Challenges of the Nepalese Economy
Nepal has a stable government, after the election of 753 local governments, 7 Provincial Governments, and the Federal Government. At present Nepalese economy faces challenges to implementing the Federal Democratic Republic system towards the path of "prosperous Nepal and happy Nepali". Nepal is a least developed country trying to attain sustainable development goals and the status of a middle-income country by 2087 B.S.
The challenges of the Nepalese economy can be explained under the following headings:
1. Upgrading Nepal to a Middle-Income country:
The current plan has a long-term vision to upgrade Nepal into a middle-income country from the current status of LDCs by 2087 B.S. and attain the Sustainable Development goals (SDGs). Although currently, Nepal has a stable government in all three levels due to the lack of charismatic leadership and the Feudalistic hangover of political leaders, it is a challenge for Nepal to meet these objectives.
2. High Price rise:
The pricing system has been under pressure due to adverse supply systems caused by low economic growth. The high inflation has on the one hand made the public's life difficult and on the other hand, production has become costlier posing difficulties to achieve the growth target.
3. Import Based Production system:
The overall production structure is relying heavily on imports as all service sector commodities relating to agriculture tools, industrial raw materials machinery parts, construction materials, and tourism are being import-dependent. Due to the devaluation of Nepalese Rupees with the US Dollar over the few years, the cost of production has increased. The task of balancing the external sector has become challenging due to the continuous increase in the trade deficit.
4. Contraction in the Labor Market:
Decreasing economic activities and extensive use of capital-intensive technology cause the contraction in the labor market. Every year new labor force of about four hundred thousand enters the labor market, while only one-fourth of them get employment. Hence, achieving poverty alleviation-oriented economic growth is a challenge. The creation of employment is becoming a challenge owing to lack of attraction of the youth in the agriculture sector, mismatch in the vocational education system, and men-power demand in the labor market especially productions and constructions are not expanding as expected.
5. Lack of physical Infrastructure and cost competitiveness:
On the one hand, the construction of large infrastructure such as roads, electricity, airports, irrigation which are pre-requisites to achieve high economic growth is slow in Nepal. On the other side, existing infrastructure is underutilized in the absence of proper operation and maintenance. As a consequence, the cost of production has increased and additional investments are not attracted.
6. Institutional Capacity & Good Governance:
As there is no increase in the institution's capacity of development administration, service delivering public institutions, and monitoring entities, this has affected the decision-making process and implementation. Consequently, service delivery is not effective as expected. The task of making public service delivery people-oriented and effective through compliance in law, economic accountability, promotion of good governance, corruption control, and increase in administrative efficiency has remained challenging.