November 30: The Federation of Nepalese Chamber of Commerce and Industries (FNCCI) has warned that the economy is heading towards crisis and has urged all stakeholders to work together to prevent a catastrophe.

Organising a press conference on Tuesday, the umbrella body of private orgagnisation said that it will announce protest programmes if the government does not revise its programmes to support the private sector.

It may be noted that the nationwide protests of industrialists and entrepreneurs were put off upon the request of FNCCI citing the general election on November 20.

During the press meet, FNCCI President Shekhar Golchha said that the revenue collection of the government is not enough even to meet the general expenses. Ho noted that inflation was all-time high compared to the last six years while the slowdown of business activities has resulted in multi-dimensional problems in the economy.

Golchha said that the private sector was hopeful that the first-quarterly review of the monetary policy would address the problems of the economy, but that did not happen. As a result, the FNCCI concluded that the economy would be heading towards a disaster.

“At present, the government, private sector and the general public all have been negatively affected. The economic indicators are dismal. If we do not take the situation seriously, the economy will head towards a disaster,” warned Golchha, adding, “If the production and supply chain becomes regular, it will ensure government’s revenue collection and job security of the general public and  bring inflation under control in course of time.”

However, the rise in prices of petroleum products in the international market and the lack of maturity on part of the regulatory bodies have resulted in the current crisis, added Golchha.

He further said that the current crisis is the result of failure of regulators to handle the post-Covid situation.

“The situation was hopeful after the pandemic. The economic indicators had shown improvements. The financial sector was in need of loan. The demand for loan in real estate, capital market and productive sector increased. The demand increased but the production remained low. In such a situation, it was  obvious that imports would rise,” said Golchha.

According to him, the credit flow of banks was five times higher than deposit collection in the first five months of the last fiscal year. “Banks invested Rs 450 billion during the review period. Foreign exchange reserves declined by 17 percent. As the regulators tried to control credit flow and foreign exchange reserves at once, credit flow declined to Rs 60 billion in the last eight months. If the government had been cautious to prevent massive credit flow, it would not have been necessary to adopt strict measures now,” said Golchha.

A survey conducted by the FNCCI has revealed that the production capacity of industries as well as business activities have slumped. As a result, revenue collection of government has also declined. According to the survey report, revenue collection declined by  19 percent in the first three months of the current fiscal year. The current expenses of the government was more than revenue collection by Rs 17 billion, said Golchha.

“If the expenses remain high and the revenue collection is dismal, we might have to take foreign loans to pay the salary of civil servants. It is the general public that has to bear the burden of that loan ultimately,” said Golchha.

The FNCCI argued that although the Nepal Rastra Bank claims inflation has reached 8.5 percent, the actual inflation has already reached double digits. It has negatively affected the purchasing power of the consumers, added the FNCCI.