nevertheless, given the adverse economic effects of Covid-19, the IMF should closely monitor the system to ensure NPLs are accurately measured and that all banks’ provisioning and capital are still sufficient. The NRB should improve the regulatory environment to offer precise restructuring guidance to address BFI assets and loan quality. NRB issued Working Capital Loan Guideline 2079, which mandates banks to issue working capital loans secured by the current assets. Credit Policy Guidelines of the licensed institution shall clearly mention the margin and adequacy of the existing assets required for the security. Hence, the NRB should encourage banks to monitor borrowers’ creditworthiness continuously and establish asset categorisation and reclassification criteria that accurately evaluate banks’ asset quality. Lastly, Nepal should facilitate bank financing to productive businesses, invest in infrastructure and education, and adopt digital technology and research and development.

– NISCHAL DHUNGEL

The opinion piece originally appeared in The Kathmandu Post on 2 February 2023. Please read the original article here.

The modern globalised ecosystem has increased public debt due to changing economic and political circumstances. Handling public debt goes hand in hand with an effort to balance those circumstances. Public debt is a domestic or foreign loan issued by a government, which remains a viable option to support government spending, and development initiatives, for which the government lacks funding. Owing to economic complexity and the Covid-19 pandemic, government spending has recently increased more quickly than its capacity to generate revenue. With interest rates skyrocketing, the rising debt severely impacts the budgets of developing countries that must invest in their economies.

Nepal started budgeting in 1951, taking debt 11 years after the budgetary practice began. The history of our public debt is not very old. The government started taking domestic loans in 1962, while foreign loans were only accepted beginning in 1963. Post-earthquake and transition to federalism, Nepal’s public debt has increased over the past several years, reaching 42.2 percent of GDP in fiscal 2019-20 from a progressive reduction of 25 percent of GDP in fiscal 2016-17. The impact of Covid-19 and responses to it are responsible for the significant increase in fiscal 2019-20. The debt-to-GDP ratio for Nepal stood at 39 percent in fiscal 2020-21. Due to Nepal’s access to concessional funding (grants or loans less than 2 percent with long repayment periods) from multilateral institutions and foreign countries, its foreign debt servicing needs are low. As per the World Bank, Nepal’s debt distress risk is rated low for both external and total debt. The International Development Cooperation Policy (2019) allows Nepal to obtain a foreign commercial loan, but Nepal has yet to utilise this opportunity. The country needs to be careful while borrowing large commercial foreign loans with highinterest rates.

The impact of public debt on Nepal’s economic growth, examined by the journal Public Debt and Economic Growth of Nepal utilising data from 1978 to 2020, indicates no clear link between public debt levels and economic expansion. The limited revenue sources have resulted in a rise in government spending more quickly than government revenue. The government has borrowed money primarily for weak areas, leaving it cash-strapped and forcing it to take out another loan to repay the previous ones. Some of the current capital loan money is in the stock market and land. Due to insufficient domestic resource mobilisation, excessive fiscal deficit, export-import imbalance, and gaps in revenue and spending, the external debt has worsened. Thus, some authors argue that deficit financing should not be considered as long as there is sustained economic growth and the possibility of encouraging investment rather than discouraging it. Furthermore, there has been no improvement in the country’s capability to repay debt; there has only been an increase in overall public debt and interest.

It is also crucial to analyse the country’s debt condition in light of its foreign exchange reserves. The depreciation of the Nepali rupee against the US dollar has increased Nepal’s debt liability in local currency terms. Foreign currency debt payments may become more challenging at a time of shrinking foreign currency reserves and rising government borrowing from foreign creditors. Nepal’s foreign direct investment (FDI) is the lowest in the region at 0.5 percent of GDP. The impact of lowering the FDI threshold to Rs20 million will further decrease the inflow of FDI. Further, capital flow restrictions may have negative effects on GDP, but FDI offers the extra benefit of not increasing the nation’s debt and relieving strain on foreign exchange reserves. The government should put in place long-delayed FDI reforms, such as simplifying regulatory approval processes, which would lead to foreign currency inflows and spur the transfer of capital and technology to boost growth.

Lesson from Bangladesh

Thanks to a robust economy and a stable government, Bangladesh has avoided relying on foreign forces for domestic survival. Three factors—exports (second largest clothing exporter), remittances (one of the biggest recipients), and fuel prices (relies on imported fuels)—together account for the majority of the economic health of the country. But these factors are in jeopardy due to a global economic slowdown that is particularly destructive in developing nations. Bangladesh has less money to import fuel as exports fall and prices rise simultaneously. It has decided to postpone non-urgent projects and expressed concerns about a growing trade deficit and a decline in remittances.

However, Nepal’s exports are not as strong as Bangladesh’s, and will be less affected by the global slowdown. The government of Nepal is making several efforts to boost foreign reserve exchange. To stop the mounting debt, the newly passed Public Debt Management Act set a limit on external debt at one-third of the GDP. This measure is intended to prevent the government from borrowing carelessly and motivate it to pay down its debts on schedule so it can borrow more money in the future. Nepal also came up with a slew of measures to ban imports of luxury goods to prevent the depletion of its foreign exchange reserves and ended the ban as foreign reserves rose. These underlying traits will continue to shape how Nepal and Bangladesh react to the current global upheavals, including growing prices, impact on remittances, and widened trade imbalance.

