Nepal Rashtra Bank (NRB) recently published key economic indicators for the fiscal year 2018-19. While the economy did not grow at 8 percent as promised in the budget speech, NRB maintained its estimate of 7.1 growth for the year. As has been the trend, post-earthquake construction boom, steadily increasing tourism numbers, favourable Monsoons, marginally but steadily growing remittance receipts, and increased spending on infrastructure and energy have been the primary factors in keeping the growth rate above six percent for the last three years. Beyond what these cut and dried figures tell us it is difficult to locate any policy-led contribution to this growth story that is clearly attributable to this or the previous government.

On the contrary, this government has presided over the longest spell of liquidity crunch in the banking sector, has not lifted a finger to change archaic procurement laws and practices that bring spending to a grinding halt for good nine months of the fiscal year, contract management practices have not been reformed leaving dug-out roads and incomplete projects everywhere you look, and despite fairly respectable growth figures corporate profits and equity markets have stagnated for over three years now. If you track all the bills making their way through the two houses of parliament, none of them relate to easing the cost of doing business, reforming the bureaucracy, controlling corruption or making service delivery agencies more efficient. Absurd as it sounds, of all the problems this government could potentially tackle it picked the usurpation of community-managed cultural assets as its priority by introducing the now infamous Guthi Bill without any discernible rhyme or reason. The piling of compliance burden on small businesses by introducing new regulations on payroll-based social security contribution without clear guidelines, without adequate transition time, and without creating a meaningful enforcement system has now left a portion of SMEs in semi-compliant and others in cluelessly non-compliant state, again, for no real reason.

While I am not a devoted subscriber of the neo-liberal theories of growth, Nepal’s growth story has begun to deeply resonate with Gurcharan Das’ 2012 book, India Grows at Night, which argues that India’s growth is only possible when the government sleeps. By that measure, the pathway to Nepali prosperity might also pass through a government that sleeps longer and manages to do nothing during the day. But squandering opportunities is never a good idea. If we indeed managed to grow at 6-7 percent without any government reform, we have to ask what if this government of two-thirds majority had done something to add 2-3 percent growth over the “free lunch” rate of 6-7 percent? Better still, what if the government begins to pivot and does something positive for a change? Unfortunately, it looks like this ship sailed in the second quarter of 2019 and is not likely to return before the next election.

Let’s look around us. India’s growth figure was revised downwards to around 5 percent and China’s down to 6 percent in the second quarter. Everybody I am sure has heard of the Yield Curve Inversion that is putting pressure on US equities and fanning fears of recession in the US. Greece, Italy and Brexit are pinching the EU, US-Iran stand-off and its potential implications on oil prices and energy security are keeping emerging economies uncertain, and Trump’s trade wars are dragging global growth rates down. Agreed Nepal’s economy, with almost non-existing export dependency, may not be as exposed to the global trends as one imagines but our tourism valued at about a billion dollars and our remittances valued at about 8 billion dollars will be affected for sure.

Then take a look at our internal fundamentals. With ever-rising import bills, we received a USD 600 million dent on our meagre forex reserve of about USD 10 billion last fiscal year. This figure will grow this year. Because of the absurd ideological position and obstructionist posture adopted by the Ministry of Finance on foreign grants, out net receipt of foreign grants was reduced by 50 percent last fiscal year. This flow will not revive, particularly, during a global slowdown. In a right hand not knowing what the left hand is doing move, internal rent seeking at the Ministry of Labour and Nepali foreign missions abroad has now managed to bring approved annual demand (different from headcount of embarkations) for international migrant workers down to less than 300,000 from over a million within two years of this government. If there is a significant recession in the advanced economies and global spread of slowdowns, our tourism receipts will be lower, remittance receipts will be lower, and our grants receipt will be lower. How much lower? We don’t know yet but enough to wipe out anywhere between 15 to 25 percent of our forex reserves by 2020-21. That is, by the way, less than 18 months before the elections. The rest will remain interesting only to political pollsters.