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DOCKING NEPAL’S ECONOMIC ANALYSIS
Agriculture The agriculture sector has been hit hard by the torrential unseasonal rain-washing hectares of land consisting of various cultivation causing a hike in the price of various kitchen staples. Paddy crops of 424, 113 tonnes on 111,609 hectares which were ready to be harvested have been destroyed. Moreover, the shortage of chemical fertilizer due to the reluctance of importers to purchase fertilizers due to the rise in price in the international market will impact the farmers during the plantation season. There has been a surge in the price of commodities like oil, ghee, meat, pulses that can be attributed to the festival season. TRADE OF AGRO COMMODITIES Ban on Import of Peppercorns, Peas, Dates, and Betel Nuts: The government has banned the import of peppercorns, peas, dates, and betel nuts at the request of the Nepal Rastra Bank (NRB). NRB requested government intervention due to the strain faced by the foreign reserve. Nepal has imported betel nut worth NPR.1473 million (USD 12.364 million), and pea worth NPR 3365.1 million (USD 28.247 million) in the first three months of the current fiscal, whereas betel nut worth NPR 171 million (USD1.435 million) was imported in previous fiscal year’s first three months and pea worth NPR 723.5 million (USD 6.073 million) was imported with an increment of 365.1% can be seen in import of pea. Nepali traders have been found taking advantage of the South Asian Free Trade Area (SAFTA) agreement’s provision of zero tariffs on goods exported from an underdeveloped country like Nepal. Nepali traders import these goods from third
countries by paying minimum tariffs and exporting finished products to India with zero tariffs. Similar interventions by the government were carried out in March 2019/20 that restricted the import of expensive edible goods along with luxury vehicles. A flexible restriction was placed due to the pressure from traders’ that allowed traders to import 15,000 tons each of betel nuts and pepper and 5,000 tons of date annually for industrial purposes only. Thus, NRB has stated that it will only allow the shipment of these goods to those traders who have obtained permits and opened letters of credit accounts as of mid-July this year. In relation to the import of these goods, the central bank has asked banks and financial institutions to not consider new documents for transactions and payments.62 PRODUCTION UPDATES Paddy Production Hit Hard by Unseasonal Rain: According to the Ministry of Agriculture and Livestock, the initial estimated
damage to the paddy crops from the unseasonal rain is at NPR 8.26 billion (USD 69.336 million). It is the highest recorded loss by the Ministry and the estimation excludes losses of livestock and food stored by farmers. The initial estimation states 325,258 tonnes of ready-to-harvest paddy crop on 85,580 hectares were submerged or swept nationwide. Lumbini province has suffered the highest losses with damages at NPR 4.51 billion (USD 37.857 million). The sudden rainfall had a major impact on the country’s economy as paddy contributes 7% to the national gross domestic product and is a major source of income for half the population. It is calculated that economic growth will drop by 0.5% to 0.6%.63 A task force was formed to evaluate the damage caused by the incessant rain in which the revised estimation of the loss was determined at NPR 11.87 billion (USD 99.639 million). With the recent statistics, paddy crops of 424,113 tonnes on 111,609 hectares have been destroyed. The government has decided