State institutions in Nepal are fragile and continue to have problems with checks and balances. The government will struggle in 2023 to stop tax evasion and broaden its revenue base, increasing its need for public borrowing. With a new government in place, synchronising fiscal and monetary policy should ease liquidity shortage to fuel investment in productive sectors. A significant issue with the democratic history of Bangladesh is the absence of robust and viable opposition. Despite political hiccups and mounting public debt, Bangladesh has made commendable economic progress. Nepal and Bangladesh are unlikely to have the same situation as Sri Lanka if their policy measures successfully utilise public debt, and balance national goals and domestic capabilities.

Addressing structural barriers

Building on prior accomplishments and addressing structural barriers will help to accelerate growth, attract private investment, boost productivity, and develop climate resilience to successfully graduate from the least developed country’s (LDC) status and achieve lower middle-income status by 2026. Nepal’s plan for economic growth and how trade, infrastructure, exchange rates, and other economic policies can help with economic development is still unclear. The growth potential will be increased by fostering an environment, encouraging trade and foreign direct investment, growing the financial sector, building human capital, and enhancing good governance. The country must spend the borrowed funds wisely and enact programmes to reduce debt. As Nepal plans to leave the LDC status in 2026, it is crucial to leverage the advantage of a lower interest rate with a long repayment period of borrowed funds. It should then work towards building a sustainable economy by investing in productive sectors with high-efficiency levels to repay the loans over time.

– NISCHAL Dhungel* and ABIJIT SHARMA

Dhungel is a non-resident fellow at NIPoRe. The opinion piece originally appeared in The Kathmandu Post on 18 January 2023. Please read the original article here.

With the onset of the Covid-19 pandemic and the Russia-Ukraine war, foreign relations trembled among major economic powers. While condemning Russia’s aggression and barraging the country with a series of sanctions, the West expected India to follow suit. However, New Delhi adopted studied public neutrality and abstained from successive votes condemning the Russian move in the UN Security Council, General Assembly, and Human Rights Council. Just like India, China maintained relative neutrality, with a solid foreign policy stance in response to the conflict. Despite its closeness with Russia, Beijing stopped short of supporting it in the war. It also stopped short of calling Russia the aggressor and abstained from a United Nations Security Council vote denouncing the ‘invasion’. Beijing and New Delhi had made their decision loud and clear. And they were not going to listen to anybody.

Assertive New Delhi

Speaking at the Globsec 2022 forum in Slovakia, Minister of External Affairs of India, Dr S Jaishankar laid clear India’s increasingly confident foreign policy. “Europe has to grow out of the mindset that Europe’s problems are the world’s problems, but the world’s problems are not Europe’s problems,” Jaishankar said. He criticised the West for hoarding vaccines, which impacted the Least Developed Countries (LDCs). It is crucial to understand how India came to this position, which was unimaginable until a few years ago.

India’s political, social and economic fabric had been damaged after 200 years of colonialism. Its foreign policy could not remain untouched. Following independence, New Delhi slowly started to chart its own path, pursuing different strategic approaches from 1946 to 2013. Nehruvian influence persisted from 1946 to 62, an era of strategic non-alignment amidst US-Soviet Union rivalry. From 1962 to 1971, considered the decade of realism and recovery, India made pragmatic choices in national security and political challenges despite a lack of resources. The country went through a complex phase from 1971 to 1991 as the US-China-Pakistan axis came up. From 1991 to 1999, it had challenges in retaining its strategic autonomy in a unipolar world, whereas from 2000 to 2013, India focused on balancing power.

But since assuming office in 2014, Prime Minister Narendra Modi has made an unprecedented transformation of Indian foreign policy. Modi has put India as an emerging superpower on the map and sought to engage rather than remain ‘non-aligned actively’. New Delhi now understands that it deals with multiple global complexities, making decisions based on calculated risk-taking. As a result, India is slowly standing out, drifting away from strategic ambiguity to strategic freedom and taking a solid foreign policy stance on international fora. This is a significant departure from the older ‘non-alignment’ tenet that had long established India’s typical social values and norms, at least in foreign relations.

India’s central foreign policy tenet under Modi is seen to be guided by the Eastern principle of ‘Vasudhaiva Kutumbakam’, which translates to “the world is one family”. This was evident during the Covid-19 pandemic when New Delhi delivered more than 100 million doses to countries in Asia and Africa. While Modi has spearheaded this new brand of foreign policy, his bureaucrats and ministers have helped implement it. In 2015, just two days before his retirement, the Narendra Modi government appointed a highly agile foreign service officer, a foreign ambassador to the US and China, to the position of foreign secretary. Jaishankar has been the flag bearer of Modi’s foreign policy ever since Modi’s second term in office. Jaishankar openly admits India’s shortcomings and stays committed to securing its national interest with/without taking any sides.

‘Wolf-warrior’ in Beijing

Coinciding with India’s assertive stance in global politics is China’s equally aggressive stance, especially against the West. The Chinese foreign policy has been so assertive and aggressive in recent years that it has earned a new name: ‘Wolf-warrior’. While aggressive Chinese rhetoric might appear quite normal now, it is a shift from China’s earlier foreign policy. And the man to bring about this shift is none other than Xi Jinping. At heart, Xi’s diplomacy calls for a more active role for China as a great power on the world stage, including reforming the Western-dominated international order and creating what China calls “true multilateralism”.

