Maintaining unity in the ruling NCP won’t be easy
One year after the formal unification of the CPN-UML and the CPN (Maoist Center), the new Nepal Communist Party (NCP) has only now finalized the chiefs and secretaries of its 77 district committees. Party leaders hail this as a major achievement toward full-fledged organizational unification. However, there is still considerable dissatisfaction in the party over the decision-making of its top leaders, and organizational issues at the local level are yet to be settled. This is happening against the background of growing public frustration with the functioning of the communist government. Kamal Dev Bhattarai talked to Shyam Shrestha, an analyst of left politics in Nepal, for his insights.
How do you evaluate the federal government’s performance thus far?
Latest data show the country’s Gross Domestic Product is growing by 6.8 percent, a definite increase from previous years. So the size of the national economy has grown. In terms of economic stats, the government is not so weak. But expectations with this government were high because of its two-third command in the national parliament and because of the ruling party’s effective control over six of the seven provincial governments. The NCP made big promises in its election manifesto and people are judging it on that basis. Another basis of evaluation is how the government is handling the country’s key priorities. These two bases give us grounds for objective analysis. For one, serious problems have emerged in the implementation of federalism.
What problems are you referring to?
The first problem is related to budget allocation. Provincial and local governments cannot fully exercise the rights bestowed on them by the constitution if they face a funding crunch. They are short not only of financial but also of human resources. Provincial governments were not given enough financial resources. In last year’s budget, 71 percent was captured by the central government even though the center does not have many rights. Only 29 percent of the budget has been allocated to provincial and local governments. The allocation is not compatible with federal structures, with a center without many rights keeping more than two-thirds of the budget. This has created a serious problem in the implementation of federalism. Similarly, the government has failed to mobilize enough staff. The provincial government does not have the right to mobilize the police forces, and provincial level home ministries are without any role. The constitution, on the other hand, envisages powerful provincial governments.
What is the state of the local governments?
They are not doing well either. Let’s take the example of education. Local governments are empowered to exercise rights related to education but the center is recruiting the teachers. Recently, the National Education Commission submitted its report to the federal government. The commission has outlined areas that need to be separately implemented by federal, provincial and local governments. It has been over three months since the government received the report but it has not been made public yet. This is a centralized, anti-federal mentality. Party co-chairman Pushpa Kamal Dahal has himself expressed displeasure at this state of affairs.
Is it because those in power now are not committed to federalism?
This is a reality. Earlier, KP Oli used to say publicly that federalism was not his agenda. But now that he has become the country’s prime minister, the onus is on him to implement the constitution. British Prime Minister Theresa May campaigned to remain in the EU before Brexit, but she now has the responsibility to implement it. The same applies here. Sincere and effective implementation of federalism is the prime minister’s political and constitutional responsibility.
You mean PM Oli himself is not honest about the implementation of the constitution?
Yes. There is inadequate budget for the effective functioning of federal structures. The center has monopolized the budget but development expenditure is low. Most of that budget will be spent at the end of the fiscal. The NCP manifesto promised radical change in agriculture by ensuring irrigation facilities. The manifesto also states that the country will be self-reliant on food within two years. But the budget allocated for agriculture has been slashed by more than half. This shows the true intent of our prime minister. Farmers are getting very low prices for their produce and yet consumers are overburdened. The government has failed to lessen the role of brokers who are capturing the market. Another problem is that the NCP base is the lower and lower-middle classes but the government is serving the interests of the middle and high classes. It seems unaware of the class it represents and how it should function to keep its constituencies intact.
In a separate context, a year after formal party unification, NCP leaders claim to have settled disputed issues. What do you think?
Top leaders did not take unification seriously. Party unification does not mean two leaders coming together. First, there should be ideological unification. Second, there should be amicable unification of organizational structures. They announced party unification despite differences on ideology and organizational structures, which was a blunder. Now they are facing the consequences. They should resolve both ideological and organizational issues through serious discussions.
But you could argue ideological coherence was never their priority and that unification was just a quick way to get to power.
Yes, ideology is not their priority. There has been no discussion or debate on party ideology after unification, even though the two parties came from separate backgrounds. The Maoists glorified the armed insurgency and they believed in bullets. The UML prioritized the parliamentary front. One party glorifies the 10-year-long insurgency while another condemns it. They need to think of how to bridge this ideological gap. Still, they have huge differences, which is why Maoist leaders still talk about Janabadi Kranti (People’s revolution) while former UML leaders adhere to the parliamentary path.
How do you see the NCP? Is it a communist or a democratic socialist party?
It would be a big thing if the NCP could be a democratic socialist party. That would be revolutionary. In many Scandinavian countries run by democratic socialist parties, the government is responsible for education and health. Norway, Switzerland and Denmark are not communist nations but their governments nonetheless look after senior citizens, and health and education. In our case, Dr. Govinda KC has to stage a fast onto death to improve the health sector. KC, who belongs to the bourgeoisie, is demanding health reform and the communist government listens to him only at the eleventh hour. It is a matter of shame for the government. The constitution clearly mentions that health and education should not be left in the hands of businesses. The government puts on a mask of communists but it is pushing a capitalist agenda in practice.
