April 1: Nepal’s consumption has drastically increased in the recent years in contrast to its weak economic production, says the white paper recently issued by the Ministry of Finance (MoF). Pointing out that 90 percent of the income is spent in consumption, Nepal’s consumption growth is too high compared to its production capacity, informed Dr Yuba Raj Khatiwada, minister for finance while releasing the white paper.

Dr Khatiwada attributes this mismatch to the past governments' failure in devising policies focused on boosting production. We are aware about the situation and will introduce policies that will boost production and reduce the gap between Nepal’s consumption and production rate, Khatiwada said. 

According to the Fifth Household Budget Survey released by Nepal Rastra Bank (NRB) in 2014/15, Nepali households, in average, earn Rs 30,121 on monthly basis but spend Rs 23,883 in consumption which is almost 80 percent of the income. Further, Rs 2,045 is spent as non-consumption expenditure allowing saving of only Rs 4,193 (14 percent). At this point of time, it is a crucial challenge to break the shackles of saving deficit, mentioned Khatiwada.

The white paper also suggested that Nepal’s economy has become an import-oriented economy with dependence on commodities for even the development of social, cultural, financial infrastructures on foreign market. The heavy imports are bound to inflict heavy trade deficits and incur rise in production costs for Nepali manufacturers.

Dr Khatiwada clarified during the release of the white paper that the double digit economic growth would be impossible without a structural change in the economy. According to Khatiwada, the long-term economic bases in Nepal, including financial discipline, have weakened creating numerous challenges for the country.

Further, Khatiwada highlighted that national revenues alone may not be able to cover the budget expenditure of Rs 804 billion in the current fiscal year which is 110 percent of the total revenue.