When the architect of China’s economic reform, Deng Xiaoping, came to power following Mao Zedong’s death in the late 1970s, he prescribed a foreign policy which was subtle and cooperative. His approach focused on “biding one’s time without revealing one’s strength”. As a result, in the 1980s and 90s, Beijing was focused on “securing position, coping with affairs calmly and hiding capacities”. The leaders who came to power after Deng continued the policy.

But Xi’s ascendance since 2012 has slowly changed things in Beijing. Far from “biding time and hiding strengths”, it is now focused on making its stance clear on the global stage. Most importantly, it is open to show its strength. Take, for instance, its recent response to the Taiwan issue. Just before the then US House of Representatives Speaker Nancy Pelosi visited the island in August last year, the Chinese President issued a stern warning to his American counterpart, allegedly saying that “… those who play with fire would perish by it”. When its alarm went unheeded, the Chinese military launched targeted military exercises.

Xi’s ambitions to help China regain its glory of the Middle Kingdom years have been evident since he took office. Upon gaining power in 2012, he immediately identified “national rejuvenation” as his primary goal. The ambitious Belt and Road Initiative (BRI) was announced a year later. At the 19th Party Congress in 2017, Xi stated that China would no longer shy away from world leadership and efforts shaping the international order. The BRI is an important example of how China has pursued its foreign policy interest. The initiative has 147 signatories and includes US allies and partners such as Saudi Arabia, Greece and UAE.

Quite naturally, the West has been critical of this stance, often saying that it might invite dangerous confrontations between China and the West. But Beijing has maintained that it is not the real aggressor but simply responding to Western threats. Defending China’s aggressive foreign policy, the then-Chinese Foreign Vice Minister Le Yucheng said last year that Beijing “had no choice but to fight back against constant ‘nagging’ and ‘insults’ from foreign critics”. Interestingly China has many flag bearers of this new assertive foreign policy, most notably the foreign ministry spokesperson Zhao Lijian. Zhao has had public spats with US diplomats and has been a vocal critic of the West.

If there is any lesson that Nepal should learn from its neighbours, it is that we need to pursue an independent foreign policy, especially in light of the geo-political games often played in the country.

– NISCHAL DHUNGEL

Quality digital infrastructure is the foundation of a fully-functioning digital economy. Digital infrastructure using any form of the technology enables a smooth flow of goods and services in the economy. The Government of Nepal (GoN) considers the advancement of digital technology as a crucial enabler of more resilient, inclusive, and growth-oriented development. The GoN came up with the Digital Nepal Framework (DNF) plan in 2019 to restructure the economy through integration of available ICT tools. It plans to do so by granting all segments of the population equal access to services and infrastructure, encouraging private sector innovation and competitiveness, and enhancing the delivery of public services. The DNF comprises 80 initiatives divided into eight categories – digital foundation, agriculture, health, education, energy, tourism, finance, and urban infrastructure. The Nepal Planning Commission (NPC) has deemed the DNF a game-changing initiative.

Before diving into Nepal’s digital landscape, it is crucial to understand the state of digital-related infrastructures in the country. Electricity is the backbone of digital connectivity in addition to availability of quality infrastructures. In this regard, electricity is fuel to develop any form of digital connectivity. Without proper access to electricity, it is almost impossible to foster digital connectivity in the desired way. Hence, access to electricity directly impacts the availability, adoption, and use of digital connectivity. Digital connectivity may be less readily available if a steady electrical supply is not always available. Even though the electricity supply has reached most of the population, the government needs to deploy base stations in non-electrified areas to ensure affordable and reliable electricity access for all Nepali citizens.

Figure 1: Access to Electricity, Nepal (Percentage of Population)

Source: Nepal Economic Survey 2021/22, Ministry of Finance *Till – Mid March 2022

More than 90 percent of the population have access to electricity as of mid-March 2022 (Figure 1). Access to electricity has considerably increased over past years from 88 percent in 2018/19 to 94 percent till mid-March 2021/21. During the same period, the Madhesh province has the highest access to electricity i.e., 99.66 percent of Madhesh population and the Karnali province has the lowest access to electricity 43.87 percent of Karnali population (Figure 2). In 2021–2022, the installed electricity capacity stood at 2,189.6 megawatts (MW). Increasing the installed capacity of electricity has made it possible to increase access to electricity. Nepal experienced power outages that lasted up to 18 hours a day for more than ten years, from 2006 to the mid of 2017. The country currently has surplus energy, primarily during the wet season, and “load-shedding” has almost been eradicated thanks to better management, leakage control, and increased power generation. Although electricity penetration in Nepal (90 percent of the population) as of 2020 is slightly low in comparison to South Asian (95.7 percent of the population) countries, Nepal stands in an excellent position to strengthen its digital infrastructure. Before the target year of 2030 was established by Sustainable Development Goal 7, the Nepal Electricity Authority (electricity regulatory body)  revealed its plan to achieve 100 percent electricity access by 2024. The plan is realistic to set a strong base for the uptake of other digital infrastructures.

Figure 2: Access to Electricity by Province (Percentage of Province Population)

Source: Nepal Economic Survey 2021/22, Ministry of Finance *Till – Mid March 2022

The Government of Nepal has placed great importance on transforming the potential of ICTs within the broader context of its ambitious developmental objectives, which are based on reducing poverty as its primary goal. The Information Communication Technology (ICT) Policy 2015 outlines the rules and practices for developing IT infrastructures and human resources for a knowledge-based society. ICTs have the potential, among other things, to help create the environment for better governance with more open, transparent and effective bureaucracies. ICTs can also address structural issues in education and health systems, enabling more access to education and health services and bridging quality gaps in education and health.

