- Hurdles to prosperity are far more difficult to clear than seasonal economic distresses
Feb 19, 2019-
The Nepal Communist Party government headed by Prime Minister KP Sharma Oli completed a largely eventless year in office on 15th of February. However, he seized the opportunity to enumerate the achievements during his tenure in office. He tried to make this anniversary eventful by inaugurating the ‘Nepal Ship Office’—an initiative to sail Nepal’s own ship in international waters, which he had for long personified with his pride and symbol of nationalism. He also addressed the nation through television on the same day and formally launched the ambitious ‘Prime Minster Employment Programme with much fanfare.
In his extempore speech sat those functions, Prime Minster Oli often repeated that his primary area of concern lies with the happiness of the people and that he was not much bothered by the plummetingeconomic indicators and exacerbating risks.
But in the ‘official’ televised address, he placed considerable emphasis on his claims of ‘historic’ and ‘unprecedented’ economic and developmental achievements by citing either selective or lightly cooked-up data. To draw his point home, he referred to being able to maintain six percent of economic growth rate for the third successive year, contain the price hike, to attract a substantial investment in the productive sector and to complete the foundation for implementing the federal polity.
But the data and events that unfolded throughout the ‘celebration week’ dwarfed all his tall claims. The ‘Current Macroeconomic and Financial Situation of Nepal’ published by the country’s central bank, Nepal Rastra Bank (NRB), did not tally with the prime mister’s claims. For example, the growth rate of merchandise exports declined to 10.3 percent as compared to the growth of 13.5 percent last year. Inflation touched 4.6 percent as against 4 percent and total trade deficit widened 32.1 percent to touch Rs.678.53 billion. The foreign direct investment to Nepal is now only Rs.4.36 billion as compared to Rs.14.33 billion during the corresponding period last fiscal year. Even prime minister’s address could not boost the investors in Nepal’s stock market, the index of which became further bearish since the rosy portrayal of the economic situation of the country.
One key failure of the government is its inability to operationalise the federal structure. The chief ministers of all seven provinces in unison are complaining that the federal government has been persistently reluctant to ‘facilitate’ them in exercising their constitutionally guaranteed rights. Chief Minister of Gandaki Province Prithvi Subba Gurung publicly alleged last week that the understanding reached in the Inter-State Council meeting on December 10 was in fact headed by the prime minister himself.
One of the crucial ramifications of such failure to effectivelyimplement federalism is manifested in the sub-national and local government’s inability to mobilise the resources, including the components of federal equalisation grants. In turn, as the liquid cash remained locked in government coffers—of all levels—development outcomes have not only suffered, but the entire financial system is faced with a constrained supply of loanable funds, ultimately pushing the bank interest rates effectively above the 15 percent mark.
Following the prime minister’s next set of claims regarding the ‘fantastic investment climate’ in the country, a delegation of business leaders headed by Bhawani Rana, the president of Federation Of Nepalese Chamber of Commerce and Industry (FNCCI) and seconded by Morang Chamber of Commerce delegates, officially cautioned him by pointing out that the private sector investment is becoming increasingly ‘impossible’. Unaffordable level of interest rates charged by the banks and unavailability of finances despite the high rates were main concerns of the business community.
The Prime Minister’s ‘assurances’ to business leaders were even more worrisome. First, he held banks directly responsible for the higher rates without acknowledging the fundamental economic rule that interest rates are subject to variation depending on the quantity of supply and demand of liquidity in the market. Second, such supply constraints are largely caused due to the government’s sheer inability to carry out capital expenditure as earmarked in the budgets at different tiers.
The situation further worsened since the inflow of foreign investment and other cash transfers have substantially reduced in recent times; the government’s inefficiency works as a major repellant to potential investors. Third, his promise to ‘instruct’ the NRB to reduce the interest rate, rather than work to increase the government’s cash flow in the market, is against the provision of NRB Act 2002 that gives the central bank the operational independence. Not to mention, the NRB may remain helpless to comply to such instructions until the liquidity flow in the market is reasonably increased.
The ball, again, lies in the government’s court. But beyond the dwindling indices and the government’s patchy responses, the government’s overall credibility certainly is a cause of grave concern.
Away from nation’s immediate priorities of fixing economic downsides and structural malfunctions (mainly on functionalising the federal façade), the risk of the entire political capital is being consumed by newly surfaced intraparty loggerheads within the ruling Nepal Communist Party (NCP).
Publicly expressed discontents of a co-chairman of the NCP, Pushpa Kamal Dahal, over Oli’s intention to take the issue of transitional justice to a conclusion as per internationally accepted adjudication norms, holds the potential to derail the party’s unification process and, thereby, affect political stability. If Dahal’s threats to Oli to go back to guerrilla warfare are real and not mere bargain tantrums to include his henchmen in the to-be-reconstituted Truth and Reconciliation Commission, the very future of the government may soon run into rough waters.
If Dahal leaves the Oli coterie and joins hands with other two dissenting former heads of the party, Jhalanath Khanal and Madhav Nepal, the prime minister will have no options to capitulate in the situation that will emerge.
But Oli seems prepared to fiercely fight to clear every impediment in his road to retain power. One of his preferred modus operandi seems to be forcibly suppressing all forms of dissenting voices wherever possible; within his own party, in public platforms, and in the (social) media.
The mood of Oli and his apparatus that is running the state clearly appears to be one of heightened and absolute unapologetic self-righteousness. Further dialogue and course correction is warranted, not only to address his demeanors that are incompatible to the democratic spirit, but also to highlight the lack of concern for democracy and the agenda to ensure its institutionalisation. Political roadblocks to prosperity are far more difficult to clear than seasonal economic distresses.
Wagle tweets at @DrAchyutWagle.
Published: 19-02-2019 10:55