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Ashesh Shrestha

About Ashesh Shrestha

Ashesh Shrestha is an independent researcher. He has an Economics background and is interested in Monetary economics and Public finance.

The Crowding Out Effect

Of late, the fiscal budget of Nepal has been growing at an alarming rate — about 27 per cent in the fiscal year 13/ 14; 19.5 per cent in 14/ 15; almost 33 per cent in 15/ 16. As the trend continues, the size of the budget has increased by more than two trillion rupees ( 28 per cent) with the total estimated outlay reaching an all- time high of 10.5 trillion rupees ( which is about half of the GDP of Nepal).

Such high levels of government spending can have many adverse effects on the economy. One of them is the negative impact on private investment. Here we specifically focus on the undesirable effect of high public spending on private sector investment.

Crowding out effect

Economists come to a mutual ground when it comes to the issue of crowding out effect — when the level of public spending rises, it crowds out private sector investment. When there is a large escalation of government spending, it is financed through borrowing out of the total savings ( investable amount) in the economy. Given the total pool of investable amount in the economy at a given time, if the government’s share out of the pool increases, the private sector is left with less money to invest, thus reducing their share of investment in the economy.For example, if the total saving in the economy is Rs 1000 and the government borrows Rs 200, the private sector is left with the investable amount of Rs 800. Now, if the government spending increases and their borrowing increases to Rs 500, private sector is left with only Rs 500. Hence, private investment is crowded out.

Furthermore, increase in borrowing from the internal market leads to increase in the demand for available funds, thus raising their price that is rate of interest ( in the same manner by which price of any goods increases because of increase in its demand).The increase in the real interest rate makes investment dearer, and discourages people from investing, thus again reducing the total share of private investment in the economy.

Inflation makes investment unfavourable

The apparent impact due to highly expansionary budget is high inflation. The increase in social security spending, salaries of government officials and other routine expenses upsurges the recurrent expenditure of the government. This can lead to high inflation as people will have more money to spend in their hands. This leads to an increase in the demand for goods and services. Given the supply side constraints in the short run ( the supply of goods cannot be increased in a short span); it will lead to high rise in the price of goods and services, hence high inflation. The high level of inflation does not only reduce the purchasing power of consumers but also affects producers.

The problem with public investment

An argument regarding investment is that, it does not matter where it comes from, either Large government spending and its effects on private investment. Increasing the size of government expenditure to bring about growth is not the way forward breaking views Getting meaningful access betsandreturns. ca government or private sector ( as both bring economic growth and generate employment). However, this might not be true in the case of Nepal. If we look at the capital expenditure of the government for the past years, it has been below the target.The spending capacity of the government is low. For example, in the fiscal 2014/ 15, the government allocated a budget of Rs 116,755,042,000 for capital/ development expenditure, but was only able to spend Rs 88,754,708,000. Similarly, in the fiscal year 2013/ 14, the targeted capital expenditure was Rs 85,099,731,000; however the actual spending was limited to Rs 66,694,726,000 only. Also, out of this, a large portion has been spent only at the end of the fiscal year in rush. Apart, from this, the inefficiency of the government is another factor. There are numerous bureaucratic hurdles, red tape, et cetera that exist in government projects, making them costlier and time consuming.

This inability of the government to make capital spending and inefficiency is enough to prove that high allocation of public expenditure cannot bring positive changes in the economy. In contrast, it bars efficient private investment limiting the growth of the economy. Hence, increasing the size of government expenditure to bring about growth is not the way forward. Instead, the government should reduce its share of expenditure in the economy, and thus remove all hurdles that come in the way of private investments arising due to increase in public spending.

This article was published in The Himalayan Times on July 31, 2016.

Ashesh Shrestha

About Ashesh Shrestha

Ashesh Shrestha is an independent researcher. He has an Economics background and is interested in Monetary economics and Public finance.

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Violation of the Property Rights by the Budget

Property rights as defined by James D. Gwartney – Florida State University, Richard L. Stroup – Montana State University, Dwight Lee – University of Georgia in the article ‘Importance of Private Property’ involves ensuring three important criteria: 1. the right to exclusive use, 2. legal protection against invaders those who would seek to use or abuse the property without the owner’s permission, and 3. the right to transfer to (that is, exchange with) another. If the owner is barred from exercising any one all of these aspects, it is the violation of the property rights.

