Increased imports, negative BoP likely

- POST REPORT, Kathmandu

May 11, 2015-

Nepal is likely to face increased dependency on imports and a negative balance of payments in the aftermath of the earthquake, economists said on Monday. They added that the massive tremor would hit the supply chain by reducing exports.

The economists said that the government should look after managing debt servicing, which amounts to an estimated Rs26 billion, by seeking donor help to postpone repayment of the principal and interest on external loans.

Posh Raj Pandey, executive chairman of South Asia Watch on Trade, Economics and Environment, said the economy had undergone through multiple impacts due to the earthquake.

Speaking at an interaction entitled Strategy to be Adopted to Revitalise the Economy Following the Disastrous Earthquake

organised by the Nepal Chamber of Commerce, experts said addressing labour problems, boosting tourism and conducting policy reform by approving the bills that have been pending in Parliament could help improve the investment environment for an economic recovery. They predicted that interest rates and inflation would increase on a poor supply chain.

A report has shown that the country sustained physical losses equivalent to $5 billion due to the natural disaster.

“Besides sustaining physical damage, there is a massive impact on production, distribution and marketing channels along with roads, agriculture and hydropower plants which are the main basis of economic activities,” said Pandey. “Domestic income has also been affected.”

Due to an increase in government spending on relief and rehabilitation, the earthquake is likely to increase the government’s expenditure.

As a result, the government will be compelled to seek financing through external or domestic borrowing. Pandey said it would hamper possible new investments from the private sector besides pushing up market interest rates.

Economist Bishwombhar Pyakurel urged the government to immediately estimate the economic and humanitarian costs in order to make action plans to revitalise the economic activities effective.

“The government should not hold back on spending by citing legal barriers,” said Pyakurel. He urged mobilising resources for the rural self-reliant fund through cooperatives and community based organisations to create employment at the local level.   

Likewise, Prithvi Raj Legal, former vice-chairman of the National Planning Commission, said skill-oriented programmes to address the labour shortage and injection of capital at the grass-roots level could help remove the impediments seen in the supply chain. “This could also help increase the aggregate demand besides checking possible inflation.”

The participants also urge dthe government not to provide relief money in haste without assessing the actual impact of the earthquake.

Published: 12-05-2015 09:39

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