Thursday, 25 September 2014

Challenges of Nepalese Economy(Part 2)

Monetary Sector:

Task of extending financial services to village level through financial inclusion and enhancing financial literacy among the general public have remained a challenge.
Maintaining financial stability of banks and financial institutions and good governance through monitoring, supervision, and macro prudential regulations are still a challenge.

Talking about merger and acquisitions of BFI’s provision and byelaw has been made  in order to maintain financial stability and strengthening their capital base. But it has still a challenging task to make merger process successful amid the eminent problems such as possibility of monopoly in the financial sector, obstruction that may emerge in financial inclusiveness and the problem of Too Big to Fail.

High liquidity is another challenge the economy is facing frequently. There is challenge to solve the problems of high liquidity emerged through the lower credit disbursement against such higher liquidity by extending credit to productive sectors and containing the interest spread within a desired limit.

Co-operative sector is losing people’s faith. It is a difficult task to regain public faith through proper arrangements of regulation, monitoring and supervision for saving and credit cooperatives thereby improving policy, legal institutional and managerial aspects and address those problems witnessed in this sector.

Capital Market: No doubt that 2nd CA election of Nepal has brought positive impact on the capital market. But  attaining sustainable development through resolution of problems witnessed while broadening the area of transaction , attracting institutional investors, enhancing the level of awareness among investors, encouraging companies of the real sector to be listed in the securities market, making securities transaction fully automated, properly regulating the commodity market, and allowing NRN to invest in capital market is really a challenges.

External Sector:

The Trade deficit is major concern for the economy. TD that stood at 15.4% to GDP in FY 20004/05 went up to 28.4% in FY 2012/13. Maintaining domestic production to optimal level has remained challenge.

Remittance: Absence of adequate employment opportunities in domestic labor market resulted in increasing number of outbound laborers for foreign employment. Though higher rate of remittances inflow has created positive impact on the Nepalese economy, its utilization in productive sector has been a major concern.

Current Account: Despite current account has remained surplus during last 10 years, remittance income has been playing the major role for such surplus. The surplus in CA due to remittance inflows has often raised a question of its sustainability. Extending the export of the goods and services for the sustainability of CA, raising income from tourism by increasing the number of tourist arrivals, attracting FDI and managing imports have remained a challenge to Nepalese economy.

Other Sectors:

Apart from stated above economic activities has been adversely affected by political transition. It is another challenge to drive economic activities ahead in an undisputable manner by forging consensus on minimum common economic agenda among major political parties thereby managing political transition quickly as soon as possible.

Attaining higher and sustainable economic growth is not possible in absence of infrastructure sector’s development. The effort and investment of the government alone will not be enough for the development of infrastructure sector as this sector requires heavy investment. Despite immense potential of infrastructure development through the public private partnership (PPP) model, its is a challenging task to make legal, policy, institutional and functional arrangements to execute plans and programs practically for the development of infrastructure sector.

                      Challenges of Nepalese Economy(Part 1)

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