The internet is a crucial component of the digital economy. Over the past few years, Nepal’s technology and communication sector have experienced significant growth. Nepal Telecommunications Authority (NTA) is the telecommunication regulatory body of Nepal established to provide a favorable and competitive environmentfor the development, expansion, and operation of telecommunications services along with private sector participation. According to NTA Annual Report 2021/22, total broadband (mobile and fixed) internet subscriber has considerably increased over the past years, from 66 percent in 2018/19 to 131.6 percent in 2021/21. According to the same report, there are around 38.3 million broadband subscribers in Nepal, of which 28.7 million are mobile broadband subscribers and 9.6 million fixed (wire and wireless) broadband subscribers in 2021/22. While fixed broadband (wired plus wireless) penetration has reached 33.1 percent of the population, mobile broadband penetration is 99 percent in 2021/22. Mobile broadband peneration has significantly increased over the past years from 52% of population in 2018/19 to 99 percent of population in 2021/22. According to the report, mobile broadband is the most popular means of using the internet, and the trend of mobile broadband users is increasing faster than fixed broadband. With 3G and 4G internet service already in place, the government is advancing the testing of 5G technology.

Figure 3: Broadband Internet Penetration (Percentage of Population)

Source: Nepal Telecommunication Authority, Annual Report 2021/22

Despite the progress in internet and electricity penetration, there are still issues with affordability, the digital divide, and digital illiteracy in many areas of Nepal. With regards to digital governance, the government has taken steps to digitalize public services, including, but not limited to, the digitization of data from land revenue offices, the introduction of the Nagarik App, the launch of the Nepal National Single Window (NNSW) system, the opening of the National ID card, and others. However, service seekers continue to encounter issues due to limited installed technology capacity and improper system management.

Workplace practices are changing due to disruptive technologies like artificial intelligence (AI), robotics, and the Internet of Things. The governments and businesses around the world are now able to fully realize the promise of exponential development because of digital technologies. Since the initial shutdown starting from March 2020 onwards (due to COVID-19), online commerce and digital payments have become more common. Also, the use of digital technology and GDP growth are closely related. A World Bank study found that a country’s economy grows by 1.3 percent for every 10 percent rise in internet access. Nepali pay more for internet connection than people in other South Asian countries, according to the Connectivity in the Least Developed Countries Status Report 2021. The report has emphasized a need for effective solutions in developing nations like Nepal to increase digital access and the need to develop specific policy proposals to hasten the transition to inexpensive and universal connectivity. 

Way Forward

The digital economy highlights the importance of digital technology in improving trade and competitiveness, economic opportunity and efficiency, and international economic integration of an economy. The COVID-19 pandemic and related lockdowns have sped up the uptake of digital services, making remote learning, e-commerce, and digital payments more crucial than ever. The pandemic has also made it clear how vital it is to adapt systems to accommodate shifting preferences, hastening the transition to a cashless and digitally aware society.  Supportive policies and investments in the workforce, vital digital infrastructure, and cybersecurity will have a long-lasting impact on leveraging the digital economy in Nepal. For Nepal to develop into a technologically advanced, rapidly expanding economy, digitalization and digital governance should be implemented, strengthening its digital-related infrastructure.

Recommendations

• Bring stakeholders from the public and corporate sectors and civil society to help shape digital policy in several key areas. 
• Encourage the adoption of inclusive digital policies and collaborate with the appropriate governmental entities. A working group on internet affordability should be established, with representatives from the private sector, civic society, ISPs, and regulators. 
• Build collaborations with the private sector to construct a digital economy that benefits all Nepalis.
• Concentrate on improving transactional efficiency, security, transparency, traceability, and financial inclusion. 
• Work with universities and technical schools to solve the cybersecurity workforce and research and development demands.
• Support the reform of IT curricula in higher education, work with the private sector to start apprenticeship or internship programs, and support the ICT initiatives of the Ministry of Education to increase the skill-building of the digital talent pool to match the demands of IT-sector employers better and increase Nepal’s competitiveness in the IT labor supply.

– NISCHAL Dhungel

The opinion piece originally appeared in The Kathmandu Post on 4 Jan 2022. Please read the original article here.

Globally, there has been a shift toward a low-carbon economy and a developing green “techno-economic paradigm.” British economist Chris Freeman and British-Venezuelan scholar Carlota Perez coined the term “techno-economic paradigm,” an innovation-based theory of economic and societal development that remains at the centre of the capitalist development process. Least developed countries (LDCs) like Nepal face enormous challenges pivoting towards green techno-economic transformation compared to advanced economies. Although LDCs have contributed the least to climate change, they are at the forefront of the crisis—over the past 50 years, LDCs accounted for 69 percent of all deaths resulting from climate-related disasters.

Compared to pressing infrastructure and poverty alleviation demands in LDCs, a robust pro-climate agenda may seem counterproductive and anti-development. At the same time, there is a developing transition toward a low-carbon economy, which some authors have referred to as a “green techno-economic paradigm.” There is a shift of productive resources from high-emission industries (sunset industries) to lower-emission ones (sunrise industries). LDCs are often condemned to be technological laggards, with the development of modern technologies remaining strikingly concentrated in advanced economies. Sunrise industries may encourage productivity and strengthen intersectoral productive lineages due to the formation of a new green-techno-economic paradigm, which may offer new and more sustainable pathways to LDCs and developed countries. Nepal, for instance, can emulate India’s growth in the renewable energy sector.

