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New Delhi: Nepal is likely to cut funds to provinces and local governments due to a resource crunch amid falling revenues.
According to a report in the Kathmandu Post, the Nepal Finance Ministry said in a press statement on Tuesday that it has to manage extra resources to ensure payment of compulsory liabilities of the provincial and local governments due to a fall in revenue collection.
The economy in Nepal which was on the path of recovery following the Covid-19 pandemic has further been hit by the Ukraine crisis.
The International Monetary Fund (IMF) noted that the global economic impact of the war in Ukraine is exacerbating existing vulnerabilities and impacting Nepal’s import-reliant economy, increasing inflation, and decreasing international reserves.
The war in Ukraine which lead to an increase in oil and food prices has largely impacted the economy in Nepal.
Meanwhile, the IMF has said that although the reserves remain adequate but have declined more than anticipated.,The economic growth in Nepal
The latest World Bank figures suggest that Nepal is estimated to grow at 5.1 percent in 2023 and 4.9 percent in 2024.
In the first decade of economic liberalisation, the growth rate trend was optimistic. However, this trend has been declining over the years. During 2000-2009, the average annual growth rate of GDP was 4.1 percent, reaching a high of 6.1 percent in 2001 and a low of 0.1 percent in 2002.
Similarly, during 2010-2021, the annual average growth rate was 4.3 percent, a slight or marginal increase by 0.2 percentage points over the previous period, reaching a high of 9 percent in 2017 and a low of -2.4 percent in 2020. This is barely enough to feed the population, which is growing at the rate of nearly 2 per cent per year.
If such economic woes continue, hunger, malnutrition rife, employment insecurity, social insecurity, health crisis and loss of livelihood will become a routine occurrence.
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