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If Nepali workers return home from abroad with two phones or slightly more gold than allowed, they face interrogation at TIA. Surprisingly, the government seems unwilling to take strict action against gold smugglers.

The Home Minister and Finance Minister had no idea about the attempt to smuggle roughly 100 kg of gold? Negligence of airport officials in detecting gold through X-ray machines has raised fresh concerns.

What compounds the case is the involvement of CPN (Maoist Center) leaders in gold smuggling. Despite this revelation, the government remains tight-lipped. That is why the UML has sought a special investigation committee.

During KP Sharma Oli’s premiership, a culprit involved in the 33-kg gold smuggling case was apprehended, instilling hope that Nepal will no longer be a transit point for such illegal activities. After the change of guard, more instances of smuggling have emerged, and authorities seem to be struggling to apprehend offenders.

The author is chief whip of CPN-UML

The Commission for the Investigation of Abuse of Authority (CIAA) is delaying investigation into the alleged misuse of approximately Rs 4bn released for the salary and well-being of Maoist combatants kept in cantonments.

The investigation had remained dormant for nearly two years, during which the CIAA could only obtain expenditure details related to the Maoist combatants from the Ministry of Peace.

As per the information provided by the ministry to the CIAA, a total of Rs 9.79bn was spent on the salary and well-being of Maoist combatants over a span of nine years. Out of this amount, Rs 5.88bn was allocated solely for paying the salaries of these combatants. Additionally, Rs 2.76bn was utilized for logistics, Rs 261m for infrastructure development, and Rs 273.71m was allocated for other miscellaneous expenses, according to the letter sent by the ministry to the CIAA.

The CIAA took a policy decision to investigate the incident after it concluded that the funds released for Maoist combatants by the then Army Integration Special Committee had been misused. The individuals under investigation include former Maoist Chairman Pushpa Kamal Dahal, former Prime Minister Dr Baburam Bhattarai, former Minister Krishna Bahadur Mahara, and other Maoist commanders.

The Maoist party has been accused of embezzling tens of millions of rupees from the national treasury by creating fake combatants. Initially, there were 32,250 combatants in various cantonments after the Comprehensive Peace Accord (CPA) was signed between the Maoist party and the government in 2006. However, the United Nations Mission to Nepal (UNMIN) verified only 18,500 of them as legitimate combatants. Subsequently, around 4,000 soldiers under the age of 18 were sent home. Even though UNMIN verified 19,600 as Maoist combatants, during the categorization process for integration into the Nepal Army or reintegration into society, only 17,074 combatants were present, approximately 3,000 less than the verified number.

Since the beginning of the peace process, over Rs 20bn has been spent on managing Maoist camps and supporting the combatants over a period of six years.

CIAA investigation has concluded that approximately 50 percent of the verified combatants were found to have been created solely for documentation purposes, intending to misuse state resources. The Maoist party has been accused of generating fake documents for around 3,000 soldiers who never actually existed, all in an effort to embezzle their salaries.

Complaints filed at CIAA state that salaries of about 6,000 soldiers have been embezzled over a period of nearly five years.

Along with government-to-government relationships, the Communist Party of China and India’s ruling Bharatiya Janata Party are competing to cultivate ties with Nepal’s political parties. Keeping their ideological positions at a bay, they are reaching out to all major parties in Nepal.  

High-level delegations from both the CPC and BJP are visiting Kathmandu, while leaders from various political parties in Nepal are also flying to China and India, with more party-to-party level exchange of visits on the cards. 

Political analysts say both New Delhi and Beijing are making a departure from their traditional policy of backing only specific parties and leaders and building ties with all political forces in Nepal, considering the political instability in the country.

The spectacular emergence of the recently formed Rastriya Swatantra Party and the resurgence of Rastriya Prajatantra Party—both of which are challenging the three traditional parties, Nepali Congress, CPN-UML and CPN (Maoist Center)—have also forced China and India to recalibrate their approach. 

The CPC has realized that by fostering and nurturing Nepal’s leftist forces is not going to secure China’s interests.  The BJP, which has been in power in India since a decade, also wants to achieve its agendas including Hindutva ideology in Nepal by roping in all political parties. For them, a favorable government in Kathmandu is not enough; they want the overall political environment of Nepal to be on their side.  

Political analyst Lokraj Baral says both the BJP and CPC are adopting “a realistic approach” in building ties with Nepal’s political parties. 