Nepal contributes roughly 0.1 percent of global greenhouse gas (GHG) emissions. Most of Nepal’s energy comes from hydroelectricity, a remarkable achievement that has created a strong base for future climate-smart prosperity. One of the richest water-resource countries in the world with more than 6,000 rivers and rivulets, Nepal can become the bedrock of energy security for South Asia, using renewable means. The country can significantly uplift one-third of South Asia from non-renewable to renewable energy consumption, reducing approximately 3.5 percent of the total GHG emissions worldwide by 2040.

Green structural transformation

It is high time LDCs shifted toward strengthening resilience, moving away from fossil fuel, and aligning national objectives for sustainable green structural transformation. The Doha Programme of Action reflects the continued importance of structural change and productive capacities for LDCs. Despite placing greater emphasis on increasing production capacity and facilitating economic diversification, most LDCs have made little progress in changing the structure of their economies. The disastrous effects of Covid-19 on trade, investment and production in LDCs, and its broader economic and social effects have further slowed progress.

The prospects of structural transformation are available to LDCs through internal structural change, targeted policy decisions, or exogenous changes in the international setting. The structural transformation occurred in developed or emerging economies shifting from agriculture to manufacturing to the service sector. In Nepal, a structural transformation occurred directly, shifting from agriculture to the service sector following the contribution to Gross Domestic Product (GDP). Agriculture, which accounts for two-thirds of the workforce and one-third of GDP, has to undergo reforms to increase productivity, reduce poverty and free up labour for new sources of economic growth. The broad-based reforms Nepal implemented between 1986 and 1996 made a positive impact on the economy. The share of industry in GDP and exports, as well as the share of manufacturing, virtually doubled. This led to an increase in the economy’s openness and diversification. Compared to the manufacturing and agriculture sectors, the structural restructuring of Nepal’s economy over the previous decade has resulted in tremendous growth in the service sector. Besides, a knowledge-based economy cannot be sustained without the support of an expanding manufacturing industry.

Remittance is the mainstay of Nepal’s economic activities and the largest source of foreign exchange earnings for the country. According to the Nepal Rastra Bank (NRB), the country received 1.007 trillion rupees in remittances in 2021, or 20.8 percent of its GDP, and it is expected to increase to 22 percent in 2022. Given the noticeable increase in remittances, they are probably the main driver of the improvement in living standards seen in Nepal, directly (households receiving remittances) and indirectly (increased labour income of those that remained). To escape the out-migration and remittance trap, a clear set of plans and policies to increase domestic employment should be the top priority of the federal, provincial and local governments. Large-scale migration is a symptom of underlying, long-standing issues rather than a sign of strength. It is a monumental task switching from foreign to domestic employment. Without rethinking its development model, Nepal cannot prosper or graduate into a middle-income country. More human capital must be put to productive use for Nepal to continue on a more robust and sustainable growth path.

The structural change could be strengthened by accelerating the development of productive capacities, which will trigger an organic process whereby investment (i.e. capital expansion) is accompanied by a gradual shift of labour and production inputs towards more advanced and higher-value-added industries. A virtuous cycle of catching up with advanced economies could result from a structural process, which could increase labour productivity within the industry and through structural change, and reinforce the profit-investment nexus. Nepal’s plan for industrial growth and how trade, infrastructure, exchange rates, and other economic policies can help with industrial development is still not clear.

In their book Creating A Learning Society, Noble Laureate Joseph Stiglitz and Columbia University professor Bruce C Greenwald stressed that a nation’s comparative advantage is influenced by the products it creates. Governments must constantly evaluate how well their industrial policies are working and whether they are being “captured” by special interests. Governments must also continuously work to implement industrial policies more effectively, and industrial policy design must reflect the capacities and capabilities of the government. For example, LDCs can employ the same technologies (computerisation, information technology), labour management, and inventory control procedures (such as just-in-time production) that maximise productivity growth in different sectors.

One crucial thing to take away from developed nations like the USA is that they have institutionalised learning as they go along. For instance, in July 2022, the US Congress passed the CHIPS Act to address new challenges, supply chain disruption on semiconductors arising from the Covid-19 pandemic and the Russia-Ukraine war. The Act aims to strengthen US domestic semiconductor manufacturing, design and research. Industrial policies that function in one environment and at one level of development do not function in another. LDCs should learn a lesson from developed countries to enact and implement policies targeting a specific sector that maximises productivity growth.

The biggest market failure the world economy is currently dealing with is arguably climate change. With rare exceptions, it has proven challenging to persuade nations to enact carbon pricing or cap and trade, which would prevent people and businesses from considerably reducing their carbon emissions. Industrial policies that promote renewable energy and dissuade carbon-intensive companies and technologies can help developing nations decrease their carbon emissions. Lastly, creating green jobs in the industrial sector of the LDCs is a step in the right direction toward replacing carbon-intensive industries.

– NISCHAL Dhungel* and SISIR Bhandari

Dhungel is a non-resident fellow at NIPoRe. The opinion piece originally appeared in The Kathmandu Post on 30 October 2022. Please read the original article here.