The state has the primary responsibility of warranting all these criteria to the citizens and thus, protecting their property rights. However, what if the one that is supposed to protect the right of the citizen is itself involved in the violation. Here, the context directly relates to provision in the recently formulated budget of Nepal. In the section related to Land Reform, the budget specifies that all the lands will be classified on the basis of their use and the land classified for the specified purpose shall not be used for other purposes. Additionally, the budget has also provisioned that no agricultural land should be left barren. In case it is left barren, there is the provision of imposing penalty of 25 percent of the potential average production of such barren land.

This budget is unswervingly trying to infringe on the property rights of the citizens. After the implementation of the budget, no citizens will have liberty to use their piece of land as according to their preferences. The use of land will be directed by the state itself. This directly bars the citizens from enjoying the very first criterion, the right to exclusive use of the property (land in this case). Furthermore, as the provision limits the use of land, market value of the land will get reduced. For example, if a piece of land can be used for multiple purposes like making residential house, commercial building, cultivation etc., its market price will be high because of high demand from multiple sector. But, if its use is only restricted to, say agriculture, there will be reduction in the demand, which reduces it market price, thus adversely affecting the land owners and their property rights.

Ashesh Shrestha

About Ashesh Shrestha

Ashesh Shrestha is an independent researcher. He has an Economics background and is interested in Monetary economics and Public finance.

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What do the taxes on vehicles say?

A quick look into custom duties of vehicles is enough to tell us how discouraging it is for any individual to purchase a car. For the vehicles that run on fossil fuel, the customs duties on 9 categories stand at 30% while that on the ‘Jeep, car and van’ category is almost three times that of other categories. Similar is the case with the electric vehicles. The customs on Jeep, car and van is 40% which is much higher than the 15% customs in other categories. The general belief that cars are luxury goods and should be taxed high seems the logic behind this. But, are cars luxury or high taxes have made them a luxury?  Higher taxes resulting into higher prices have made the cars less affordable to the middle and lower income class and thus only providing privilege to the rich. And, even if we regard them as luxury, are the rich only the ones who get to enjoy this luxury?

In the midst of current fuel crisis, promoting the use of the electric vehicle has become talk of the town. The customs on electric vehicles are definitely lower when compared to the vehicles that run on fuel, however, this rate seems still high for encouraging its use. If the uses of electric vehicles are really to be encouraged and promoted, the custom duty along with other taxes must be further reduced.

Ashesh Shrestha

About Ashesh Shrestha

Ashesh Shrestha is an independent researcher. He has an Economics background and is interested in Monetary economics and Public finance.

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Market at work amidst Nepalese political-economic crisis

A little over two months into the blockade of supply of basic necessity goods and services including the petroleum products from India to Nepal, Nepal is facing a severe economic as well as humanitarian crisis like one it has never seen before. Hospitals are running out of medical supplies, households are running out of cooking gas, industries are running out of fuel (which has led to the shutting down of hundreds of thousands of enterprises – big and small), majority of the people have been forced to resort to either walking or commuting on crammed buses that are carrying two to three times their capacity of passengers. During the second week of November, Nepal Oil Corporation (NOC) which is the government-owned enterprise with the monopoly of acquiring petroleum products for supplying to the entire country even asked the private consumers to not queue up in the fuel pumps for its stock had come down to a level where it could only supply to operators of emergency services, and even that was only for a few days.

Not a single citizen has been spared from facing the brunt of this crisis. Presumably, everything would have come to a standstill. But amazingly, people are still managing to continue to do what they do. Of late, the traffic is even getting heavier than what it used to be about a month ago. So what is this source from which people are getting fuel for their motor-cycles, cars, public buses and taxis despite the failure of the government monopoly that was responsible to do it?

The answer once again, when the government fails to deliver, is the market. Yes, it is the market. Or as the government likes to call it, “the black market!” Entrepreneurial private individuals around the Nepal-India border (from both sides) are coming together to “smuggle” the basic necessities into Nepal and then send them across Nepal; against all restrictions imposed by the state and risking being caught and charged for committing a crime. And why crime? Because the government has prohibited anyone other than its very own failure of an enterprise from importing petroleum products in Nepal. However, it is this black market that has helped us in our endeavor to live a normal life and do what we do. Yes, we can only do some 25-30% of what we would otherwise do, but still much better than the nil that we would be doing in their absence.