“There is no ideological foundation in such relationships because both sides want to appease each other to enhance their power.” 

Baral says the CPC is still more partial toward Nepali communist parties, even though it has increased its engagements with other political forces.

This week, Yuan Jiajun, member of the political bureau of CPC visited Nepal at the invitation of the ruling Maoist Center. During his stay, Jiajun met leaders from across the political spectrum. As Prime Minister Pushpa Kamal Dahal was out of the country, the Chinese leader held a virtual meeting with him. 

While the Chinese leader was in Kathmandu, a five-member delegation led by Phampha Bhushal of the Maoist party flew to India at the invitation of the BJP. The ties between the BJP and Maoist are only just evolving. Sources say lately, India's ruling party has also been approaching the UML.  

As for the Nepali Congress, it has always been close to India. Last year, the BJP had invited a group of leaders from the Congress party, which was led by Prakash Sharan Mahat. Former prime minister and Congress president, Sher Bahadur Deuba, had also visited the BJP headquarters in India before holding bilateral talks with Indian Prime Minister Narendra Modi. 

The engagement between China’s CPC and Nepal’s Maoist party has been there for a long time. During the insurgency period, Beijing largely supported Nepal’s monarchy, but it took no time to reach out to the Maoists, led by Prime Minister Dahal, after the party came to power following the fall of monarchy. Ideological proximity between the CPC and Maoist party brought them together. In the past six months, at least two Maoist delegations including one led by former speaker Agni Sapkota have visited China.  

Since the Maoist party is in power right now, Prime Minister Dahal is making utmost effort to strike a balance between India and China. He needs the support of both the CPC and BJP to stay in power.

But scores of Maoist leaders believe that they should step up engagement with China to reap the benefit from its economic development.

They are of the view that Nepal should immediately implement the Belt and Road Initiative (BRI) and other agreements reached between the two countries. Through cooperation with Nepal’s political parties, China wants to replicate its development model in Nepal, not export its political ideology, say some experts. 

Due to increased interactions, Nepali leaders too have started appreciating China’s development and its model.

During his talks with Nepali leaders, Chinese leader Jiajun said that China is willing to deepen practical cooperation under the BRI with Nepal, and deeply and solidly promote the strategic partnership of cooperation featuring ever-lasting friendship for development and prosperity between two countries.

China’s Xinhua news agency reported that the CPC is willing to strengthen exchanges and mutual learning with Nepali political parties to boost the development of China-Nepal relations. Jiajun told Nepali leaders that China is willing to enhance cooperation and exchanges with Nepal in agriculture, poverty reduction and education to enrich the relationship between the two countries through subnational exchanges.

Tanka Karki, former Nepali ambassador to China, says it is normal to build party-to-party relationships and there is nothing harmful about it. “Both countries want to enhance people-to-people relationship and political parties remain a key instrument of it.”

The relationship between Nepal’s Maoist party and the BJP is a new one. In July last year, as a party chair, Dahal visited the BJP headquarters in New Delhi and held talks with BJP President JP Nadda. After one year, BJP hosted the Maoists delegation in its party office for what they call to strengthen party-to-party relationship.

Perhaps, it is the result of cordial ties between the BJP and Nepal’s political parties, many Nepali politicians including Prime Minister Dahal are talking about protecting and promoting Hindu religion and culture.  

Not only India and China, the US, the UK and the EU countries are also trying to enhance their influence among Nepal’s political parties through bilateral exchanges and visits. They are mainly close with parliamentarians to influence the law-making process in Nepal.  

Political analyst Chandra Dev Bhatta says India and China’s increased engagements between the political parties of Nepal, can certainly be helpful to enhance relations at the political level which can also percolate at the peoples level.

“This is also particularly important when diametrically opposite political parties in terms of ideology are in power on both sides— BJP in India and Maoist Centre in Nepal. It will help resolve contentious issues between the two countries,” he says. “But if such engagements are done merely for other interests either to stay in power or to create a comfortable regime, they could backfire and damage the relations.”

The monetary policy for the current fiscal (2023/24) has garnered contrasting reactions from different groups. While some have supported the policy’s intention to mitigate risk associated with stock and real estate lending, others have raised concerns over the absence of an explicit economic growth target, signaling Nepal Rastra Bank (NRB)’s shift in priorities. In the last fiscal, economic activities faced significant challenges due to a dearth of investable capital in banks, rather than high interest rates. During the period from Dec 2021 to Dec 2022, banks experienced a shortage of investable funds, leading to a contraction in loan provision and a subsequent slowdown in economic activities. The confluence of these factors placed entrepreneurs in a precarious situation, further exacerbating the economic dilemma.

