KATHMANDU, April 10: The government is yet to come up with a strategy or plan to revive the economy that is certain to be severely impacted by the COVID-19 pandemic.
While the government announced a package of relief measures last week, they were largely aimed at providing temporary assistance to the poor and businesses hardest hit by COVID-19 and the ongoing lockdown.
These immediate relief measures were aimed at providing assistance to daily wage earners or laborers who lost their livelihood and relaxing the tax filing deadline for businesses.
However, these temporary measures are not enough to soften the blow to the economy that has come to a standstill, according to economists and private sector leaders.
“Through temporary measures, the government has offered relief to the most vulnerable people and businesses. But these can't stimulate the economic activities in the country,” Keshav Raj Acharya, a senior economist, told Republica.
“Now, the government should come up with a strategy to put the economy back onto the recovery path. This is an unusual time where fiscal conservatism does not work. So, there should be a stimulus package to protect businesses and industries, shield the economy from the coronavirus disease and ensure people are not thrown out of their jobs,” he added.
But, the government is still clueless about how severe the impact of COVID-19 will be on the economy. The National Planning Commission has been asked to carry out a study on the disease's impact on the economy. It's not only the government that is left wondering about the economic fallout of the pandemic. Even private sector leaders, economists and multilateral organizations are uncertain about the severity and magnitude of the COVID-19's economic damage.
“In today's world, things are changing by the day. Our assessment of the impact on the economy right now may be fundamentally different from tomorrow. Tomorrow is going to be different from today or the day after tomorrow,” said Faris Hadad-Zervos, World Bank Country Manager for Nepal.
“We all are operating under the understanding that we need to act very quickly. The government has been moving quickly by introducing relief package to address the immediate impacts of COVID-19,” he said.
However, it's not that the government has not done anything yet. The government is said to be holding discussions with the stakeholders to chart out its strategy to mitigate the potentially devastating effects of COVID-19 on the economy.
“We are making assessment of the impact. The problem is that the scenario is changing rapidly. Our response has been in line with the changing scenario. We introduced temporary relief as the daily wage earners were suffering and small businesses were seeking some relaxation of various deadlines,” said Uttar Kumar Khatri, a joint secretary at the Ministry of Finance, adding that more measures will follow in the days to come.
The Asian Development Bank (ADB) last Friday projected that the economic growth in the current fiscal year 2019/20 is anticipated to contract to 5.3% from pre-COVID estimate of 6.3%.
However, growth could further contract if the economic and financial crisis deepens due to this pandemic, according to the ADB's Macroeconomic Update for Nepal. The impact on livelihoods of daily wagers and informal workers could be huge if the situation persists for much longer period.
Private sector leaders also see an urgency from the government to lay down measures and plans to support businesses for their revival as well as broader economic recovery.
“We are happy that the first package of relief measures like deferment of tax filing and loan repayment deadlines came in line with our requests. But, those were measures that were needed during the lockdown,” said Shekhar Golchha, senior vice president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI).
According to Golchha, the FNCCI is presenting its recommendations on measures that the government should take to revive businesses and stimulate economic activities to the government on Thursday or Friday.
“The next round of package should have measures including assistance to lift businesses that are on the verge of collapse so that the economy could regain its footing,” he added.
For the World Bank's Country Manager for Nepal Hadad-Zervos, the need is to have early discussions on a recovery plan.
“There are a lot of uncertainties and it's very hard to assess or judge whether a relief package or stimulus or recovery package is a good one or not. It's too early. However, we have to have early discussion on stimulus and recovery. This is being done. The government is holding discussions with us on recovery and stimulus strategy or action plan that will be announced within the next couple of weeks,” added Hadad-Zervos.