Some indications of a strengthening economy, but most still point to worse

The International Monetary Fund (IMF) and the Asian Development Bank (ADB), two significant donor organizations, said two days apart that Nepal's economy is strengthening.

The economy will benefit from the increase in agricultural output, visitor arrivals, electricity generation, etc., according to a statement issued by ADB on Wednesday. In response, ADB's National Director Arno Koshwa stated that the GDP will rise as a result of rising domestic income, faster infrastructure spending, and the resurgence of services related to tourism.

He claimed that the agriculture sector will grow as a result of the early completion of paddy planting and the regular rains. He added that the expansion of industrial growth will be aided by the increase in power generation capacity.

As ADB stated, Nepal now has an abundance of electricity. Every day, about 800 megawatts of power are exported to India in order to meet domestic demand. Approximately 1100 megawatts of electricity will be connected to the national transmission line during the current fiscal year.

Overall, according to ADB's prediction, Nepal's economy will continue to improve in the current fiscal year 2081–082, as it will support economic activity. As per the ADB, this year's growth rate is expected to be 4.9%. The economy grew by just 2% in 2023. According to ADB's estimation, in 2024, the growth rate will be 3.6.

According to ADB projections, Nepal should be able to contain inflation in 2024 to a maximum of 5.4 percent. It was 7.7 percent in 2023. According to ADB projections, inflation in 2025 will rise marginally to 5.5 percent.

Earlier, members of the IMF visited Nepal from August 26 to October 6. The IM stated in a statement following the ten-day tour that there are indications of progress in Nepal's economy. The group from Colombo, headed by resident representative Sriwat Jahan, claimed that Nepal has adequate foreign reserves, that remittances have increased, that inflation is under control, that tourist arrivals have increased, and so on. 

Remittances have grown rapidly as well. As to the data provided by Nepal Rastra Bank, remittances totaling one trillion and seventy-seven billion rupees were received as of July in the current fiscal year. One trillion and sixteen billion rupees were received in July of previous year.

In the first month of the new fiscal year, foreign exchange reserves have also increased. There has a reserve of $15 billion,580 million as of July. As of June 30th, 2080–2081—the reserve stood at $15 billion and 27 billion USD. The value of dollars has climbed by 2% in a single month. The National Bank estimates that this will fund imports for more than 13 months.

Price increases are another area in which donor agencies have demonstrated economic improvement. The increase in consumer prices in July of this year is restricted to 4.10 percent.

Compared to 7.52 percent over the same time frame in the previous year. Both the post-investment position and the current account are in the black. The current account had a 30.89 billion surplus as of late July. The current account had a surplus of 13.37 billion up until July of last year. In a similar vein, study results in savings of 40 billion 90 million. 36.43 billion was saved in the previous year.

"Issues with Government Finance Administration"

As a result, even when the economy has improved in certain areas, the majority of the indicators remain negative. Despite the celebration being near, the businessmen have refrained from taking out loans. The bank's ample liquidity has caused the interest rate to drop. There is a large deficit in foreign trade. Government spending and revenue collection have fallen short of expectations. 

In the first two months of the current fiscal year, the nation has lost 2 trillion 37 billion 45 crore rupees in commerce, according to the customs agency. Exports fell by five percent. In July and August of current fiscal year, 11.46 percent of the targeted revenue was collected, according to the Comptroller General's office.

Due to the festival, imports will be higher in August, but the government has not been able to meet its revenue targets during this time. Not even a single rupee has arrived in the course of the two months' foreign subsidy. The government has set a goal of Rs 52 billion 32 crore in subsidies for this year. Additionally, government spending is not anticipated. In July and August, only 7.51% of the total amount was spent.

As a result, experts have noted that while the Nepalese economy, which has been in decline for a few years, is showing some signs of improvement, it is not yet sustainable. 

According to economist Dr. Dilliraj Khanal, issues with government financial management prevent the economy from being declared to have improved. The government has not been able to meet its spending and revenue targets. The amount that can be invested in the bank has been kept to a minimum, he said. "It is not seen that it will be completed with this way of working." As a result, despite the appearance of improvement in certain areas, the economy is still struggling. He warned that the market might be badly impacted once more because of the significant issues with the government's financial management. 

Market demand and income collection, according to experts, do not match the goal. They think there is a revenue leak here. Businessmen have been claiming that the channel's content has not been able to compete in the market because of widespread piracy.

"Not only is the government losing revenue due to stolen exports, but businessmen are not able to invest due to lack of demand," stated Rajesh Agarwal, president of the Nepal Industry Confederation.

A team from the government has been established to handle theft reports. Finance Minister Bishnu Paudel announced the creation of a committee to boost revenue and reduce theft following the formation of the new government. We'll have to wait and see what the team follows up with.

While there are still a lot of these issues facing the economy, economist Dr. Chadbad has been instrumental in bringing about some of the current advances. says Achyut Wagle. "There is no sign of improvement by the government's policy work," he stated. It's barely gotten any better. Festivals are involved in this as well. According to him, the economy is not improving by getting stronger or stronger.

Economists claim that until domestic output rises, the service sector improves, and investor confidence is reinforced, the economy cannot be said to have improved. Experts advise increasing domestic output and finding an other source of foreign exchange other than remittances in order to address this. "Government should control current expenditure and increase development expenditure," economist Khanal stated.