The continuous political instability in Nepal has always weakened the executive body to function in its full capacity. With a hope that the promulgation of Constitution 2015 and the shift to federalism would ensure stability in the country, the first federal government had been formed in the year 2017. However, this government too was not immune to shocks. The tenure was affected by both external and internal shocks and ended in 2022. At present we have already completed the second parliamentary elections along with the formation of a second federal government. In the meantime it is important to assess the performance of the previous government, its achievements along with shortcomings in order to point out the mistakes and avoid them if possible in the coming days. Realizing this, Samriddhi Foundation with support of CIPE initiated a discourse titled “Five Years of Government: A Review ” to analyze the performance of the past federal government. As a part of this discourse, it also conducted a public dialogue on the same topic on 31st January, 2023 at Hotel Himalaya Kupondole; Lalitpur. The panel was enriched with the presence of Mr. Prithviraj Ligal, former Vice Chairperson of National Planning Commission and Dr. Kushum Shakya, Dean of Faculty of Humanities and Social Sciences at Tribhuwan University and the session was moderated by Dr. Sucheta Pyakurel, Director; Center of Governance; IIDS.
The event kicked off with the presentation prepared by Yatindra K.C., research assistant at Samriddhi Foundation, which was based on the research he and his team conducted on the same title. The presentation hinted that the research conducted was more focused on economic governance rather than political governance. According to the presentation, the overall performance of Nepal did not show any significant improvements in the indicators of governance; however, people’s perception regarding the overall direction of the country has remained optimistic. Such strong optimism was the result of the change in governance structure that has made public service delivery easier. Despite this, the underlying economic structure has remained the same except it has become more inclusive and the crucial agreement on what development means how to proceed with it seems to be missing. When it comes to Nepal’s growth trajectory, it remained strong as growth rate was six percent till 2017 but the pandemic slowed it down. The country’s GDP growth is reliant on the primary and tertiary sector while the GDP on the demand side was driven by consumption. The investment from the private sector has exceeded the government’s investment. This shows that the private sector is moderately happy about the country’s economic policy. Talking about the expenditure pattern of the government, after 2017 it was limited to eight percent and about thirty percent of capital expenditure occurs in the months of June and July. This however aided in the decreasing trend of fiscal deficit which has been limited to three percent of total GDP. Overall budget plans have remained ambitious and have had to be revised downwards for three consecutive years and most of them do not come to fruition. There also seems to be a gap between the formation and implementation of such plans and policies because most of them are not supplemented by the country’s Finance act making it difficult to achieve expected results of such plans and policies.
Now coming to the panelist, when asked about a paradoxical term ‘economic governance’, Prithvi Raj Ligal said that despite economics and governance having individual meanings, they cannot be separated as they are intricately related. Even though governance is more inclined towards politics, the direction of development and prosperity and how to move ahead in that direction is heavily dependent on a certain set of resources, which relies on the economic aspect of efficient use of such resources. Giving the example of India’s recent achievement in outpacing China in terms of economic growth, he mentioned that the content of India’s budget is more focused on aspects of economic growth instead of putting political rhetoric forward in spite of the pressure of upcoming elections next year. Again citing the strategy of the USA at the present time of recession, he added that Biden’s government is more focused on investment, infrastructure building and job creations, prioritizing the country’s domestic demand. The multiplier effect of investment and development of infrastructure leads to the creation of more jobs that increases publics’ disposable income that will help to drive consumption, eventually fostering GDP on demand side. Here, both countries have prioritized stable and fastest growth. Nepal should attempt this by making good use of the remittance that flows into the country’s economy by directing it towards domestic investments instead of consumption, he added.
He also expressed his concern over how economic policy of the country has discouraged primary and secondary production in Nepal. According to him, the pegged exchange rate with Indian Rupees has subsidized Indian imports, making trade a profitable business instead of manufacturing and agricultural sectors. However, one of the benefits of such fixed exchange rates is that it has protected Nepal’s economy by avoiding depreciation of nepali rupees against the surging price of dollars. But still the reliance on the tertiary sector is not good for the economy so, there must be a deep study to get out of this trap. He pointed out that tighter monetary policies might make it difficult for Nepal to sustain its economy in the near future. So, he suggested the exchange rates should be made flexible gradually so that Nepal’s economy can adjust into the new environment and avoid major shocks. Then it should gradually move towards the policies to ease the capital account convertibility along with credit expansionary policies.
Dr. Kushum Shakya pointed out three issues in our governance system; one is the lack of proper documentation, gap between policy formulation and implementation, and finally lack of representation in the process of making policies. Lack of documentation becomes a problem especially during the time of shocks or disaster management. She added that during the time of Koshi flood in the year 2008, the lack of documentation created a problem in formulating policies of post disaster remuneration packages for affected families. She also stressed on the importance of providing training and resources to the local level government so that they can quickly respond to the disasters which will aid in the management of risks and shocks.
Addressing the issue of gap between policy formulation and implementation, she added that the lack of capacity of public administration in executing written policies and development projects has led to such problems where many national projects do not complete on time that just increases the cost of development. Finally she highlighted the importance of representation of women while making a budget which seems to be lacking in the context of Nepal. So, she called attention towards the role of NGOs, research think tanks that can advocate for women’s representation and their active participation.
The event ended after moderator Dr. Pyakurel highlighted the fact that representation is a crucial factor in policy making and overall governance of the country. She added that representation is necessary in order to capture the voices of people, to point out the needs and demands for policy and to make it more inclusive. Giving the example of Care economy, she addressed the issue of how women who are involved in this particular sector are avoided while making policies and this tendency should be avoided. Similarly, adding to Ligal’s argument, she also stressed on the need of revisiting bilateral agreements with India regarding the fixed exchange rate system in order to foster the manufacturing sector of the country.