This might raise another question in our minds. How can the market arrange all these things so smoothly while the almighty government is having a hard time doing it? Fortunately, market makes necessary adjustments whatever the situation of the economy be, the very capacity the state lacks. After the supply shock of the petroleum, the higher demand couldn’t be catered to. But the people still needed fuel which resulted in people willing to pay higher prices. The willingness of the people to pay higher prices was communicated to other players in the market (people who did not have to be previously associated with the petroleum industry at all) to divert their resources to ensuring supply of petroleum. The higher returns incentivized them to devote their time, money, energy and most importantly to bear the risk of playing in the “illegal” market of petroleum and supplying them.

The people who valued the petroleum product more and were willing to pay more came in contact with the suppliers and thus made a deal in which both of them mutually agreed and benefitted in their own personal ways. The suppliers who were willing to risk it all got higher profits, and the consumers who needed fuel to carry on with their regular businesses got to use the fuel to do what they do and earn a livelihood by selling other goods or service that they produce. And this is exactly how the market works. Each individual consumer and producer based on his/her knowledge that he/she has acquired from the market, acts and reacts to the market situation in order to achieve personal expectations and benefits.

So what lesson do we draw from this real-life example? What we need to do at the moment is acknowledge and institutionalize this automation in the economy. If the private sector is allowed to enter into this business of petroleum trading freely and fairly easily, the possibility of another economic crisis will be substantially reduced. The government has to loosen all restrictions barring private sector from coming into the petroleum trading business. For instance, the minimum paid-up capital regulation should be dropped. Meanwhile, it should be ensured that exclusivity should not be offered to any private company in order to prevent private monopoly which is much worse than the government monopoly. Furthermore, the international companies interested to enter into the petroleum supply business should also be encouraged by eliminating various discouraging restrictions to them. For instance, tariffs on the import of petroleum product could be reduced to minimum. In this way, competition between various national and international companies should be encouraged. Hence, each and every player in the market will compete against each other trying to gain a large share of the market and therefore will try to supply qualitative product at cheaper price. In the long run, the players who cannot survive the fierce competition and are performing quite bad will exit the market.  So, NOC wither will have to be really competitive and function efficiently or, it will have to be shut down.

Ashesh Shrestha

About Ashesh Shrestha

Ashesh Shrestha is an independent researcher. He has an Economics background and is interested in Monetary economics and Public finance.

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जलविद्युतमा पछिल्लो विकासक्रम

हाम्रो देशमा ठूला–ठूला राजनीतिक परिवर्तनहरु भए तापनि विविध कारणहरुवश हामी गरिब राष्ट्रकै रुपमा रहिरहेको अवस्था छ । नेपालको विकास भन्ने बित्तिकै जलविद्युत र पर्यटनलाई केन्द्रमा राखेर हेर्ने गरिन्छ । नेपालको १०३ वर्ष लामो जलविद्युतको ईतिहास खासै उत्साहजनक भने छैन । नेपाल उद्योग वाणिज्य महासंघका अनुसार नेपालको अहिलेको एक प्रमुख आर्थिक समस्या ऊर्जा अभाव हो । नेपाल विद्युत प्राधिकरणले आपूर्ति गर्ने विद्युत करिब ९ रुपैयाँ प्रति युनिटमा उपलब्ध हुने बिद्युत लोडसेडिगंको समयमा डिजेलबाट उत्पादन गर्दा करिब ३६ रुपयाँ प्रति युनिट पर्न जान्छ; जसले आम सर्वसाधारणलाई असुविधा त हुन्छ नै, यस अलावा वस्तु तथा सेवा उत्पादनको लागत पनि बढ्न जान्छ । नेपालमा प्रचुरमात्रामा जलस्रोत हुनु र संसारमा पानीको महत्व हरेक किसिमले बढ्दै जानु हाम्रा लागि धेरै अगाडीदेखि मौकाको विषय थियो । यद्यपि यो मौकालाई उपयोग गर्न हामीले धेरै ढिला गरिसकेका छौँ । पछिल्लो संविधानसभाको चुनावपछि भने नेपालको अर्थतन्त्र र जलविद्युूत क्षेत्रमा केही राम्रा संकेतहरु पनि देखिएका छन्; यद्यपि नीतिगत देखि अन्य सुधारको आवश्यकता धेरै ठाउँमा छ ।