In the current context of climate change, where global movements towards renewable energy are gaining momentum, the world’s attention is shifting to doubling renewable energy resources. The world has witnessed a significant rise in the production of renewable resources from 941 terawatt hours in 1965 to 7,931 terawatt hours in 2021. In this context, Nepal, with more than 6,000 rivers and rivulets, can become a bedrock of energy security for South Asia. The country’s untapped hydropower can play a significant role in future energy supply as it is an affordable and renewable source of electricity with few environmental effects. It can significantly reduce the carbon footprints of neighbouring giants and one of the most populous countries, Bangladesh.

Nepal has declared Energy and Water Resources Decade (2018-28) to implement the Roadmap for Energy Development. Nepal has now become self-sufficient in electricity production, producing 11,064 GWh in 2022, a significant jump from 4,258 GWh in 2013. The roadmap promotes generating and using electricity, intending to increase production, consumption and national income by selling energy. With the rise in electricity output, today, 93 percent of the population has direct access to electricity. The government has aimed for 100 percent energy access by the fiscal year 2022-23.

Arun 4 (capacity 490.2 megawatts), West Seti (750 megawatts), Arun III (900 megawatts) and Lower Arun (769 megawatts) are major hydropower projects which will start distribution between 2030 and 2035. There has been increased production and export of energy and a reduction in energy imports. Where should we use this surplus energy? The ideal answer would be using it to replace traditional or non-renewable energy. Nepal has also become the first country in South Asia to participate in the Indian Energy Exchange from which it aims to expand trading in South Asia. Today, 14.1 percent of the country’s total imports consist of petroleum products which can be easily substituted by electricity. Nepal’s hydropower can convert one-third of South Asia from non-renewable to renewable energy consumption, thus reducing approximately 3.5 percent of total greenhouse gas emissions worldwide by 2040.

Nepal should focus on making the best use of hydroelectricity and possibly hydrogen energy, which has a promising comparative advantage in the energy trade. This presents an opportunity for Nepal to decarbonise the region’s major energy end-use sectors such as households (use of electric cooking stoves) and transport (battery-powered vehicles).

Climate financing

Climate change priorities and strategies are mainstreamed into government planning and budgeting procedures; however, direct government investment is significantly low. Legal and practical obstacles limit foreign direct investment, private sector investment and bilateral and multilateral support. Energy-related industries had received 59.7 percent of the investment pledges as of March of fiscal 2020-21, but actual investment came to only 35 percent. There is a need to create a favourable environment by relaxing legal obstacles to attract more foreign investment in the vibrant energy sector.

The financial requirement for meeting climate objectives is huge and needs to be better defined. Currently, the primary climate funding comes from the government, multilateral funding agencies and small private sector contributions. The climate budget has increased from $3.75 billion in 2017-18 to $4.66 billion in 2021-22. Since 2010, Nepal has received more than $300 million in international climate funds from the United Nations Framework Convention on Climate Change (UNFCC) alone. According to the most recent data, between 2015 and 2020, Nepal received over $2.59 billion in climate finance from international development banks, with $1.2 billion coming in 2020 (excluding mitigation and adaptation funds). Most domestic banks finance hydropower projects with local currency debt, but their capacity for large-scale lending is limited. Between 2017 and 2021, private independent power producers invested $400 million per year in hydropower production.

The energy sector in Nepal received investments totalling, on average, $527 million annually from 2010 to 2017. The power generation sector received most of the funds (more than 70 percent), nearly all of which went to hydropower projects. Local independent power producers and the Nepal Electricity Authority came second and third, respectively, in terms of investment in hydroelectricity generation. A total of $29-$46 billion in investments is expected to be required in the electricity sector over the period 2018-2040. Although a large sum, it is insufficient to cover the annual needs.

Energy investments

Moreover, export-focused hydropower projects would require yearly incremental investments of $0.5-$1.0 billion. Even under the most optimistic assumptions, the financial sector’s capabilities are limited and require further investment. The underlying economics of export-oriented projects and the creation of a solid institutional and regulatory environment for energy commerce will determine their success in contributing to the national economy. Development partners are already on board, note World Bank support for Nepal’s Green, Resilient and Inclusive Development approach, climate financing and the Millennium Challenge Cooperation compact (United States-Nepal partnership), and Indian and Chinese energy investments.

The government should build on the momentum and gain more support from the international community. Also, the international community should understand Nepal’s untapped energy potential that can contribute to long-term climate goals in the region. In the coming years, domestic consumption (industrial and household) alone will not be sufficient to consume the ever-increasing electricity generation. India and Bangladesh particularly seem interested in Nepal’s enormous energy potential to lift the region out of energy poverty and point it towards environmental salvation by bringing regional energy connectivity to the centre of discussion, commitments and collaborations. Energy trade can be fruitfully fostered.

– NISCHAL Dhungel, Non-Resident Fellow

The book review originally appeared in The Kathmandu Post on 17 September 2022. Please read the original article here.

“Why climb Everest?” a reporter asked George Mallory, who took part in the first three initial Everest expeditions. Mallory’s hilarious reply to this was, “Because it’s there!” What may have been Mallory’s instantaneous not-so-well-thought-of expression about why people pursue climbing may sound a little absurd and ambiguous, but it eventually became the three most famous words in the world of mountaineering.

For many climbers worldwide, the three-word prototype still holds true, but with a slight adaptation. For a random aspiring climber today, the answer to the same question asked before Mallory could be—“Because there are Sherpas!”

