Dadhi Adhikari, PhD in Environmental and Resource Economics from University of New Mexico, is currently working as a Director at the Kathmandu-based research institute-South Asian Institute for Policy analysis and Leadership (SAIPAL). Adhikari has studied the impact of the Covid-19 on Nepali economy. In an interview with Nepal Live Today, Adhikari provides insights on various impacts of Covid-19 on Nepali economy, budget for fiscal year 2021/2022, federal system, role of local governments in enhancing health services to tackle the Covid-19, education and many other issues.
You were involved in studying the impact of the Covid-19 on Nepali economy. Nearly one and half years down the line, what has been the overall impact of the Covid-19?
Adverse impact of Covid-19 on the entire Nepali economy is evident. Its direct impact has remained in health and employment sectors resulting in increased levels of poverty. Right now, the rate of Covid infection seems to have subsided due to availability of vaccines, though in limited amount, and various forms of lockdown imposed to curb the spread of the pandemic. However, it will have a long term impact on poverty. The government record shows that 1.2 million people have lost their jobs while 1.6 million people have slipped below the poverty line due to Covid-19. The ground reality could be much more severe.
There has been a long term negative impact of Covid in various sectors of our economy. The worst affected sector is tourism. Many hotels and restaurants have remained closed. As per a study by the Nepal Rastra Bank, at present, only 57 percent of hotels and restaurants are in operation. This has not only affected the employment situation but has also affected infrastructure development in the tourism sector, which will have a lasting impact on the national economy. Apparently, the hotels and restaurants that have remained closed will take a long time to reopen. Besides, small and cottage industries have suffered colossal damage. As per the report of the central bank, only three fourth of such industries are in full phase of operation at the moment. This shows how Covid-19 has impacted the industrial sector. However, there has been one positive impact of Covid-19 as well.
Can you elaborate what that is?
People are now more health conscious. The government has increased investment in the health sector. This will have a positive impact in the long run. Another good news is that our prediction of remittance flow, made at the initial phase of Covid outbreak, has been proven false, much to our relief. We had predicted a sharp decline in remittance flow, but it increased. There can be various factors behind this, but it is a matter of immediate relief to the national economy.
We now have a new government in place. What do you think should be the priorities of the new coalition government?
Stability and delivery of this government is under question. However, this does not mean that the present government is incapable. The doubt surfaced due to the nature of the formation of this government and its possible consequences. In the recent past we saw how the government led by a party with a majority remained unstable. Only the future will tell us on the delivery of the present coalition government of three-four/multiple parties. However, as things remain, this government mainly needs to perform three major tasks.
First, free vaccines should be provided to all citizens. For this, if the vaccines received as donation are not adequate, it should buy the required quantity of vaccines. The government should have access to vaccine manufacturers and it should buy the required quantity of vaccines. The government should exude a high level of diplomatic ability. Another important conjoined aspect of vaccines is its equitable distribution. The situation where only those with access and means benefit from vaccines should not end.
Second, those who have lost their jobs and the poor should be provided either with relief materials or cash. The outgoing government had terribly failed on this front. It is estimated that around four million people have a hard time meeting their daily ends due to Covid-19. Those people should be provided with food and cash relief. The government should work in coordination with local levels for this.
The third thing is to maintain good-governance and austerity measures. Good-governance is a crucial aspect of governance. It is all the more important during a pandemic situation. A government, in absence of good-governance, will lose its public trust. This will result in a huge negative impact in its attempts towards controlling the pandemic. Therefore, the government should take serious measures to control corruption and maintain transparency. Besides, the government should also adopt austerity measures to manage resources to solve problems resulting in the health and livelihood of people.
The government should adopt austerity measures to manage resources to solve problems resulting in the health and livelihood of people.
The outgoing government unveiled the fiscal budget in May this year. How did you find the budget of the federal government? What are the areas you think need to be focused on or revised?
Budget for the current fiscal year was brought through ordinance. Therefore, the constitutionality of this budget is questionable. Since there is now a new government and the budget is in the initial phase of implementation, there remains a huge possibility for the budget presented by the outgoing Finance Minister Bishnu Poudel to be revised. Now, let’s forget its political aspect and only focus on the economic aspect. Or if the current government is to revise the budget, what type of revision is required? Let’s now look at that.
The worst part of the budget presented by outgoing Minister of Finance Bishnu Poudel is that it does not address the issue of relief for the poor people at all. Provincial and local governments are also silent on the issue of relief. This clarifies that rather than addressing genuine problems, those responsible for running the government are solely concerned about gaining popularity through quick fix stunts.
The second weakness of this budget is its populist nature where resources have been scattered. In the language of economics, this type of budget results in the inefficiency of resources. In a country like ours, decrease in the efficiency of resources means further increase in resource deficiency. In the present context, where the budget should be utilized to control Covid-19 and for relief materials, the budget has been allocated for activities that are not of pressing need (such as for railway and for the Pashupatinath temple).
The third weakness of the budget is that the grant provided to local governments is not transparent. In a federal system, the grant provided to the local government has a crucial role. This does not only mean judicial distribution, but also ensures participation of local people in development initiatives. Therefore, budget allocation for the local level should be transparent. However, the current fiscal budget has discriminatory resource allocation.
Other weaknesses of this budget include repetition of projects, dependency on foreign loan for development expenditure and tax exemption in an unscientific manner. If the new government decides to unveil a new budget or review the current fiscal budget, these issues need to be addressed.
You have been studying the functioning of local and provincial governments closely. What lessons have we learnt so far?
