In the last day of his role as primary minister, the Maoist premier Prachanda stated that his administration gave “utmost importance to financial transformation” and made “a major contribution to economic revolution”. Unlike his boss, former Finance Minister Dr. Baburam Bhattarai was a bit modest in laying statements about economic improvement achieved under his management.
In assessing the economic plans and progress under the Maoist administration, it is unclear the way the dismal performance, in stimulating private sector and utilizing development expenditures especially, amounts to or leads to “economic revolution”. The other commendable policies initiated by Dr. Bhattarai were loan waiver of greatly indebted farmers and the Youth Self-Employment Program (YSEP).
These programs were well-intentioned, however the execution was not all that clear. Overall, the huge demand for loans by youths and partial comfort received by some of the poorest farmers was worth the policy experimentation. Not all the planned program and guidelines of the prior administration were successful. The drive for more revenue generation and implementation of VDIS resulted in savings flight as nervous investors and savers searched for safer vaults abroad. While this plan was unpopular in the business community, the government, of looking for a common route instead, wasted more than three months going head-on-head against the entrepreneurs, whom it saw as bourgeois and “feudalist classes”.
At a time when there is a desperate need for normalization of pressure between the private sector and the federal government, this incident led to souring of romantic relationship and fostered distrust between the two. Probably the most counterproductive and devastating policies were to let YCL make a mockery of agreement enforcement, destabilize the already feeble industrial sector, and convert a deaf ear canal to dire call for industrial security.
By implicitly assisting the activities of its militant cadres, the Maoist administration demonstrated double standards in working with the private sector. Some of the Maoist ministers even defended and endorsed the extralegal occupation of commercial districts by YCL cadres, forced donation marketing campaign, and threat to life and property of entrepreneurs, whom they see as ‘feudalists’. The federal government engaged in multiple rounds of debate with entrepreneurs but did not budge on the call for disciplining YCL cadres and taming disruptive activities of trade unions.
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This resulted in the closure of several garment firms, jute mills, and multinational companies, amongst others. The administration backtracked only after it was threatened of noncooperation by the opposition parties; it had not been since it was responding to the concerns of the private sector. Later on, the Maoist federal government was active cleaning up its own mess.
Too centered on managing and finding a means out for its disruptive cadres, it was helpless in supplying the most needed essential services in rural areas. For example, it was powerless when more than one-third of the populace was under the risk of starvation at the height of the global rise in the price of food and commodities, so when major forests were burning.
Moreover, the government did not do enough to control the safe return of IDPs also. In relation to macroeconomic management, the administration’s performance was very disappointing. The price level initially rose above 14 percent due to rise in food, energy, and item prices in the global market. However, as prices of these items declined globally, these were too sticky in the Nepali market, resulting in an inflation rate of above ten percent. The government was struggling to manage the lack of goods, which was created by keeping back again inventories artificially.
The export sector continued to reduce its hold in the international market and trade deficit is rising. The way to obtain fuel was severely affected due to the regular closure of the main highway linking the Valley and Terai. The nationwide authorities had to bail out cash-strapped, debt-ridden NOC 2 times. Still, the country lacks a plan to close a big opening in NOC’s balance sheet. In addition, there is no immediate plan to bridge the wedge (of 500 MW) between demand for and supply of electricity throughout the market.
Worse, domestic and foreign traders are not yet convinced of secure investment, rule of regulation, and respect for property privileges in the infrastructure and hydropower industries. The Maoists also failed to mobilize development expenditure, leading to very few development programs being implemented-a point or even. Bhattarai has conceded. So far, only 27 percent of total capital expenditure has been spent. Meanwhile, achieving the targeted economic growth rate is now a fairy tale! The economy is definitely not being transformed. There were some successes in income collection and welfare programs.