With more than 24 lakh people infected worldwide and 1.65 lakh dead, the Covid-2019 pandemic shows no signs of abating. As a vaccine is yet to be found, lockdowns remain the only way to slow its spread. However, the lockdowns are also pushing major economies to the brink.
The IMF has revised its global GDP growth estimate from 3.3% just 3 months ago to a contraction of 3%, something not seen since the Great Depression of the 1930s.
Nepal went under a complete lockdown from March 24. Majority of our economy is in a month long lockdown. International borders are sealed, labor movement is blocked and schools/colleges are closed down across the country. Major companies have temporarily suspended their operations.
Asian Development Bank (ADB) has predicted that Nepal will have to bear $36.78 million dollar loss to the global outbreak of coronavirus – with 15,880 job cuts depending on how the virus evolves.
Tourism in Nepal is a source of both direct and indirect employment and is a major foreign exchange earner. In 2019, 1.17 million international tourists came into the country. This year, the government had a goal to attract two million. The optimism surrounding the Visit Nepal Year 2020 likely led to a hotel building spree. Now, hotels point out that occupancy has dropped to new lows.
The airline operators have also decided to ask redundant employees to go on leave without pay as distributing salaries has become difficult for the airline companies. They will also cut other facilities given to staffers.
Remittances’ role in the Nepali economy has substantially increased over the years. In the last fiscal year, they totaled Rs879 billion, which equalled a quarter of the country’s gross domestic product. Moreover, remittances are a major source of foreign exchange reserves, which stood at $9.64 billion mid-February—enough to cover 8.5 months of imports. However, in the first seven months of the current fiscal, they dropped 0.5 percent year-over-year to Rs513 billion; they should continue to come under pressure in the months and quarters to come.
The government has announced, so far, a relief package which mandates, among others, that food to the needy be provided at the local level and employers continue to pay workers during the lockdown. Nepal Rastra Bank has cut the cash reserve ratio for BFIs to three percent from four percent. Borrowers facing a mid-April loan-installment deadline can now make their payment by mid-July. These are all welcome measures; more are likely in the days and weeks to come.
The public and private sector should, however, plan together for the best and prepare for the worst scenarios. The next few months could be horrible, but things should improve after that. It will be the responsibility of everyone — government, businesses, educational institutes and citizens — joining together to implement the procedures outlined by national leaders.
Rajendra Kumar Lal Das
Asstt. Professor (T.U.)