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Economy worries

Friday, December 18th, 2009

Everyone, that is everyone except perhaps the political leaders, are worried about the future of the economy. Nepali Times writes:

Nepal’s trade deficit with India is now a whopping Rs100 billion and growing every quarter. While the balance of payments was still healthy, Nepal paid for goods imported from India in remittance and tourism dollars. But money transfers from Nepalis working abroad have plateaued. Overall exports are down, and the fuel import bill is up by 90 per cent from last year. There has been a three-fold increase in vehicle imports this year, which will mean another spike in fuel imports in 2010. All this will put further pressure on rupee parity with India.

Anticipating a housing bubble burst, Nepal Ratra Bank has imposed a cap on housing loans. Republica reports:

In a bid to correct the over heated realty market, Nepal Rastra Bank (NRB) on Thursday imposed a cap on the exposure of banks and financial institutions to housing and real estate loans, asking them to limit such exposure to 25 percent of their total investment portfolio by the end of the fiscal year 2012/13.

Commercial banks are revising their interest rates on housing and auto loans, as a result. Republica writes:

Major revisions have been made on auto and housing loans. The new interest rates on housing can go as high as 14 percent, and on auto loans it could be around 13 percent. Interest rates on housing and auto loans were between 10 and 11 percent just six weeks ago.

And, exacerbating the problem is the flight of investment capitals to India. The Kathmandu Post writes:

Nepal Rastra Bank has concluded that large amounts are going to India through the ‘banking system’ itself.

“In the first four months of this fiscal year, more than Rs10 billion has gone to India for different investment purposes,” said a highly placed source at NRB.

Most of the money is being transferred to Indian insurance companies by individuals who like to buy life insurance policy from Indian companies, writes The Kathmandu Post.

“The country’s fluid politics have also increased the outflow,” added the source. “Investigate more, and you will even find politicians and civil servants with Indian insurances policies.”

So, we should be very concerned by a statement made by Maoist Vice Chairman Kiran Baidhya that the political situation will worsen in the coming days. The Himalayan Times writes:

With little sign of a resolution to the ongoing political imbroglio, he claimed that there had been a breakdown of inter-party talks.

He opined that there was a slim chance of reaching a consensus soon, and that would take its toll on the statute drafting process as well.

That’s not all. The UML has started training camp for its Youth Force in Sindhuli to prepare them as opposition to the Young Communist League. Its not going to be an armed force, said a UML leader.

Madhesi Janadhikar Forum Chairman Upendra Yadav has warned that he will launch a third Madhes uprising soon. He said he was unhappy that the agreement singed between the government and the Joint Madhesi Morscha has not been implemented yet.

Until that happens we still have about half a month of Maoists’ protest programs to look forward to, which begins with a three-day banda beginning Sunday. Let’s brace ourselves.

(Posted by Indu Nepal)

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One Response to “Economy worries”

  1. Welcome back to reality ! « Bibek Paudel’s weblog on Says:

    [...] an predicted economic crisis (triggered by a liquidity crunch) in six months, and a foreseen political crisis in four months, [...]

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