As the country enters the seventh year of a difficult political transition, its economic prospects appear no brighter. Especially since the Constituent Assembly’s dissolution, politics seems to be the only game in town, as the country’s economic needs have been conveniently sidelined for the ‘greater good’ for the time being. This bleak climate is well reflected in the International Monetary Fund’s (IMF) latest quarterly assessment of Nepali economy. According to IMF, Nepal´s economic growth has further weakened in last three months due to huge shortfall in government spending, weak agricultural output and contraction of the Indian economy. Only a month ago, the World Bank had predicted the country to grow at 3.8 percent in the fiscal year 2012-13, which was already one of the lowest rates in the region.
The economy falters across the board: inflation is out of control, current account surplus is diminishing, and the gaping trade deficit continues to grow. As such, Nepal continues to rely excessively on (diminishing) remittance to keep its economy humming. It is difficult to argue against IMF’s recommendation of increasing “high quality spending” to perk up the moribund economy. But this appears to be an impossible task at a time the country has, year after year, been forced to operate with stopgap budgets. Thus the first course of action has to be adoption of a full year budget ordinance for 2012/13, even at this late stage of the fiscal cycle. Equally important, as the IMF emphasizes, is early approval of budget ordinance for 2013/14 to facilitate planning by line ministries and to avoid another year of budget delay.
But it will be hard to get the economy back on track without first putting the disorganized political house in order. For this, it is important that the long-stalled political and constitutional process be kick-started by reviving the spirit of consensus and cooperation among the major parties. In doing so, it would be wonderful if all major parties could coordinate to devise common economic plans for the country. If this happens, no matter which government comes to power in the future, the country will continue to move unhindered along the predefined development trajectory.
Thankfully, all major parties realize that it will be impossible to consolidate progressive political changes without first getting the fundamentals of the national economy right. But this realization has so far been inadequate to devise minimal understanding on the country’s economic development. At the minimum, the political parties ought to develop a mechanism to come up with a complete budget every year, irrespective of which party is in the government. The country’s vital economic growth should not be held hostage to partisan interests, and anyone looking to do so should be exposed. It is hard to see how the country will come out of the deep quagmire it finds itself in without genuine political commitment to economic development and shared prosperity. After all, what Nepal has been lacking over the years is not ambitious plans, but the political will to carry them through.
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