Our current economic slowdown has lately hit the import of petroleum products. The slow pace of development along with the sharp increase in the purchase of electric vehicles is attributed to the current decline in the imports of petroleum products. The reduction in the import of fuel means a notable decline in the government revenues collected through imposing higher taxes on consumers of petroleum items. This causes further slowness in the economy. According to reports, the government has lost tens of millions of revenues collected through taxes levied on fuel. The Department of Customs showed that the diesel import slid by 18.22 percent from mid-July 2023 to mid-January 2024 as import expenses were cut down to Rs. 12.12 billion in the first half of 2024/25. Last fiscal year, Nepal imported diesel worth Rs. 54.36 billion, down from 66.49 billion. The nation imported petrol worth Rs 32.15 billion, down from Rs 33.92 billion in the same period. The sluggish development project works are attributed to the reduced import of diesel, used as fuel for the operation of equipment in the construction sector as well as for the public and private transport system. The construction sector experienced negative growth in the two quarters of the fiscal year 2023/24, as indicated in the growth rate (0.3 percent).
Similarly, the lack of enough capital expenditure also affected the import of diesel, which has an impact on revenue generation. The government could spend only 16.16 percent of 352.35 billion during the review period. This reflected the government’s failure to run and conclude various projects that would have otherwise fueled the development works, necessitating more imports of fuel. Another culprit in the current scenario is the rise in EV imports, which has led to the flight of capital. Nepal imported 5,480 units of EVs worth Rs 13.19 billion in merely six months of the current FY. During the same period last year, the country imported only 5,107 units of EVs, amounting to Rs 12.73 billion. The slashing of load shedding spurred the reduction in diesel imports.
Nepal’s banking sector faces impact of sluggish economy
Nepal's economy has struggled for several reasons, which have led to a decline in petroleum imports. The biggest problem is imports are perennially higher than exports for Nepal, which compels us to spend more money buying goods from other nations. The lack of jobs for aspiring youths has forced them to leave for work abroad. While remittances are good for families, they have a role in weakening our workforce, as both skilled and non-skilled workers leave the nation instead of contributing to the economy at home. Too frequent change of government, rampant corruption, both vague or flawed policies, and lack of proactive and constructive approaches to liquidity mobilization by banks and financial institutes have affected the investment environment. For Nepal to improve its economy, the country has to do a lot more other than over-depending on revenues generated through petroleum or goods imported from third nations such as palm oil or betel nut. To fix the economic slowdown in both the long run and the short run, it must adopt some drastic measures. The government must focus on improving key sectors like agriculture, hydropower, tourism, and IT service sectors. Having better highways, an uninterrupted electricity supply, better mobilization of bank liquidity, and investor-friendly policies will attract investors, which will help businesses to function. All these will help our economy to grow in both the short and long run, thus ending our misery caused by our overdependence on import-based revenues.
