Fingers crossed

The ugly economic outlook entangled in messy politics is a well-known characteristic of Nepal. But out the gloom, some silver linings have lately emerged. The economy is projected to grow at around 5 percent this year, the highest in three years, and remittance, the backbone of our economy, has been growing at an exponential rate of 38 percent. Moreover, the balance of payment recorded a hefty surplus of over Rs 60 billion after last year’s big deficit and tourism industry is rapidly reviving after years of sluggishness. However, behind all these good news, one prominent question does stand out: How sustainable are the latest achievements?



Frankly, we doubt their sustainability. Most of them have not been the product of policy reforms initiated by the state but the product of good fortune. For instance, Nepal achieved a record growth in cereal production not because of expansion of irrigation facilities or enhanced supplies of agricultural inputs, but because of good monsoon.



Paddy, which contributes around 21 percent of the agricultural GDP, recorded a whopping 14 percent growth. In addition, the production of winter crops, which commands one-third of the total crop production, were healthy too since there was no damaging cold wave in the Tarai region. All those good fortunes ultimately propped up the GDP growth rate. But there is no guarantee that similar fortune will smile upon us next year.



Similar is the story of remittance. It grew because of higher demand of Nepali workers in Malaysia and Gulf countries as their economies continued to expand. According to recent statistics, Nepal is exporting roughly 1,500 youth each day for foreign employment. The healthy growth in remittance has greatly helped to correct the deficit seen in the balance of payment, which in turn has boosted the country’s foreign currency reserves. But our good fortunes might well turn into a disaster if the economies that imports Nepali workers plunge into recession or if Iran’s long-running disputes with the West on its controversial nuclear program ignites a war in the Gulf region.



However, we are hopeful because of the astonishing revival of tourism industry, which has undoubtedly been the country’s most important achievement of last one year. It has the strongest multiplier effects on the economy and it is one of the few sectors with the capability of luring foreign currency, though far less than what remittance brings in. So, since we can do nothing to minimize possible risks in Nepali labor hosting countries, we believe massive reforms in agriculture, one of the few sectors that is largely unaffected by power shortage, is the most powerful means to reduce growth volatility and move toward a more sustainable growth.

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