Nepal’s Tourist Shortfall Continues to Hammer Its Economy

Skift grip

An economic crisis is looming, with the nation’s recovery now hampered by inflation and rising oil and coal prices following the war in Ukraine. Not exactly a tourist friendly location.

Matthew Parson

Nepal will miss its growth target, a senior government official said on Thursday, pointing to the troubled state of an economy struggling with a pandemic-induced loss of tourism, a growing trade deficit and soaring prices. raw material.

This month, the Himalayan nation of 29 million people imposed restrictions on imports of luxury goods in a bid to rein in the outflow of its dwindling foreign exchange reserves and suspended the governor of its central bank, fueling concerns about a possible economic crisis.

Nepal’s GDP growth target of 7% for the financial year to mid-July will not be met and growth could be ‘limited to just 4%’, a senior government official told Reuters having direct knowledge of the matter.

The official was not authorized to speak to the media and declined to be identified.

Skyrocketing prices for crude oil, coal and edible oils following Russia’s invasion of Ukraine have hurt Nepal’s economy which had gradually recovered from the large losses of tourist dollars during the pandemic.

Former central bank governor Deependra Bahadur Kshetry said the biggest worry was the country’s widening trade deficit, which could reach the size of the government’s annual budget.

“It’s an alarming trend and needs to be controlled,” he said.

The trade deficit widened 34.5% year-on-year to 1.160 billion Nepalese rupees ($9.5 billion) in the first eight months of the fiscal year as import costs rose.

Fueled by rising commodity prices, soaring inflation is also making life much harder for many Nepalese. Kshetry said retail inflation, currently at a five-year high of 7%, could hit double digits by the end of the fiscal year.

“If prices continue to rise this way, it will be difficult for ordinary people like me to survive,” said Sita Magar, a 35-year-old maid in Kathmandu.

She added that her monthly income of $90 can barely cover her daughter’s school expenses and two simple meals of rice and lentils for her each day.

Nepal’s economic difficulties are comparable to those of Sri Lanka, although the situation in Colombo is much more serious. The country is facing a sovereign default and its economic crisis has sparked protests calling for the ousting of President Gotabaya Rajapaksa.

In its report on South Asia, the World Bank warned on Wednesday that global commodity prices could cut Nepal’s growth by 0.2 percentage points this fiscal year to 3.7% and by 0. 4 percentage points next year to 4.1%.

(Reporting by Gopal Sharma; Additional reporting by Manoj Kumar; Editing by Edwina Gibbs)

This article was written by Gopal Sharma from Reuters and has been legally licensed through Industry Dive Content market. Please direct all licensing questions to [email protected].