Nepali Economy : Yubaraj Khatiwada again

Visit Nepal 2020 kicked off with the unveiling of the oversized yetis, the much-reviled campaign logo. No sooner had the year started, coronavirus hit China, from which Nepal expected at least 500,000 tourists this year. The number of Chinese tourists soon collapsed. With much of the world now under the grip of the dreaded virus, Nepal’s signature tourism campaign has been called off. The hospitality sector that had borrowed heavily in anticipation of the Visit Nepal tourist bump has been walloped: average hotel occupancy is barely 15 percent. Restaurants are deserted in the fear of corona contagion. Travel in and outside the country has slowed to a trickle, wrecking aviation.
As if that were not enough, the re-appointment of Yubaraj Khatiwada as minister of finance, despite his dismal performance in the past two years, has sapped any remaining confidence of businessmen and investors. The stock-market that witnessed an exuberant rise when the news of his exit surfaced has since the confirmation of his re-appointment seen a bloodbath. There are more signs of trouble for Nepal. India’s GDP growth is now under-6 percent. Even without the corona epidemic, the Chinese economy was similarly slowing, and corona has firmly put on the skids. The Oli government, which had been banking on developing Nepal as a ‘vibrant economic bridge’ between these two giants, seems to have run out of ideas.

It’s easy to panic in this situation. In fact, not one thing seems to be going right for the economy. Yet this is precisely when calm is needed. Khatiwada has always been a critic of ‘laissez faire’ capitalism, and a strong advocate of greater state involvement in the economy. That would not necessarily be bad for a country in Nepal’s stage of development. It has indeed become vital to secure the interests of the poor from crony capitalists. Yet Khatiwada seems to believe that most private actors are crooks and only by wielding a stick can they be brought in line.

Instead of supporting the economy and setting the foundation for a welfare state, in line with the government’s commitment, his measures have demotivated businessmen and entrepreneurs and scared away investors. Khatiwada has a second chance to redeem himself. The monetary policy is far too tight for these troubling times. How will he lay the foundation of a functioning welfare state if he doesn’t have any money to work with? Surely, he doesn’t believe the government can achieve its ambitious economic goals without the help of the private sector. In fact, right now Nepal needs all the help it can get, from all legitimate sources in and outside the country.