KATHMANDU: Officials of the Ministry of Finance on Tuesday briefed Finance Minister Bishnu Prasad Poudel about the country's economic challenges and proposed measures to address these issues. "Mainly, there are 46 challenges in Nepal's economy, according to the observation of the Finance Ministry. Steps are required in 29 sectors to overcome these challenges," stated a press note issued by the ministry.
The ministry's secretaries and joint secretaries provided the minister with an overview of the country's economic status and proposed solutions. In response, Minister Poudel directed prioritizing these challenges to resolve them effectively.
Key challenges identified by the ministry officials include the slow growth rate in the economic sector compared to available resources, limited growth in savings, consumption, and investment, poor investment in the productive sector, and a significant gap in the import-export ratio. Additionally, unstable and slow economic growth, a substantial financing gap, limited gross domestic savings, and massive internal migration leading to a decreasing population trend in mountain, hill, and rural areas were highlighted as major issues.
The ministry also pointed out the limited contribution of the productive sector to economic growth, low productivity, and the declining trend of the industrial sector's contributions to the economy. Furthermore, the officials highlighted challenges such as an import-based revenue system, poor export status, a massive trade deficit, marginal growth in revenue collection and expenditure, ineffectiveness in capital expenditure, rising debts, and substantial financial liability for loan repayment.
To address these challenges, the ministry suggested reforms in 29 sectors. These reforms should focus on ensuring effective public expenditure with prioritization, improving capacity to increase capital expenditure, emphasizing fiscal strengthening, prioritizing production-based revenue, promoting effective use of debts, reducing financing risks, boosting economic growth by creating a conducive environment for investment, and investing more in the productive sector.
The ministry also proposed ideas for revitalizing the economy amid ongoing slowdown. These include removing internal obstacles to attract foreign direct investment (FDI), stressing the construction of hydropower projects and transmission lines, developing quality road networks, aligning rural roads with agricultural production and marketing, promoting the effectiveness of capital expenditure, and applying austerity measures in administrative costs.
Additionally, the ministry recommended focusing government investment on infrastructure development, mobilizing foreign grants and concessional loans for national priority projects, and using funds related to climate change effectively. Other suggested measures include maintaining the government's reserve fund, discouraging non-budgetary demands, ensuring loan disbursement in the productive sector, and controlling bad debts.
The ministry's officials also called for applying relaxed monetary tools to reduce the costs of fiscal tools while maintaining stability, providing project-based loans for SMEs, ensuring effective regulations of the fiscal sector, and developing a second-layer regulatory mechanism for the cooperative sector. Encouraging the use of remittance in the productive sector and implementing policy and legal reforms to increase the inflow of foreign investment were also among the proposed solutions. -- RSS