भारतका प्रधानमन्त्री नरेन्द्र मोदीको नेपाल भ्रमणलगत्तै नेपाल र भारतबीच ऊर्जा व्यापार सम्झौता (पि.टि.ए.) मा हस्ताक्षर भएपछि जलविद्युत क्षेत्रमा केही काम भएको देखिन्छ । त्यसपछि काठमाडौंमा भएको अठारौँ सार्क सम्मेलनमा नेपालकै प्रयासस्वरुप सार्क ऊर्जा सम्झौतामा हस्ताक्षर भएपछि यसक्षेत्रमा उत्साह झन थपिएको छ । यद्यपि उत्साहलाई नतिजामा बदल्नका लागि धेरै काम गर्नुपर्ने देखिन्छ । सबभन्दा महत्वपूर्ण कुरा त यसबीच दुई ठुला आयोजनाहरुः माथिल्लो कर्णाली र अरुण तेस्रोको आयोजना विकास सम्झौता (पि.डि.ए.) भएको छ । यी दुवै आयोजनाहरु ९०० मेगावाटका हुन् । यस बाहेक करिब २ हजार १ सय ५६ मेगावाट बराबरका ९२ जलबिद्युत आयोजना निर्माणको चरणमा छन् । करिब १२ सय मेगावाट बराबरको जलबिद्युत आयोजना आगमी ३÷४ बर्षभित्र बनिसक्ने अवस्थामा छन् जुन अहिलेको लोडसेडिङ्गहटाउन करिब पर्याप्त बिद्युत हो । लगभग १३ हजार मेगावाट बराबरका ५ सय ४७ आयोजनाहरुको सर्वेक्षण र उत्पादन अनुमतिपत्र बितरण भईसकेको छ । करिब ७० आयोजनासँग प्राधिकरणले बिद्युत खरिद सम्झौता (पि.पि.ए.) गरिसकेको छ । यसैबीच करिब १८ बर्षपछि ६ हजार ७ सय २० मेगावाटको पञ्चेश्वर बहुउद्देश्यीय आयोजनाका बिवादहरु पनि समाधान हुने र निर्माण अगाडी बढ्ने प्रक्रियामा छन् । यसैगरी नेपालको चीन र बङ्गलादेशसँग पनि पिटिए गर्ने तयारीमा छ ।

नेपाल र भारतबीचको ऊर्जा व्यापार सम्झौताले नेपाल र भारतमा ऊर्जा किनबेच र लगानी आदान–प्रदानको बाटो खोलेको थियो भने सार्क ऊर्जा सम्झौताले अहिलेलाई सैद्धान्तिक रुममा मात्रै भएपनि नेपालको ऊर्जा कम्तिमा भारत, बङ्गलादेश र पाकिस्तान सम्म पु¥याउने बाटो खुलेको छ । यी तीनवटै देश ऊर्जा अभाव भोगिरहेका राष्ट्रहरु हुन् । नेपाल र भारतमा ऊर्जा बढी उत्पादन हुने र बढी माग हुने मौसममा फरक पर्ने हुँदा किनबेच अझ बढी सान्दर्भिक छ । बङ्गलादेश आँफै नेपालसँग विद्युत किन्न चाहन्छ । भारत र बङ्गलादेश बीच प्रसारण लाईन पनि बनिसकेको र नेपाल र भारत बीचको प्रसारण लाईनको क्षमता बृद्धि हुने क्रममा रहेका कारण बङ्गलादेश निकट भविष्य मै हाम्रो बजार हुनसक्छ । पाकिस्तान पनि भारत र अन्य देशसँग ऊर्जा किन्न चाहन्छ । भारतले पाकिस्तानलाई विद्युत बेच्छ भनेपनि अप्रत्यक्ष रुपमा हाम्रो बजार बृद्धि हुन्छ । चीन ऊर्जाक्षेत्रमा लगानी गर्नका लागि अत्यन्त सम्भावित देश हो । हालैको चिनियाँ विदेशमन्त्रीको नेपाल भ्रमण पश्चात चीनको नेपालमा सहयोग उल्लेख्य रुपमा बढेको छ । नेपाल उत्तर कोरिया पछि चिनियाँ सहयोग धेरै पाउने दोस्रो देश भएको छ । चीन अनुदान सहयोगका साथसाथ लगानी पनि बढाउने मनसायमा रहेको देखिन्छ । उनीहरुको ध्यान पूर्वाधार लगानी मै केन्द्रित रहेको देखिन्छ । नजीकैको अर्को राष्ट्र भुटान भने जलविद्युतमा नजानिँदो किसिमले हाम्रो प्रतिस्पर्धी बनिरहेको छ । भुटान अहिले करिब १७०० मेगावाट विद्युत उत्पादन गर्छ र यसको करिब दुई तिहाइ भारतलाई बेच्छ, जुन उसको प्रमुख आम्दानी बनेको छ र यही कारणले उनीहरुको प्रतिव्यक्ति आय बढेको छ । सन् २०२० सम्म भुटान १० हजार मेगावाट विद्युत बिक्रि गर्ने योजनामा रहेको छ । तर पनि तत्कालै भुटान हाम्रो लागि समस्या रहने देखिँदैन । भारत उदाउँदो अर्थतन्त्र भएको र उसलाई प्रशस्त विद्युत चाहिने हुँदा यदी नीतिगत तथा अन्य समझदारी भएमा बजारको समस्या हुदैन । यसैपनि अन्य स्रोतहरुलाई हटाउने हो भने हाम्रो आन्तरिक विद्युत माग नै ५२०० मेगावाट पुग्छ र नेपाल विकासशील राष्ट्र बन्ने तर्फ उन्मुख हुँदैगर्दा यो गुणात्मक रुपमा बढ्ने निश्चित छ ।

