New Government Unveils 'Shock Therapy' Economic Reforms in 100-Point Agenda

Kathmandu. Following the new mandate, the new government has introduced a 'shock therapy' policy to accelerate the economy. This means implementing rapid and comprehensive economic reforms in a short period.

The country's economy has been sluggish due to prolonged slow credit flow, declining revenue, and low morale in the private sector.

To revitalize this sluggish economy, the government has adopted this policy through a 100-point agenda for administrative reform aimed at improving the nation's economy. Nepal is planning serious structural reforms in the areas of plan formulation, budget execution, revenue administration, and the capital market for the sustainable development of its economy.

Despite past reform efforts, expected results were not achieved due to political instability, lack of policy continuity, and weak implementation capacity. However, the new government, arriving with a fresh mandate, is taking such steps. The government's 100-day agenda clearly sets deadlines for economic reforms to be completed between 15 and 180 days.

Red Carpet for Investors, Company Registration in 2 Days, Fee Abolition

Starting a business in Nepal is considered a major hassle. However, the Balen government has put forward an action plan to overcome this by implementing a startup fast-track system, enabling business registration within 2 days. Furthermore, the action plan announces that the government will allow local levels to register small and cottage industries with capital up to NPR 250 million and completely abolish registration fees.

The government has planned an action item to implement a one-stop system for business registration, tax registration, and bank account opening within 45 days. An action plan is also in place to implement a private sector protection and promotion strategy to enhance the security and morale of the private sector.

The announcement regarding the implementation of the private sector protection and promotion strategy has pleased the GenZ movement and the private sector, which has maintained low morale for a long time. This government action plan indicates that the government is preparing to move forward by assuring the private sector with a red carpet.

The private sector has welcomed the government's 'shock therapy' policy for economic reform. Umbrella organizations of the private sector have openly welcomed the government's 100-day reform agenda. The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) issued a press release welcoming the cabinet's decision to immediately implement the private sector protection and promotion strategy.

FNCCI President Chandra Prasad Dhakal stated that the plan to implement physical security and asset protection, economic revitalization, and regulatory simplification through the strategy, considering the suggestions of the private sector, is welcome. He added that the private sector is delighted by the decision to immediately implement policies related to investment promotion and youth entrepreneurship, emphasizing that strong collaboration is necessary for its successful implementation.

He said, 'We expect that this will guarantee the security and necessary promotion of private sector businesses, individuals, and investments by the government. We anticipate that this will boost private sector morale and support investment promotion.'

President Dhakal stated that the 100-point agenda will make the country's governance system results-oriented, transparent, and accountable. He noted that including issues like making service delivery digital, easy, and timely, administrative reform, corruption control, creating an investment-friendly environment, and developing entrepreneurship in the agenda is very positive. 'We welcome this reform agenda. We believe that its effective implementation will contribute concretely to economic revival, job creation, and sustainable development,' Dhakal said.

Similarly, Nepal Chamber of Commerce President Kamlesh Kumar Agarwal stated that the economic reform agenda will lead the country's overall economy towards economic prosperity. He welcomed the implementation of the report from the High-Level Economic Reform Suggestion Commission formed under the coordination of Rameshwar Khanal. President Agarwal depicted that the implementation of the agenda issued by the government will bring radical changes to the entire economy.

'This agenda seeks to address the changes in technology globally and the shifting patterns of production and consumption. In the past, many economic norms were unacceptable, but in the current context, they are becoming acceptable,' said President Agarwal. 'It will facilitate conducting economic activities by embracing the changes brought by technology.'

He mentioned that small entrepreneurs, youth, and women are happy with the decision to register industries with investments up to NPR 250 million as micro, cottage, and small industries. He stated that the government's decision to make the registration process hassle-free within 45 days will attract new entrepreneurs, youth, and women to business.

Surgery on Revenue and Search for Idle Capital

The government, which has been relying on domestic debt and foreign grants, plans this time to mobilize idle capital accumulated in its own treasury and the market. The government has put forward a policy to bring the funds from inactive accounts, which have not been claimed by anyone for ten years in banks and financial institutions, under the government's name. While it remains to be seen how successfully this plan is implemented, the government has made an agenda to activate the economy by mobilizing idle capital and making it capital expenditure.

Furthermore, there is a plan to utilize large amounts of bail money lying dormant in courts and government offices for development construction after fulfilling legal procedures. Similarly, the government plans to consolidate more than 139 scattered funds and implement mandatory e-billing for large businesses within one month to stop revenue leakage.

Liquidity in Banking Sector and Relief for Distressed Businesses

To address the complaint that small and medium enterprises, agriculture, and information technology sectors are unable to secure loans despite money being available in the market, a policy is being implemented through the central bank within 30 days to reduce the risk weight for these sectors. This will encourage banks to lend to these sectors. Additionally, packages involving tax exemptions, interest subsidies, and loan restructuring are being introduced for businesses affected by protests or economic recession.

Cutting Public Expenditure and Reforms in Procurement Law

As a remedy for the disease of low capital expenditure and rising current expenditure, the government plans to reduce the number of ministries to 17. It is determined to abolish unnecessary boards and committees. To stop delays by contractors, the government has planned to amend the Public Procurement Act within 30 days and implement performance-based contracting. The agenda includes finalizing within 30 days whether to continue or terminate the contracts for long-stalled, sick projects.

From Opening PPAs to Payment to Farmers in 25 Days

The energy, agriculture, and tourism sectors, which drive the economy, have been given special priority in this agenda. In the energy sector, preparations are underway to open up stalled Power Purchase Agreements (PPAs) within 180 days. This government agenda has provided significant relief to hydropower developers.

Prakash Dulal, Deputy Secretary General of the Independent Power Producers' Association, Nepal (IPPAN), stated that it is positive that the 100-point strategy put forward by the government has set timelines for working on the energy sector, considering it the main basis for economic transformation. He said the government's plan to formulate an energy export strategy and introduce a policy to export electricity at high prices during peak hours within one month is a welcome step.

He also mentioned that the provision to finalize all decisions related to Power Purchase Agreements and licenses within 180 days will end administrative hassles. The plan to develop multi-dimensional structures, including Public-Private Partnership models, to expand investment is welcome.

Furthermore, the government is preparing to enact a legal provision requiring mandatory payment to farmers within 25 days of selling their produce, failing which the buyer must pay with interest.