In deep economic crisis, Nepal may just sail through
The war in Ukraine which lead to an increase in oil and food prices has largely impacted the economy in Nepal
New Delhi: The economy in Nepal which was on the path of recovery following the Covid-19 pandemic has further been hit by the Ukraine crisis.
The International Monetary Fund (IMF) noted that the global economic impact of the war in Ukraine is exacerbating existing vulnerabilities and impacting Nepal’s import-reliant economy, increasing inflation, and decreasing international reserves.
The war in Ukraine which lead to an increase in oil and food prices has largely impacted the economy in Nepal.
Meanwhile, the IMF has said that although the reserves remain adequate but have declined more than anticipated.
The economic growth in Nepal
The latest World Bank figures suggest that Nepal is estimated to grow at 5.1 percent in 2023 and 4.9 percent in 2024.
In the first decade of economic liberalisation, the growth rate trend was optimistic. However, this trend has been declining over the years. During 2000-2009, the average annual growth rate of GDP was 4.1 percent, reaching a high of 6.1 percent in 2001 and a low of 0.1 percent in 2002.
Similarly, during 2010-2021, the annual average growth rate was 4.3 percent, a slight or marginal increase by 0.2 percentage points over the previous period, reaching a high of 9 percent in 2017 and a low of -2.4 percent in 2020. This is barely enough to feed the population, which is growing at the rate of nearly 2 per cent per year.
If such economic woes continue, hunger, malnutrition rife, employment insecurity, social insecurity, health crisis and loss of livelihood will become a routine occurrence.
Nepal no longer a ‘Least Developing Country’
Reports suggest the economic situation in Nepal is not as alarming as it is perceived to be. As far as the foreign exchange reserves is concerned, Nepal is in a far more better condition than Pakistan and Sri Lanka.
During the 40th plenary of the 76th session of the United Nations General Assembly (UNGA), Nepal qualified to graduate from the LDC category to a developing country.
Despite encouraging signs of recovery, Nepal will need corrective measures to keep the economy firm.
A report in the Kathmandu Post said, “The economic growth rate in Nepal is not only disappointing but also depriving. Irrespective of its size, few people have excess over the fruits of its growth. This means the distribution of the fruit of the growth has been skewed. Unemployment is endangering the livelihood of people, corruption is rampant, and anti-corruption mechanisms are ineffective. The living standard of the richest 10 percent has been increasing over the years while that of the rest is deteriorating. The monetary sector is growing, setting up a large number of financial institutions while the real sector is deteriorating.”
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