What I believe and what can be proved scientifically is that if there is a way to develop Nepal that is through the federal system. Some voices of dissent can be heard now and then in social media. But, that is because those people are not well informed about the way federalism works and its benefits. Transparency is one of the major outcomes of adopting a federal system. Since the public is close to the government under federal structure, we now get to be informed even of small incidents of corruption through the media. Once the incidents of corruption are revealed, they help to control corruption.
Though federalism has numerous benefits, some problems have surfaced in the context of Nepal. These weaknesses are because federalism is at its infancy. Of the starkest weaknesses is the lack of experience and capacity. Because they relied on the central government in formulating all kinds of policies and their execution in the past, the local governments are now realizing that they lack experience and capacity to undertake such initiatives. They lack human resources and knowledge. These have affected the selection of projects, implementation mechanism and formulation of required policies. There have been problems like the budget being spent on road construction alone, scientific method not followed for road construction, ineffective flow of service and lack of timely budget preparation, among others. We can hope and believe that these problems will be solved gradually. Another problem with federalism is lack of coordination between the civil servants and the elected representatives. In some municipalities, there have been ego issues between these two, while in others, elected representatives are found to be pressurizing civil servants for inducting expenses against the rule and that is because they do not have knowledge on procurement laws. Such problems are temporary.
The worst part of the budget presented by the outgoing Minister of Finance Bishnu Poudel is that it does not address the issue of relief for the poor people at all.
In order to make federalism a success, the government should enhance the capacity of local level, it should set the minimum standards of goods and services to be provided by local bodies across the country and develop a system for allocating grant in a transparent manner.
Climate change has emerged as a major issue that governments must address while planning for development programs and projects. How do you think the government should integrate its climate policies in its overall development planning and implementation of major projects?
Climate change is a real problem, not a hoax, and its negative impacts are visible. Incidents of floods and landslides a few weeks ago might be the result of climate change and our reluctance to respond to natural disasters properly. Therefore, we must be very serious about climate change.
We have done some work towards climate change, but those are limited to papers. For example, environmental impact assessment, a prerequisite prior to construction of any physical infrastructure, is conducted lightly as part of paper work only.
The government needs to do two things to reduce the pace of climate change and to minimize the impact of climate change. Climate is the common good of the world. Therefore, Nepal should contribute to efforts towards reducing climate change though our role to this effect could be minimal. For this, it is important for the government to undertake activities like paying attention towards sustainable use of natural resources, encouraging the use of green energy and reducing the emission of green-house gas. For example, initiatives such as tree plantation and construction of gardens in every municipality, scientific management of forest, promoting the use of electric vehicles and tax exemption for people on the use of solar energy can be taken to retard climate change at national level.
Though federalism has numerous benefits, some problems have surfaced in the context of Nepal. These weaknesses are because federalism is in its infancy.
The government should also be conscious towards minimizing the impacts of climate change. It should undertake activities such as translocating a settlement under the threat of landslide or flood to a safer place, developing crops suitable for new climatic condition, informing people on health problems due to the impact of climate change and management of treatment facilities accordingly and, most importantly, conducting research activities on a continuous basis on climate change in the context of Nepal.
The Covid-19 has highlighted the need of investing in primary health care so as to deal with the pandemic successfully. How do you see the role of local and provincial governments in expanding and improving the quality of primary health care?
Preparation in advance is important to cope with a pandemic like Covid-19. It is important to be able to predict possible disasters, be ready to respond to them with proper plans, and drill those programs regularly. Besides, adequate budget should be allocated and, most importantly, the environment to conduct high quality research activities inside the country should be created. In the absence of science and scientists, it is not only impossible to cope successfully with such a pandemic but also to develop the entire country.
As to the issue of primary health and Covid, these can be viewed from two perspectives. First of all, raising awareness among the public on health issues is important. Public awareness should be raised through regular updates based on facts.
The second important factor is the access to health services. Access to health services is not possible only by increasing the number of health facilities. Environment should be created so that the general public can visit the hospitals and benefit from the services. That means, distance to health facilities should be as minimum as possible, there should be good transportation facilities, health facilities should be equipped with adequate human resources and equipment and drugs and the services should be affordable for all.
Whether in Covid situation or without it, the capacity of local levels should be enhanced and provision of universal health insurance should be made based on the income of people for the treatment of diseases other than those that fall under free treatment services provided by the government.
The constitution of Nepal has incorporated basic health as a fundamental right and has entrusted local levels with the responsibility to ensure such rights. However, citizens are deprived of health services as envisioned by the constitution in lack of adequate human resources and drugs with local levels. Yet, there is no doubt that whether in Covid situation or without it, the capacity of local levels should be enhanced and that the provision of universal health insurance should be made based on the income of people for the treatment of diseases other than those that fall under free treatment services provided by the government.
Educating girls is said to be a key to reducing gender disparity, violence against women and promoting women empowerment. What would be your suggestions for all three levels of governments to enhance the quality of teaching and learning at our schools, with focus on girls’ education?
At present, enrollment at elementary level is satisfactory. Given the data, we can assume that enrollment rate at elementary level will be 100 percent in the near future. Yet, there exists two types of weaknesses in our educational system. First, the dropout rate increases in grades above elementary level and the dropout rate is higher among girl students. Awareness level of the public and the issue of family economic status should be addressed to solve this problem. If a family is unable to send its all children to school due to its poor economic condition, chances are high that girl children will be left out of school in that family. Various incentives can be provided to address such problems. Provision of midday meal and free sanitary pad are some examples. More such incentives should be introduced at schools. For example, free education for girls and ensuring employment to the family of poor girl students can increase th
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