Monday, June 15, 2009

Bad Times for Nepalese Economy Due to Economic Recession

Just a few weeks ago, I wrote an entry in this blog: Impact of Global Economic Recession on Nepalese Economy. If you read it then you will notice that I talked about the possible negative effects of recession of the economy of this country. Well, at that time, not too many people in Nepal felt that their economy would suffer seriously from the economic crisis. In fact, some political leaders of the ruling party were very confident that Nepal would remain immune from the global crisis. Anyway, now it is official that global economic slowdown is hurting the economy. This official recognition has come from none other than Nepal Rastra Bank (NRB) governor Dipendra Bahadur Kshetri.

Some leaders of the ruling Maoist party were optimistic that in the ongoing fiscal year, Nepal would see nearly 7% of economic growth. Now, Dipendra Bahadur Kshetri has stated that it would not happen and not only that he is also worried about other things too. The thing to be worried about is that migrant Nepalese workers are losing jobs in Malaysia and in the Middle East and many of them will be forced to come back home. So, the inflow of remittance of foreign currency will suffer and this is not good news for the country.

There is nothing to be shocked at to this matter. However, I am shocked because of another reason. In neighboring India, inflation rate has decreased a lot because of economic recession. On the other hand, inflation rate is still high in Nepal and there is no sign that inflation rate will decrease. I also cannot understand why the NRB is reluctant to take strong measures to decrease inflation rate.

These problems are making the Nepalese Rupee (currency) weaker against dollar. A few months ago, the exchange rate was nearly 70 Rupees for one US dollar. Now, it has become around 80 Rupees. This is bad because it increases the import bill. Not only that, Nepal is under huge debt and every year, the country has to spend a lot of money for debt servicing. So, weak Rupee means that the country has to spend more money for debt repayment.

(This entry was originally published in March 2009 and it is written on the context of that time.)

1 comment:

  1. when the economic downturn was first observed in the developed countries we weren't even a bit concerned that it would hit the nepalies economy so hard.afer all, all that we though was that we had a mere part in the globalised economy. however it has hit us hard; in the
    back bone of our economy, so hard that it will take a long time to recovery.
    loss of job, lack of materials and inflation has induced in our mind an inevitable fear and anger to punish those who have tricked us into this hole. but now is not a good time to express our anger.more impotantly we should think for the progress of the economy(solution being impossible). political parties being the top most authority of the economy should forward effective labour market management laws which would be ale to ensure jobs to the 300,000 labours entering each year plus the expected labours returning home. besides this proper laws for private industries must be executed.

    if these thind are possible for the government then it would be clear that nepalies economy would recover soon enough.