Let’s assume you have decided to climb Everest. Your finances are sorted, and you have a green signal from your family and doctor to pursue this extreme adventure. Your next existential question would be, “How will I get there?” Or better, put this question like this—“Who will take me there?” Who else but the Sherpas—an ethnic group that lives mainly in Nepal’s high mountains. Over the years, Sherpas have earned a reputation as the world’s strongest mountaineers. You may have read about them and their climbing prowess in the mountaineering literature, but how many of these stories have been from the Sherpas’ point of view? Very little. So far, the vast majority of the narratives around mountaineering, specifically Everest, have focused on the glories and achievements of western climbers, who acknowledge the contributions of Sherpas, but most limit it to expressions like— ‘I and seven other Sherpas climbed Everest’.

Well, not anymore! The mountaineering narratives have evolved and come of age. ‘SHERPA’, a book written by home-grown Nepali authors Pradeep Bashyal and Ankit Babu Adhikari, unravels stories of Sherpas unlike ever before. The book’s subtitle, “Stories of Life and Death from the Forgotten Guardians of Everest,” speaks for itself. The book not only focuses on summit feats by Sherpas but also provides a first-hand oral history of their existence and the struggles that go into achieving the most remarkable feat in today’s mountaineering landscape.

Speaking of the authors, Bashyal is a journalist, and Adhikari is a musician/songwriter. The book resonates with the authors’ backgrounds, as it has rich research-oriented journalistic storytelling and, at the same time, reads like a finely woven rhythm of one of Adhikari’s songs. The authors do not impose their opinions on the readers; instead, the book illustrates a story from Sherpa’s perspective, which feels more authentic.

‘Sherpa’ presents an evocative graphical representation that allows readers to become familiar with the villages (human settlements), mountain peaks and passes, airfields, monasteries, lakes, and rivers/streams that the Sherpas hold close to their hearts. Additionally, the book has two sections that are dedicated to intimate and people-centred images that showcase the area and the people featured in it.

Divided into 12 chapters, each chapter in the book portrays different stories that make the readers understand that Sherpas started in the mountaineering world as porters, chefs, weather experts, technicians, medics, climbers, etc. Today, many of them operate as internationally certified mountain guides, with a few leading some of the best mountaineering expedition companies in the world.

The book also presents the spiritual journey of Sherpas. For instance, there is a story of Phurba Tashi Sherpa, who summited Everest 21 times. After spending many adventurous years summiting mountains, Phurba Tashi suddenly quit mountaineering to live a quiet life with his wife and children. He is still considered one of the best mountaineers the world has ever seen, and there are people all over the world willing to climb alongside him. But it all means nothing to Phurba Tashi, for he has his own personal and spiritual reasons for quitting climbing. Another story of Kushang Sherpa, a Darjeeling native, details his spiritual journey, how he was sold in Bhutan’s labour market and emerged from it and ended up climbing Mount Everest from all its all three faces—north, south, and east.

The book provides unique insights about several generations of Sherpas and how they view mountaineering as a profession. From the outset, each chapter has its success and failure stories, be it taking clients to the different peaks of the world or rescuing climbers from the world’s highest mountains. Most importantly, this book takes a community immersion approach where authors explore the surroundings and interact with the characters to closely understand the daily lives of Sherpas, the history and culture that influenced their way of life, and how they interacted with the mountains.

The book showcases Sherpa women’s crucial role in caring for family, livestock, and hotel businesses while the men in the family head to the mountains during climbing seasons. The book also recognises the fact that Sherpa women form the backbone of the tourism industry high up in the mountains.

What’s more, the book also goes into detail in answering the common question, i.e., “What makes a Sherpa different from a normal human being?” is pretty fascinating, backed up by sociological-scientific evidence.

The book also reveals how many Sherpas have died on the mountains and that many of their families don’t get their bodies back. The book highlights that bringing down bodies from Everest is three times more expensive and arduous than simply climbing the mountain.

Given that mountaineering has become one of the most popular adventure sports, the authors have chosen to include the impact of climate change on Nepal’s fragile mountain ecosystem. Just like wind patterns and movements of ice blocks on the mountains keep changing, the book explains how a new generation of Sherpas have a different view of mountaineering, with many preferring to engage in other professions. I felt that the authors could have focused a little more on the future of the mountaineering industry, especially given how expensive climbing Everest has become. Additionally, I longed for some potential measures to tackle pertinent problems in this fast-changing mountainous realm.

The last section of the book, which I have rarely come across in other books, keeps track of all the significant events and records held by the people featured in the book. Since ‘Sherpa’ has numerous characters, keeping track of who’s who becomes challenging. Hence, the book’s final section brings all the individuals’ historical timelines, including the dates and places the interviews were taken.

At last, the authors’ phenomenal storytelling acumen shows dark and bright stories, which help readers understand that Sherpas have different mountains to climb daily. Not many books have been written covering the human aspect of the lives of Sherpas, and this book brings such stories to the forefront. There is no doubt that climbing is in Sherpas’ blood, be it daily struggles, climbing peaks, or dragging bodies and litter down from the high-range mountains.

The book has the potential to reach a larger global audience not just because it’s related to Nepal’s much-talked subject but has brilliantly portrayed a moving human side of people performing the world’s deadliest job.

SHERPA: Stories of Life and Death from the Forgotten Guardians of Everest

Authors: Pradeep Bashyal and Ankit Babu Adhikari

Publisher: Octopus Publishing Group Ltd./ Hachette, UK

Pages: 321

Rs 1120

– NISCHAL Dhungel, Non-Resident Fellow

The opinion piece originally appeared in The Kathmandu Post on 4 September 2022. Please read the original article here.