Even in capitalist countries, the state takes the responsibility of health and education. Political ideologies are immaterial. But in Nepal crucial areas such are health and education are captured by businessmen while the government looks on helplessly. This is not the working style of a communist government with a two-third majority.
Do you think the unification will last?
If they do not take immediate steps to resolve ideological and other disputes, unification will be in grave jeopardy, for three reasons. First, ideological and other backgrounds of the two parties are different. Second, there is growing dissatisfaction over party functioning. Third, even top leaders are saying that justice has not been done. There are complaints that a few leaders exercise a monopoly. Madhav Kumar Nepal’s command over the party is strong as he served as its general secretary for more than 15 years. Similarly, Bam Dev Gautam and Jhala Nath Khanal also have a strong hold. Maoist ministers are not happy with PM Oli. The ideological as well as organizational issues remain unresolved. The organizational structure is becoming more complicated. There also are questions of intra-party democracy.
How do you assess the supposed power-sharing formula between Dahal and Oli?
There may be a dispute as Oli is not ready to step down easily. The party is not working according to a system, and there is a bureaucratic mindset. If a communist party functions in a bureaucratic way, it centralizes power at the upper level and creates anarchy at lower levels. Only a participatory approach will sustain unification. The way the party is currently functioning will deepen dissatisfaction among the rank and file, ultimately leading to a split.
There are reports that top leaders are ganging up against Oli.
This is because of Oli’s own behavior. I see the possibility of big changes in internal alliances. Dahal, Nepal, Khanal and Gautam have all suffered at Oli’s hands. If these four leaders come together, there would be a change in power balance in favor of this alliance. There are high chances of such an alliance and PM Oli fears this. The power balance is unstable. If the four leaders come together, Oli, already in a minority in the politburo, will face the same situation in the Central Committee and other organizational structures.
Now, the party is like an alliance of different factions, which are based more on differing interests than on ideological differences. Now they are united only because they are in power and disunity could throw them out of power. There are many ways to sustain party unity but senior leaders don’t seem serious about it. So it will be hard to keep the party unity intact.
Is the rift between Oli and Dahal widening?
Yes, due to some pressing issues related to federalism. Similarly, there are reports that PM Oli has not given much importance to ministers of former CPN (Maoist Center) and constantly interferes with their work. Minister for Education Giriraj Mani Pokhrel, Minister for Industry Matrika Yadav and other ministers have expressed dissatisfaction over the PM’s working style.
Quick questions with Barsha Lekhi
Q. What is your biggest pet peeve?
A. Poor customer service at restaurants and supermarkets.
Q. If you had just one day left to live, how would you spend that day?
A. Party, time with family, cook great food and enjoy it.
Q. When you are down, what keeps you going?
A. The fear of failure.
Q. What does your perfect day consist of?
A. Drinking warm water, yoga, good lunch and praise at work.
Q. How do you deal with negativity on social media?
A. I have never received negativity on social media. And even if I did, I don’t think I would care.
Q. What is the best thing a fan has ever done for you?
A. Make a fan art. It still hangs on my room wall.
Q. What would be your superpower?
A. Power mimicry.
Q. What is an issue you feel deeply about and wish to highlight?
A. Human-wildlife conflict in conservation areas.
Q. One Nepali celebrity you absolutely admire and why?
A. Anuradha Koirala for the tremendous work she has done for our society and for being idolized worldwide
Quick questions with Salon Basnet
Q. What is an opinion you hold that most people would disagree with?
A. The only thing you should care about is yourself.
Q. What do you like the most about your fans?
A. Love and support that they give in every step of my journey.
Q. If you had only one day left to live, what would you do?
A. I would organize a big party and invite EVERYONE.
Q. Your alternate career choice?
A. A singer.
Q. Did you always want to be an actor?
A. During my teenage years, I thought I would become a rockstar. Never had I ever imagined working in the film industry. But now I love it!
Q. Which actress would you like to work opposite?
A. Swastima Khadka, again.
Q. Your best and worst purchase?
A. Best purchase: Every building material I purchased to make my house. Worst purchase: The Bluetooth mic I bought online.
Q. What would you like to say to aspiring actors?
A. Work hard and have patience. Entering movie industry is not as easy as it seems but it will be worth it!
Q. Are you someone who likes to live in a happening city or its quiet outskirts?
A. I mostly like living in a city. It also depends on my mood though.
The narrative of the loanable fund crisis or credit crunch is not validated by data
The International Monetary Fund (IMF) has urged coherence in fiscal, monetary and financial sector policies for broad-based growth, stable macroeconomic situation and external sector stability. It has also emphasized leveraging knowledge and innovation, efficient fiscal and monetary institutions to mitigate downside risks in every economy. How does Nepal fare on these metrics? Pushpa Raj Acharya of the Annapurna Media Network caught up with Geert Almekinders, IMF mission chief for Nepal.