Since Jan 2022, the available investable amount in banks has shown an upward trend. However, a certain degree of ambiguity persisted among banks regarding the inclusion of debentures in local-level deposits. Despite this, the demand for loans failed to escalate amid the dormant economic landscape. Consequently, loans were not extended by banks during this period.

The existing scenario suggests that banks still possess an untapped reserve of around seven percent, approximately Rs 4bn, available for investment. This amount is expected to suffice the loan demand for the next 6-7 months. Additionally, auxiliary resources from remittances and debt recovery further augment the investable capital pool. In light of these developments, the Nepal Rastra Bank (NRB) has astutely introduced a flexible monetary policy for the current fiscal, entailing a reduction in the policy rate from seven percent to 6.5 percent. This strategic move aims to ameliorate loan interest rates, as already evidenced by banks’ recent reductions.

Anticipated decrease in interest rates is likely to spur a surge in loan demand, consequently reducing operational costs for businesses. With a relatively low CD ratio, banks can source affordable funds from the NRB and invest them at favorable interest rates into loans, thereby fostering increased economic activities. As a result, entrepreneurs are poised to be more enticed to avail themselves of loans. Meeting the demand of entrepreneurs, interest rate reduction appears to be a key factor facilitated by the current monetary policy, ensuring economic continuity. Additionally, the increment of the real estate loan limit from Rs 15m to Rs 20m is likely to stimulate systematic real estate business and encourage small investors in share loans, both of which contribute positively to overall economic activities.

Furthermore, the monetary policy explicitly addresses the demands regarding working capital loan guidance, as of 2022. While these loans have not been a major issue previously, the NRB acknowledges the necessity of revising guidelines to tackle pertinent problems associated with such loans, ultimately contributing to sustained economic activities.

The introduction of the “Stressed Loan Resolution Framework” to facilitate debt restructuring for borrowers facing challenges due to natural disasters or special circumstances serves as a welcome measure. Effectively utilized, this framework can aid the recovery of affected industries and bolster overall economic viability. However, it is crucial for banks to exercise discretion and refrain from haphazardly rescheduling and restructuring loans, as such practices could engender future complications. Responsible and targeted use of this facility is advisable.

In alignment with government policies aimed at revitalizing the economy, the Nepal Rastra Bank has formulated a monetary policy to complement the budgetary initiatives. The policy focuses on promoting loans to productive sectors, continuing the provision of loans up to two crore rupees for businesses operating in Nepal, and instilling optimism in the prospects of the economy.

In a positive stride, the monitoring of major borrowers has been prioritized, seeking to prevent disproportionate allocation of bank funds and address any inquiries or doubts surrounding their utilization. NRB’s vigilance over large borrowers and the prospects of introducing a policy to extend loans to companies and businessmen with 49 percent public shares are potential measures to bridge the wealth disparity gap.

Additionally, amendments to the Banking Offenses Act are proposed to deter chaotic activities observed in the banking sector recently. Such actions are expected to ensure that perpetrators are held accountable for their actions, thereby promoting a more secure financial environment. Moreover, NRB's collaboration with relevant agencies in combating money laundering and ensuring a safer borrowing environment bodes well for the development of the financial sector.

An encouraging development is NRB’s commitment to supporting the supervision and regulation of savings and credit cooperatives. The establishment of a separate regulatory body, backed by the government and the NRB, is crucial to address the prevailing issues in the cooperative sector, furthering its stability and efficacy.

Business communities anticipate caution in expectations, emphasizing that cheaper interest rates are necessary to foster a conducive business environment, but effective implementation of existing policies is equally crucial. The market’s significant message is that relying solely on monetary policy may not be wise in the future. Instead, policy decisions should consider the broader economy rather than just market demand. To meet political and market expectations, certain flexible elements have been integrated, especially in providing support to the real estate and stock market sectors.

It appears that the NRB aims to strike a cautious balance, considering the improved liquidity situation. Stakeholders may need to adopt a more cautious approach, as no radical shift in policy regimes is expected. The NRB may revisit and revise its actions if the need arises.

The author is Deputy Director at Nepal Rastra Bank. Views expressed herein are personal