Growth Without Momentum

Nepal’s economy has been laid bare, and the diagnosis is equally uncomfortable. The economy seems to be stuck in a slow and unproductive cycle, according to the Current Economic Situation Report–2083, presented by Finance Minister Swarnim Wagle the other day. The report indicates that growth, currently around four per cent, has been slow and uneven. The pace of private spending has declined. Nepalis of working age are forced to go abroad because there are not enough jobs at home, and the money they send back has kept domestic spending going. The report has also pointed out major structural problems, such as a small tax base, poor revenue collection, rising state debt, and an expanding informal economy. Capital spending remains low, while recurrent spending continues to rise without producing meaningful results. Issues with governance, corruption, and a lack of implementation capacity further undermine confidence in the economy. The situation has worsened after the country was placed on the FATF grey list. Even the banking system has struggled to channel credit into productive sectors, despite its growth. In short, the economy shows signs of stress at almost every level.