 MIN RATNA BAJRACHARYA |
In Nepal, political analysis often overshadows economic analysis. There is a deficiency of accurate and unbiased economic data, and whatever is available is usually from a development sector perspective that is inadequate for the private sector. Nepal Economic Forum's NEFport is meant to bridge this gap, with the second issue published in April this year.
On the global front, the international economy showed signs of recovery as prudent fiscal and monetary measures taken by governments and central banks helped shake off the effects of the global financial crisis. Nationally, the economy of Nepal experienced some major setbacks due to the bleak political outlook, coupled with a significant downturn in the financial sector. The key stories and business highlights of the year included the liquidity crisis, capital flight, balance of payments, real estate market, gold imports, and inflation.
The liquidity crisis deepened after Dasain 2009, with financial institutions unable to access ready pools of cash. It was then that capital flight was assessed. NEFport reveals that 'USD 100 million (over Rs 8 billion) from Nepal found its way into banks in Hong Kong during the first five months of the fiscal year'. Similarly, 'gold imports crossed 14 tons in the first seven months of the fiscal year 2009/10'. The Nepal Rastra Bank banned the import of gold from mid-January, on the grounds that gold imported into Nepal was being smuggled back into India. The bank feared excessive spending of foreign reserves on gold imports.
Inflation soared to 12 per cent in the first seven months of the current fiscal year, increasing the price of sugar and related products by almost 80 per cent. The government cut import duties and the Agricultural Reform Fee on raw materials for the edible oils industry, and also pledged a 50 per cent VAT refund, in order to curb inflation.