National Planning Commission Vice Chairman Dr. Gunakar Bhatta States Nepal's Economy Faces Three Critical Traps

Kathmandu. Vice Chairman of the National Planning Commission, Dr. Gunakar Bhatta, has stated that Nepal's economy is currently in a challenging phase. Speaking at a program organized by the Economic Journalists Association (SEJON), he mentioned that both the private sector and the government are under different financial and structural pressures, and the country's economy is primarily caught in three serious 'traps'.

According to him, the first trap is that the private sector is caught in a deep burden of debt. He pointed out that private sector loans from the banking sector are equivalent to 92 percent of the Gross Domestic Product (GDP), and this ratio reaches 110 percent when loans from the Citizen Investment Fund and the Provident Fund are added, stating that such a situation is unsustainable.

He stated that the second trap is that the private sector is entangled in disorganized and unproductive assets. He said that due to the lack of increased investment in productive sectors, economic activities have not gained expected momentum. He mentioned that the government itself is caught in the third trap. Stating that the government is under the pressure of liabilities, he said that government expenditure management will be challenging for the upcoming budget due to increasing social security expenses and loan principal-interest payments.

Vice Chairman Bhatta said, 'We are in three traps. The first is the private sector in an unsustainable debt trap, the second is the private sector itself in a trap of disorganized unproductive assets, and the third is the government in a trap of unbearable liabilities.' He emphasized the need to advance sustainable economic growth as a common agenda for the private and public sectors to escape all three traps, manage the economy, and achieve the ambitious goal of high economic growth.

Recalling past phases of economic growth, he stated that reforms initiated after the budget presented by Dr. Prakash Chandra Lohani in 2041 BS and policy changes after 2048 BS boosted the industrial sector. He said that economic growth after 2073/74 was driven by infrastructure expansion and the implementation of fiscal federalism.

Stating that policy reforms and investment have made economic growth possible in the past, he asserted that innovation and digitalization are the main bases for future economic growth. He said that as Nepal is moving towards a new phase of industrial development, there is no alternative to the government and private sector moving forward together to achieve high economic growth.

Emphasizing that economic management is becoming increasingly complex, he stressed that future policies should be balanced and moderate, and that policy formulation should maintain fiscal balance, as excessive monetary expansion or unstable changes in tax policy can lead to risks.