Nepal is facing an unprecedented crisis, with the double whammy of political instability and COVID-19 pandemic. Since the lower house has been dissolved and PM Oli is heading a caretaker government till the elections in November takes place or till the Supreme Court’s next ruling on the validity of his continuance, a concerted official action in this crisis phase seems implausible. This adverse situation calls for an urgent attention from its friendly neighbours, India and other countries, that can respond positively at this critical point in time. Nepal, a landlocked country which relies primarily on imports, failed miserably to secure enough basic medical drugs and vaccines. While it received the complimentary one million doses of Covishield vaccine from India under the COVAX facility and the first installment of one million procured doses from India, the remaining doses were not delivered by the Serum Institute of India (SII)—and now those who have taken the first dose, are in dire need of the next one. The abrupt knock of COVID’s second wave caught everyone by surprise in India, and in no time, Nepal too entered into a similar state. Its vaccine procurement was not well-planned, as with SII, its orders were for only three million doses. A country with a population of about 30 million should have carefully ascertained the exact need. Of late, it started exploring other options including Sputnik V from Russia and China’s SinoPharm.
The abrupt knock of COVID’s second wave caught everyone by surprise in India, and in no time, Nepal too entered into a similar state. Its vaccine procurement was not well-planned, as with SII, its orders were for only three million doses.
So far, the COVID data from Nepal suggests a grim reality. On 22 May 2021,
as per the Health Ministry, Nepal reported 8,591 new coronavirus cases in the last 24 hours taking the nationwide infection tally to 5,05,643. The countrywide death toll has now reached 6,153. The number of active cases stands at 115,806. According to the Ministry, 373,684 infected people have recovered from the disease so far; 8,848 of them in the last 24 hours. By 25 May 2021, the infection tally was 520,461; active cases 115,447, total deaths 6,531 and the number of recovered people is 3,98,483..
The figures reflect well on the trend; however, ascertaining the actual losses is not possible through them as Nepal’s COVID-testing capacity is far from satisfactory—many of the cases are going undetected. Hence, it can be estimated that these figures are at the lower side. Accordingly, the required measures should be taken by Nepal's central and federal governments.
NepaliEconomy in tatters
As Nepal is badly gripped by the second wave of COVID-19, a few international development agencies have come forward to handhold the people in distress. The Asian Development Bank (ADB) has launched
“ADB COVID-19 Response: Nepal” and is reaching out to the government and partnering agencies in Nepal. The ADB’s findings suggest that, “The outbreak of this deadly disease will hit almost every sector of the Nepali economy, shaving up to 0.13 percent off the Gross Domestic Product (GDP) and rendering up to 15,880 people jobless.” Believing the findings of leading industry chambers and think tanks, the actual losses are much higher, and it is unlikely that any key sector has remained unaffected in the latest spiral of doom. With no manufacturing capability and sufficient expertise for the services segment, even the healthcare sector in Nepal is faring poorly. There can be a few exceptions of the private hospitals and black marketers, albeit counting on those will be irregular.
With no manufacturing capability and sufficient expertise for the services segment, even the healthcare sector in Nepal is faring poorly. There can be a few exceptions of the private hospitals and black marketers, albeit counting on those will be irregular
The Nepali economy is majorly driven by Small and Medium Enterprises (SMEs), and it started to suffer in no time as the COVID first wave came in 2021 and disrupted the entire operational universe. The government gave a short, two-worded response— ‘no action’. The frontline sectors like tourism, hospitality, aviation, trade, and production linkages, supply, education, healthcare, retail suffered unimaginable losses, and now the situation is worse as the COVID second wave has halted production activities barring a few only. Last year itself, an ambitious campaign
“Visit Nepal 2020” had to be scrapped soon after its formal launch, the goal of attracting over two-million high-value visitors remained unfulfilled. Most of the luxury hotels in Kathmandu are shut or facing extremely low occupancy; the allied businesses of tour, travel and hospitality are on verge of collapse already. All these businesses combining together account for over 10 percent of Nepal’s economy.
Like the private sector, the public sector too has suffered immensely in Nepal, especially state-run banks have sustained a hard blow, with their heavy investments in the exposed segments of the economy comprising hospitality and aviation. The ancillary manufacturing units and start-ups in services particularly are in extremely poor shape in the absence of demand from outside and China’s inability to supply the critical raw materials. The second largest contributor to Nepal’s economy—the wholesale and retail sector that contributes about 14.37 percent—is also impaired, with drastic downfall in imports from China.
Business from India too is a reality of the bygone era.
The second largest contributor to Nepal’s economy—the wholesale and retail sector that contributes about 14.37 percent—is also impaired, with drastic downfall in imports from China. Business from India too is a reality of the bygone era
Nepal’s natural and human resources have been untapped, though the outbound migration for advanced study and foreign employment has helped Nepal positively in the recent years. Remarkably, foreign remittances contributed majorly to Nepal’s economy. In 2019, it contributed 26 percent of the country’s GDP. While the high rate of migration has its own drawback and shows how Nepal’s development agenda has been delinked to augmenting the domestic economy, the falling remittance and government’s revenue collection will have serious destabilising effects on its economy in the foreseeable future. The falling consumption level will have long-term adverse impacts, accompanied by social and psychological repercussions as well.
As per a World Trade Organisation (WTO) study, “Looking ahead there is also a high risk of general inflation. In the situation of limited supply from China, Nepal may have to import from third countries, which results in the products becoming more costly. The situation is alarming. Although we are yet to experience the full impact and aftermath of the coronavirus, this worldwide threat has already created economic uncertainty amongst all of us. People are worried as still we don’t know much about this deadly virus and how deep and widespread the economic fallout will be.”
Braving the unprecedented crisis
As per the
World Bank’s South Asia Focus, the growth outlook of the South Asian economies including Nepal is not positive. However, contradicting its own findings, the World Bank appears bullish in its narrative beyond the presented figures, “Prospects of an economic rebound in South Asia are firming up as growth is set to increase by 7.2 percent in 2021 and 4.4 percent in 2022, climbing from historic lows in 2020 and putting the region on a path to recovery. But growth is uneven and economic activity well below pre-COVID-19 estimates, as many businesses need to make up for lost revenue and millions of workers, most of them in the informal sector, still reel from job losses, falling incomes, worsening inequalities, and human capital deficits.”
A concerted effort is the need of the hour where the government creates an essential interface with the industry and civil society institutions, and with prioritising nation-building in post-COVID times, Nepal will be able to avert a permanent crisis. Nepal’s low population base, productive international exposure, and its democracy are in favour of an economic rebound. The policy action will show the way, and majorly the political will will influence it.
Nepal’s low population base, productive international exposure, and its democracy are in favour of an economic rebound. The policy action will show the way, and majorly the political will will influence it
Quest for an alternative development paradigm
Despite the sharp upward trends in the last five years, with falling government revenue in the pandemic times,
Nepal’s Debt to GDP Ratio is still reasonably placed at 40.16 percent as of the last fiscal year 2019-20. There is still room for more borrowing for solving the deficiency of development and bringing the domestic economy back on track; however, it has to be a cautious move with a complete check on the leakages. Even before the ongoing crisis, Nepal needed to relook at its development strategy and explore the promising potential it has on its own.
With a goal of inclusive and sustainable development, Nepal should produce electricity at a competent cost and commercialise it reasonably—with focus on the domestic market. Also, it should be less taxing as the other sources of income go up with the renewed focus on the domestic economy and ending the chronic anomalies with the taxes and custom duties. Shifting to an alternative development paradigm will be the game-changer for Nepal. It should be given a chance.
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