One fourth of the global population is under lockdown to stem the spread of the novel coronavirus, which has already affected 199 countries with confirmed cases of 664,590. A total of 30,890 infected lost life and 142,368 recovered so far as this article is being written.
Coronavirus (COVID-19) pandemic not only cost lives but also hit economies worldwide hard slowing down global growth to below one per cent in 2020, as per initial estimates. The two largest economies – USA and China along with developed European nations have suffered heavily from the pandemic, even as the global progression of coronavirus remains uncertain.
The International Labour Organisation has said that there will be income loss of $340 billion and 25 million people would become unemployed.
Nepal’s preparedness remains inadequate
Due to lack of preparedness to cope with the COVID-19, Nepal is likely to face huge socio-economic loss if the virus is not contained. The Nepal government’s ill-preparation is clearly evident in its slow and inadequate response to health systems or sustaining of the economy. “Nepal’s preparation is always like digging a well only after the house catches fire,” said former Finance Secretary Rameshore Prasad Khanal.
The government sent a chartered flight to bring necessary medical equipment including personal protective suits for medical persons, a move taken only after they were condemned for ill-preparation by the frontline medical service providers. So far Nepal has done less than 1000 tests. The government has been advised to trace and test more to combat the disease.
The country has only one lab to test coronavirus, however testing facility has been recently extended to Nepalgunj, Pokhara and Dharan among other places. “Saving lives along with sustaining the economy and retaining jobs should be the priority but the government’s passivity raises serious concerns,” said Khanal.
Magnitude of loss
The Nepali economy has yet to stabilize post earthquake followed by trade disruptions during the blockade. Nepal’s economic growth nosedived during that time. The country was receiving remittance during that time and foreign aid but the current crisis could affect both.
Experts have identified the following economic challenges:
• Supply chain disruptions for industries
• Trade (import and export)
• Demand shock for Nepali business and industries including service sector like hospitality and airlines
• Shock in remittances inflow
• Slowdown in construction sector
• Industrial output loss
• Increase in unemployment
The magnitude of economic loss is huge in multiple sectors even as the country must incur rising expenses of government and healthcare systems.
Even the largest and most powerful economies are struggling to minimise losses. In Nepal, some private sector companies have already started to lay off staff to and minimise expenses.
Domestic airlines operators alone have faced a huge loss of over Rs 8 billion in the last two months, according to Yograj Kadel Sharma, spokesperson of the Airlines Operators Association of Nepal (AOAN). This was the situation before the lockdown. “Nepal’s tourism sector was upbeat when the government had announced a substantial increase in the inflow of international tourists to cross two million in 2020. The private sector had made investments to expand their capacity to cater to this figure,” said Sharma. He urged the government to facilitate the severely hit sectors in tax filing and loan repayment.
The share of the service sector in the country’s economy is around 60%. Retail and wholesale trade covers 15% of the GDP. Similarly transport, communication, storage covers 8% and real-estate and renting covers 12% of the GDP.
Industries are facing challenges to continue production even after the lockdown due to supply disruptions and export-oriented industries are facing trouble due to demand shock.
“We can take the example of Nepal Electricity Authority to elaborate how business entities are facing demand shock. Peak hour electricity demand plummeted to 945 megawatts from 1200 megawatts along with closure of industries, construction works during the lockdown,” states Nara Bahadur Thapa, former Executive Director of Nepal Rastra Bank.
Industries are facing challenges to continue production even after the lockdown due to supply disruptions and export-oriented industries are facing trouble due to demand shock. Against this backdrop, the government has yet to come up with a plan to address the economic engine of the country.
Daily wage earners are hit hard as the government enforced lockdown without any relief package for the underprivileged and low-income groups. Former Secretary Khanal advises that this has to be solved as priority using the fund established by the government for the prevention and treatment of Corona infected people and those isolated in government operated quarantines.
He also urged the government to come up with an economic stimulus package as other countries are doing to minimise loss in both human and economic front. India has recently announced a stimulus package of $ 22.5 billion. Similarly, the United States government announced a reportedly unprecedented economic stimulus of $ 2 trillion. The Federal Reserve has cut down the rates to near zero in attempt to prop the US economy.
Similarly, Britain government announced a 30 billion pound stimulus to cushion the economic shock of the coronavirus pandemic. UK government provides sick-pay bill of 14 days for those working in private companies if they have to isolated or quarantine because of infection. Similarly, Bank of England slashed its key interest rate to a record low of 0.25%. Corona-hit Italy has announced $ 28 billion plan to revive economy.
Swornim Wagle, former Vice Chairman of the National Planning Commission (NPC) said that the country could face unprecedented challenges on macroeconomic stability if certain measures are not taken as early as possible. Experts opine that the government has Rs 241 billion unspent in the treasury and the delay in announcing a comprehensive economic stimulus may shatter the economy.
Additionally, the government has recently received $29 million in grant from the World Bank Group to cope with the coronavirus disease. It is reported that this support will be spent to strengthen health services and primary health care, bolster disease monitoring and reporting, train front line health workers, encourage community engagement to maintain public trust, and improve access to treatment for the poorest patients.
The International Finance Corporation (IFC), the World Bank Group’s private sector arm, has asked the country to support sustaining jobs and livelihoods. Another multilateral development partner, Asian Development Bank has assured required financing for the recovery of the private sector.
Finance Minister Dr Yubaraj Khatiwada has said that his officials are negotiating with development partners to avail necessary cooperation. “Foreign cooperation is must for low-income countries like Nepal to fight with the coronavirus pandemic,” Khatiwada said.
The Finance Minister further said that the scope of the Prime Minister Employment Programme will be revised to provide employment to those set to go abroad for foreign employment and create more opportunities within the country. “The economy will bounce back again as a strong and resilient economy with the execution of the government’s revival plan,” he said.
NRB has said that it is flexible towards one-time loan rescheduling and restructuring for corona-hit businesses. This provision is also mentioned in the half-yearly review of the Monetary Policy 2019-20 a month back. Gunakar Bhatta, Executive Director of NRB has said that the Central Bank will also provide concessional finance worth Rs 22 billion for severely affected sectors from the refinancing window of NRB, but the facilities are yet to come into effect.
The country’s private sector has been urging the government to provide loan rescheduling and restructuring based on add on interest method (to add on interest matured in certain interval to principal) and defer the tax submission deadline of mid-April to mid-July, end of the fiscal year.
Public skepticism on government assurances rest low as the already flailing economy struggles further to survive the onslaught of the virus. Small and medium entrepreneurs struggle with the uncertainty of their existence as they are unable to pay rent or salaries with the impact of the pandemic and the lockdown.