नेपालमा जलविद्युत विकासका लागि सबभन्दा बढी नीतिगत र संरचनागत सुधारको खाँचो छ । हामी अहिले सिगंल बायर (एकल खरिद) मोडेलमा छौँ । नेपाल विद्युत प्राधिकरण आफै बिजुली उत्पादन गर्छ, प्रसारण लाईन निर्माण, संचालन, विद्युत खरिद सम्झौता र विद्युत बेच्छ । जसले निजी क्षेत्रका उत्पादकहरुलाई प्रतिस्प्रर्धा गर्न गाह्रो बनाइदिएको छ । यसको समाधानका लागि एक अलग्गै विद्युत व्यापार कम्पनी चाहिएको छ । प्रशारण लाइन निर्माणमा निजी क्षेत्रलाई सहभागी गराउनुपर्ने देखिन्छ । यसका लागि विद्युत ऐनमा नीतिगत सुधार आवश्यक छ । यसैगरी विद्युत विकास विभाग आयोजना निर्माणमा सहभागी नभई नियमनकारी निकायका रुपमा मात्र रहनु अत्यावश्यक छ । प्रसारण लाइन निर्माणका क्रममा जग्गामा दिइने मुआब्जा र जग्गा अधिग्रहणमा समस्या देखा परेको छ । यो सम्पत्तिको अधिकारसँग पनि सम्बन्धित छ । यसको उचित समाधानका लागि वैज्ञानिक उपाए अवलम्बन गर्नुपर्ने देखिन्छ । लोडसेडिगं समस्याको दिगो समाधानका लागि बुढीगण्डकी जस्तो रिजर्भमा आधारित आयोजना अगाडी बढाउनुपर्ने हुन्छ । यसलाई अगाडी बढाउन आवश्यक लगानी जुटाउनका लागी निजी–सार्वजनिक साझेदारी देखि लिएर बन्ड बिक्रिसम्मका उपाए अवलम्बन गर्न सकिन्छ । यसैगरी केही विज्ञहरु जलस्रोत, सिचाँई र ऊर्जासँग सम्बन्धित एउटै मन्त्रालय भएमा काम गर्न निकै सजिलो हुने तर्क गर्छन् । यसकुरामा पनि ध्यान जानु जरुरी छ । आयोजनास्थलको सुरक्षा पनि एक सवाल हो । यसैगरी वैदेशिक लगानी आकर्षित गर्नका लागि अहिले प्रस्तावित वैदेशिक लगानी नीतिलाई बढी भन्दा बढी लगानीकर्तामैत्री बनाउनुपर्ने देखिन्छ । यी र यस्ता सुधार भएमा हामी जलविद्युतमा फड्को मार्ने संघारमा पुगिसकेका छौँ ।

जलविद्युतको विकास नेपालको समग्र विकासको आधार हो । जलविद्युत नेपालमा रोजगारीको सृजना गर्ने, निर्यात बढाउने र सम्पूर्ण देशको काया पलट गर्नसक्ने क्षेत्र हो । यसले अन्य क्षेत्रको विकासका लागि समेत जग बसाल्ने देखिन्छ ।वैदेशिक सम्बन्धहरुलाई आर्थिक अवस्था, व्यापारको मात्रा र आयात निर्यातले परिभाषित गरिरहेका नयाँ परिवेशमा यदी हामीले जलविद्युतमा अपेक्षित विकास गर्न सक्यौँ भने हाम्रो भारतसँगको सम्बन्धमा नयाँ आयाम थपिने मात्र होइन नेपालको नयाँ अन्तर्राष्ट्रिय पहिचान बन्न पनि निकै सहयोग पुग्ने देखिन्छ ।

Ashesh Shrestha

About Ashesh Shrestha

Ashesh Shrestha is an independent researcher. He has an Economics background and is interested in Monetary economics and Public finance.