Nepal has faced tremendous hitches in the path of economic development. Keeping natural barriers (landlocked externally and challenging topography internally) aside, the nation has been undergoing a protracted era of political change over the past two decades, graduating from a monarchy to multiparty democracy, marred by armed war, ethnic unrest and frequent changes in power. Frequent changes in government, irrespective of a unitary or federal form of government, has directly hampered Nepal’s development path, compounded by poor policy decisions. Poor policy decisions have led to weak performance of the primary agricultural and industrial sectors, low public investment and capital accumulation, and low productivity growth.

Given this context, it is not surprising that foreign employment has become more pervasive, particularly in the years following Maoist conflict. The Department of Foreign Employment started issuing labour permits in the late 1990s. The number of labour permits issued peaked in 2013-14 at a high of 519,638. In 2020-21, the number of labour permits issued plunged to a 16-year low of 72,081 due to the Covid-19 outbreak and the ensuing restrictions on people’s freedom of movement. At present, formal overseas employment procedures have become cumbersome due to the bureaucracy that requires foreign employment agencies to produce authentic labour demand letters, get the demands attested from the Nepali embassies in target countries, and provide several other documents. Despite the cumbersome out-migration procedures, foreign employment has become a lucrative area to escape Nepal’s job market.

Remittance trap

Remittances in Nepal have surged at an unprecedented pace. Personal remittances received were less than 1 percent of GDP up until the late 1990s, lower than Bangladesh and India. This share dramatically increased during the first half of the 2000s, rising from 2 percent in 2000 to 22 percent in 2010 and 30 percent in 2015. Following the pandemic, it was anticipated that Nepal would experience a sharp fall in remittance inflows, impacting imports, the balance of payments, foreign exchange reserves, consumption, savings, loans and interest rates. However, according to the data released for fiscal 2020-21, Nepal performed better in remittance inflows.

Given the extraordinary increase in remittances, they are probably the main driver of the improvement in living standards seen in Nepal, directly (households receiving remittances) and indirectly (increased labour income of those that remained). Research published by Nepal Rastra Bank showed that compared to households that do not get remittances, households that receive remittances have a 2.3 percent lower chance of falling into poverty. With every 10 percent increase in remittance inflows to households, the likelihood of those households falling into poverty lowers by approximately 1.1 percent.

Large-scale migration is a symptom of underlying, long-standing issues rather than a sign of strength. One of the world’s most extensive and dense anti-poverty initiatives is likely to be found in Nepal. Unfortunately, more resources go into the process of delivering benefits to “the poor” rather than achieving impact (making “the poor” rich). Economists Yurendra Basnett, Chandan Sapkota and Sameer Khatiwada have rightly pointed out that much effort is also put into process innovation and complexity (how to get the goodies to “the poor”) while neglecting the apparent reality that a great job with a high salary would go a long way in reducing poverty in one of the chapters of the book entitled Politics of Change.

Large-scale migration and the resulting remittances have facilitated the expansion of low-productivity services. Still, they have also contributed to the low competitiveness (via appreciation of the real exchange rate). As a result, this cycle intensifies already-existing problems that Nepal has faced for a while, further impeding its competitiveness and limiting its economic potential. Because of all these factors, Nepal, home to some of the most hardworking and adventurous people in the world, may remain in a high migration and remittance trap for years to come.

Domestic employment

The pandemic provided the government with a fantastic opportunity to learn a lesson from the existing policy gap to keep the people who had returned to help with the need for the nation’s development. It is a monumental task to switch from foreign employment to domestic employment. Approximately 500,000 young people enter the workforce each year, and 80 percent of them manage to find work abroad. Due to a lack of investment that may have helped produce output, Nepal is now entirely dependent on imports. Ironically, Nepal imports even agricultural items, even though 66 percent of the country’s population is employed in agriculture. Agriculture, which accounts for two-thirds of the workforce and one-third of GDP, has to undergo reforms to increase productivity, reduce poverty and free up labour for new sources of economic growth.

For Nepal, unleashing massive hydropower investments would be a game changer. It would not only result in considerable increases in productivity and new investments, but it also has the potential to raise wages dramatically, reverse migration and boost competition in downstream industries. According to the National Planning Commission and UNICEF report Demographic Changes of Nepal: Trends and Policy Implications, Nepal will have an ageing population by 2028 and an elderly population by 2054. Therefore, Nepal has a very limited window of opportunity to capitalise on the demographic window. It is necessary to invest in the skills of Nepali youth to fully realise the demographic dividend. For Nepal to continue on a more robust and sustainable growth path, more human capital must be put to productive use.

History also shows us that Nepal has implemented significant reforms in the past and is capable of doing so again. The broad-based reforms that Nepal implemented between 1986 and 1996 positively impacted the economy. The share of commerce in GDP and exports, as well as the share of manufacturing, virtually doubled, increasing the economy’s openness and diversification. The political shift to democratically elected administrations, which also gave the populace a new purpose, served as the foundation for these reforms. Today, they serve as a sobering reminder that Nepal can undergo significant and complex reforms. To escape the out-migration and remittance trap, a clear set of plans and policies to increase domestic employment should be the top priority of the federal, provincial and local governments. Without rethinking our development model, the country cannot prosper or graduate to a middle-income country.