In its latest update, IMF revised Nepal’s economic growth to 6.5 percent in the current fiscal i.e. more than what it said in its last review. The earlier IMF projections in its World Economic Outlook report show only 5 percent growth for Nepali economy.

“Following a prolonged period of subdued growth, economic activities in Nepal have picked up in recent years. Supported by greater political stability and reliable supply of electricity, the growth is expected to reach 6.5 per cent in 2018-19, on expanding post-earthquake reconstruction activity, services and manufacturing,” reads a statement in the Article IV Consultation Report of IMF released on December 13, 2018.

An IMF team led by Geert Almekinders visited Nepal on December 2, 2018 for discussions on the 2018 Article IV consultation.

The new outlook recommended Nepal to balance its economic growth trajectory, alongside keeping a close watch on the rising fiscal and current deficits that increased outflow of foreign reserves.

IMF also recommends tight policy measures to keep up with the current economic scenario, deal with the internal & external pressure and achieve a durable economic expansion; it suggests higher interest rates, smaller fiscal deficit and tighter macro-prudential policies (than the budgeted).

It also cautions the government to ensure that the general budget won’t increase further in the process of implementing fiscal federalism.

Lauding the government for its efforts towards taxation and consolidation of expenditure through the Public Expenditure Review Commission, IMF suggests to slow-down on distribution of resources and responsibilities to the provinces and state governments.

IMF urged the government to also control the credit growth stating, “while credit growth has helped spur growth over the past several years, high pace of expansion raises stability concerns,” and also suggested to deny any measures that cause credit rise.

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The report puts Nepal at the 158^th position out of 190 countries.

 
This indicates the lowest ranking based on the 10 indicators including:

Reasons for Low Ranking
According to World Bank’s annual ranking, Nepal’s ‘2017 Labor Act’ made tax paying difficult. The introduction of labor gratuity, medical insurance and accident insurance through this act, puts a considerable burden on companies having a complex administration.

The biggest burden, labor gratuity mandates that employers must file and pay it manually on a ‘monthly’ basis. This in turn has a major impact on tax payments and time taken to comply with tax obligations.

Photo Credit: NepaliIndata

In 2017, business entities in Nepal paid close to 39 payments and spent 353 hours to comply with tax obligations. On a global average, companies spend 24 payments and 237 hours in tax compliance.

“Raising revenues for spending on social expenses is needed and possible. It will be critical to find ways for not overly burdening companies with paperwork, taking time and resources away from generating profits to employ workers and spread prosperity,” said Faris Hadad-Zervos, Country Manager, World Bank, Nepal.

The Solution
Coming up with a solution, Nepal’s tax authorities are considering an e-filing platform that will make compliance easier for businesses.

On the other hand, the Government is considering the merger of taxes and contributions that are levied on the common tax base.

It has also approached World Bank for assistance in simplifying business process in the coming period.

“We view this as a very positive step forward and stand ready to support these critical reforms as part of Government new vision of Crowding in the Private Sector,” Zervos added.

Overall, Nepal’s reduced the number of business reforms to 19 in 2017 compared with previous year’s revised record of 21 reforms.

US Ranking in WB’s ‘Best Places to do Business’
Similarly, US dropped two spots in the World Bank’s annual ranking of the ‘Best Places to Do Business in the World’.

According to the Wall Street Journal, America fell to the ‘eight’ place based on following indicators :

Meanwhile, New Zealand, Singapore and Denmark continued to maintain their ‘top three’ ranking for the third year in a row.

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Interview by Sai Nikesh D

Nepal has come a long way in development. As a nation sharing borders with the world’s two major economies, Nepal has been striving to become a developing country and grow further to achieve the developed country status.  As a process, the Government of Nepal has been actively participating in various global and local level platforms promoting country’s strengths and potential to development, and is sincerely aiming to see the benefits as part of its UN 2030 Agenda.

Continuing with a wide coverage on Nepal and its developments over a period, Nepali Sansar, as a Nepal-focused media house, got a chance to get in touch with Dr.Ek Raj Ojha, Senior Sustainable Development Consultant from Nepal, for a better understanding of the country’s progress towards its set goals.

Dr. Ojha, with his sound expertise in working with national and international level organizations like ADB, UN and government departments in sustainable development and planning, policy framework, among other key aspects of development and planning, shared a valuable information in this regard, helping us portray a complete picture of Nepal and its developmental path over a period and towards future.

Following are a few excerpts of Nepali Sansar Bureau’s detailed interaction with Dr. Ojha:

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