Political instability could deteriorate investment climate, give additional financial burden to country: Experts

KATHMANDU, Dec 20: Economists and industrialists have warned that the country will have to incur a huge economic cost due to the sudden decision made by Prime Minister KP Oli to dissolve the federal parliament and announce dates for the midterm elections. The country might face an increasing burden of debt and downfall in the investments with the government’s move that was not anticipated by most businesspersons and investors.

As the country was reeling under the threat of the COVID-19 pandemic, the government had been putting efforts for the past several months to settle the intra-party rift within the ruling Nepal Communist Party (NCP). But as there was no sign of resolving the intra-party rift, Prime Minister Oli recommended President Bidhya Devi Bhandari to dissolve the House of Representatives and set new dates for the mid-term general election on April 30 and May.

As controversy, whether the decision of Prime Minister Oli was legitimate, is set to last for long, the country is likely to face huge economic costs if the country goes to a fresh election. Economists said it will put the government under pressure to manage financial resources while increasing the threat of extortion from the business community.

Economist Dipendra Bahadur Chhetri said the country might have to take additional borrowings from both internal and external sectors to manage the expenses for the elections. “As the foreign loan is always subjected to productive use of the borrowed money, donors may raise questions in future while sanctioning loan amounts,” Chhetri told Republica.

According to a study conducted by the Election Observation Committee, Nepal (EOC-Nepal), a total of Rs 13.16 billion was spent on elections of the three tier governments held in 2017. Out of it, Rs 1.62 billion was spent by the government for the federal election. In addition to this, candidates and their supporters spent Rs 2.63 billion for the provincial election and Rs 1.96 billion for the federal election.

Former Finance Secretary Shanta Raj Subedi said the political chaos will slow down development activities and create a risk of money extortion from private sectors. “As the political parties mostly manage their expenses through the extorted money in the form of donation, it is likely to affect the domestic entrepreneurs and overall business environment,” Subedi said.

Industrialists expressed their woes over the inconsistency in the implementation of economic policies due to current political development. “Many entrepreneurs who made investment with a hope of political stability due to two-thirds majority of government in place, will be hard hit by the political instability,” said President of the Confederation of Nepalese Industries Satish Kumar More.   

Assistant Professor of Economics at the Tribhuvan University Raghu Bir Bista said the country will have to bear an additional cost burden with the fresh election. “It is also equally important to take into account the indirect costs involved while assessing the impact of such political moves.  Such costs are often more than the actual financial costs,” Bista said.