Nepal is going to achieve sound growth for three consecutive fiscals and is projected togrow at 6-6.5 percent in next two fiscals. Yet the IMF has pointed the risks of macro-economic instability.
The near-term outlook for growth is favorable. We, at the IMF, expect growth to reach 6.5 percent this fiscal and 6.3 percent in the next fiscal. This is supported by ongoing reconstruction, investment in hydro-power projects, and strong tourism-related activity. In the context of the IMF’s annual discussion with Nepali authorities in December and the subsequent staff report published in February, we noted how the strong growth is fueled by expansionary fiscal and credit policies. These expansionary policies lead to rising non-food inflation, a widening current account deficit, falling foreign exchange reserves, and a buildup of financial sector vulnerabilities.
You mean Nepal cannot sustain higher growth?
In the 10 years before the 2015 earthquake, Nepal’s growth averaged 4.4 percent a year. Governments changed frequently. The capital spending was low. The pace of macroeconomic and structural reforms was slower compared to neighboring countries, and domestic and foreign private investment were subdued. Because of the suppressed economic prospects in Nepal, large numbers of people went abroad to find work. As a result, Nepal’s actual and potential growth averaged about 4.4 percent a year. Put differently, Nepal’s economy got used to this level of growth.
Several recent developments have likely raised Nepal’s growth. Improved and reliable supply of electricity and increased political stability will both raise investment and boost growth. However, looking at the experience of other countries and the external pressures experienced by Nepal in the past two years, it is probably not realistic to target 8 percent growth.
What does the IMF recommend then?
In the staff report we recommend that the authorities focus on containing rising domestic demand pressures and external imbalance, and safeguard financial sector health. Combined with actions to make Nepal’s economy more competitive and attractive to investment, this will also deliver stronger and more sustainable medium-term growth. The government is making commendable efforts to upgrade the legal framework for domestic and foreign investors. It also held a successful Investment Summit last month. Nepal needs to build on this reform momentum and continue to strengthen the business environment.
But our finance minister has been saying that the BoP deficit is not a serious issue; it like a child suffering from diarrhea due to teething troubles.
It is only natural for post-earthquake reconstruction and investments in infrastructure to push up imports. But there are limits to the absorptive capacity of Nepal’s economy, and rapid decline in reserves is one of the signs that it may be advisable to slow the demand growth. In this regard it is encouraging to note that central bank reserves have staged a recovery in recent months and are now back up to $8.5 billion.
Nepal has had the perennial challenge of loanable fund crisis in its bank and financial institutions. And banks are now lobbying to increase the credit to core capital cum deposit (CCD) ratio from the current 80 percent. However, the central bank itself has been relaxing CCD time and again.
The narrative of the loanable fund crisis or credit crunch is not validated by data. Going by the numbers published by the central bank, banks expanded their credit to the private sector by about Rs 520 billion over the past 12 months. This is a phenomenal increase, equivalent to 17 percent of GDP. According to our assessment tools, credit is growing too fast. To contain the buildup of risk in the financial sector, we support efforts of the central bank to slow credit growth to a sustainable pace. Given the banks’ desire to expand their loan portfolio and increase their profits further, it is perhaps understandable that they are lobbying the central bank to increase the CCD ratio. However, to support financial stability, we think the central bank should resist such pressures.
Nepal has been raising revenue target every year, yet the capital expenditure is low. Banks blame the government for low deposit growth due to lack of spending of development budget. How can these problems be solved?
It is true that there is considerable seasonality in government spending. Unfortunately, a large share of central government capital spending typically takes place in the last few weeks of the fiscal. This is an old issue and there will be important gains if this spending can be spread out evenly across the fiscal. The quality and efficiency of capital spending would rise and overall cashflow in the economy would be more balanced. It will take time to address this issue and for now banks should take the seasonality into account when they plan and manage their lending business.
Imports are fueled by bank loans and the government depend on imports for revenue. Do you think this is a sustainable approach?
To sustain growth over medium term, the economy’s productive capacity must be increased through higher investment and greater competition. The capital budget management and the investment climate both need to improve. To improve budget planning and promote efficient spending, immediate action should focus on proper planning, selection and implementation of major capital projects and spreading them evenly throughout the year.
Many say remittances are contributing to the ‘Dutch disease’ in Nepal. What should be done before remittances slow down?
The steps we just discussed are also essential to create jobs in Nepal, which is needed to create a viable alternative to going abroad for the work. Recent improvement in availability of electricity has reduced the cost of doing business in Nepal. Other reforms, including steps to address physical and social infrastructure gaps, can also be expected to help boost investment, productivity and growth.