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Four Problems in Credit Market of Nepal

Every year, the Canada-based think tank, Fraser Institute, publishes the Economic Freedom of the World Report. Samriddhi, The Prosperity Foundation releases the report in Nepal as the country partner. This time around, Samriddhi Foundation also undertook a Country Audit process to test how truly the numbers in the Index reflect the attributes of the economic sector of Nepal. The process further studies how the economic freedom of the Nepalese people has been restrained.

Out of the five major components and forty-two sub-components of economic freedom, Nepal score a 7.28 (out of 10) in the Credit Market Regulation sub-category under the category “Regulation”. The country audit process has identified the following 4 problems in the credit market sector as the major challenges to instating economic freedom in Nepal.

  1. The first major problem in Nepalese banking sector is low public participation. A large proportion of the people do not have access to banking. In real 1984/85 terms, the per capita cash deposit in the banks and financial institutions was as less as Rs. 20 in the year 2007. This figure depicts that a large number of people are deprived of banking services, and consequently, of credit as well. This deprivation is one of the main hindrances for capital accumulation and formation, and thus, higher economic growth.
  2. The direct control of the government over the banks has added more problems. The government has pressured banks to provide collateral-free loans at low interest rates to some ‘deprived/marginalized’ groups. This has compelled banks to make riskier investments in order to increase revenue generation from alternative sources. Also, there is a provision in the monetary policy of 2012/13 that prohibits banks and financial institutions from charging interest of more than 9 percent for refinancing in the productive sector. Such interest caps can also been seen in some other sectors too. It is true that these sectors may get loans at cheaper interest rates; but only at the cost of interest expenses of other sectors, meaning, banks will charge higher interests in other sectors to cover up the loss.
  3. The Central Bank has also regulated the spread. In July 2014, the Central Bank issued a directive that restricted the spread rate –the difference between interest charged to borrowers and that paid to the depositors –at 5 percent. These controls over the credit market, in the pretext of benefitting some groups, have hampered the growth of a free credit market.
  4. Another problem in the credit market is lack of alternative channels of investment. There are inadequacies of the entities like hedge fund, mutual fund and venture capital. These alternative forms of investment provide opportunity to the people to invest in various forms and gain higher returns instead of saving in the banks and earning negative real interests or investing in the physical assets. Development of these alternatives will lead to more choices to the investors and will induce more investments.

Hence, the regulatory control of the authority over banks seems to be the main reason behind the underdevelopment of the credit market. Freeing the credit market may help boost up the financial system and thus yield higher levels of growth. Although the regulator had not set forth any regulation over the specific interest rates since liberalisation started in Nepal in the early 1990s, the 2014 directives of Nepal Rastra Bank (the Central Bank of Nepal) instructing commercial banks to keep the spread rate within 5 percent is against the principle of liberalisation and economic freedom. This has shown the Central Bank’s duality in its commitments and actions. The end of this control seems more justifiable to resolve the problems of the credit market.

Another potential solution could be pooling up the various government funds such as Youth and Small Enterprise Self-Employment Fund into a single larger fund and mobilizing it through a private party. Similarly, in order to increase the banking habits of the people, the provision of the bill-payment of the various public utilities through banks should be executed. Another requirement for an improved Nepalese banking sector is competitiveness. Allowing the foreign financial institutions to enter the Nepalese market freely can promote competition, lead to innovation, increase choices to the consumers and thus improve the whole financial market.

Along with the free entry of foreign banks, a liberal Foreign Direct Investment (FDI) policy should also be implemented for an easy inflow of capital. Allowing FDI would also help local banks, enhancing their client base.

In addition to these, a liberal financial policy that will foster alternative channels of investment such as hedge funds, mutual funds, and venture capitals may provide capital owners with choices beyond conventional banking and real estate.

For more details on the 2015 Economic Freedom Country Audit Report Nepal, please click here

Ashesh Shrestha

About Ashesh Shrestha

Ashesh Shrestha is an independent researcher. He has an Economics background and is interested in Monetary economics and Public finance.

Published by: