November 5, 2010
The caretaker government runs out of money in less than two weeks and the passing of a new budget seems remote. As it stands, after November 16, there will be no money to run the administration, disburse old-age pensions, feed inmates in jail, or even collect taxes.
Remittances from the millions of Nepalis working in the Middle East, Malaysia and other countries – upon which a large percentage of Nepalis count on to survive – has declined alarmingly due to the ongoing global recession.
In the last fiscal year, Nepal’s economic growth – already sluggish compared to South Asian neighbors – fell from 4% to 3.5%.
Nepal’s political paralysis has reached the point that longtime donor nations are rethinking their willingness to offer further aid. Foreign institutions cite Nepal’s lack of credibility as their main concern. Donors have experienced a chronic lack of results in their development projects plagued by unwarranted political meddling and crippled by frequent and disruptive transfers of project chiefs.
The warning signs are planted in every direction and yet the political partiescontinue to ignore the absolute necessity of connecting political transformation with economic development.
Using Denmark as an example: How foreign donors lose their appetite for helping Nepal.
Several weeks ago, the Manila-based Asian Development Bank (ADB) – Nepal's largest international donor – said development projects funded by aid agencies could slow down if the Nepali government failed to pay its share in the absence of a budget.
"If the deadlock continues development projects will face a serious crisis," Sultan Hafeez Rahman, ADB's director general for South Asia, said during a recent visit.
Then last week, Denmark echoed ADB’s prediction. A senior official of the Danish International Development Agency (DANIDA) Board warned that Nepal could be struck off the list of recipients of direct assistance if there is no improvement in the political situation within a year.
Denmark has committed US$ 81 million (Rs.576 million) to Nepal for various programs including support for the peace process. But as Denmark is in the process of revising its assistance strategy, Nepal’s political paralysis is giving the Danes a reason to wonder if their money would be better spent elsewhere.
According to a senior official of the Danish International Development Agency (DANIDA) Board: “As donors, we would like to see results and solutions. Otherwise, Nepal can’t count on our support for eternity.”
Denmark is an old friend of Nepal’s. It has provided assistance to livelihood, human rights, good governance, rural energy and education sectors since 1989. It has provided over US$ 450 million during the period. But things are changing. DANIDA is not immune to the global recession and now feels obliged to reduce the number of its recipient countries from 26 to 15.
“Danish aid would be used much more effectively if Nepal had a stable political situation. That’s why it makes sense for a small country like Denmark not to be in all countries and instead refocus its efforts where it can help the most,” said the DANIDA official.
Diplomatically put but, in other words, Nepal’s patience with itself – often praised by Kathmandu politicians – is not regarded in the same light by foreign benefactors. Their frustration is building, their purses are shrinking and they are taking a long hard look at Nepal’s chronic procrastination.
And this is Denmark, one of the mildest of Nepal’s benefactors.
Patience may be a virtue. Political foot-dragging is not.
Economic shambles and political stalemate entwined
1. Nepal, South Asia's poorest economy, has been without an effective government since Prime Minister Madhav Kumar Nepal resigned in June, bowing to pressure from Maoists former rebels who want to head a new coalition government.
2. The government has been spending from an interim budget allowed under the interim constitution, but money from that runs out on Nov. 16
3. The Maoists say the caretaker government cannot prepare the budget and insist that political parties must agree on a new coalition, which should prepare the new budget for approval.
4. The problem with having the Maoists at the helm is that, instead of taking the peace process to its logical end, they are more intent on leading the government once again before the new constitution or even ex-rebel integration can take place.
5. Three weeks ago, PLA leader Barsha Man Pun made it clear that the PLA will not be dismantled until the new constitution is promulgated. That the Maoists are in no mood to go ahead with solving the problem of the ex-rebels was confirmed when Pun said that progress on integration and rehabilitation can take place only after the extended plenum of the party that is set to meet on November 14.
6. Prachanda gets the blue ribbon for stalling the peace process, although last month he was selected to be the coordinator of the newly created (and all-important) task force, whose job is to jumpstart the constitution drafting; the task force was mandated to finish its recommendations before October 24. Instead, Prachanda left for China on October 22. The dead line had to be extended by 11 days because of his “unofficial” trip to China.
And what about the budget deadline of November 16?
As the head of the task force, how can Prachanda concentrate on resolving the budget crisis when the Maoist party’s extended plenum is scheduled to begin on November 14? Can anyone argue that his priority is the country’s flailing economy?
Of course all of the political parties get to share the blame for the current situation.
Who has tried to connect political transformation with economic development?
Who has tried to create a concrete environment for foreign nations to assist Nepal?
Who has focus on the peace process and the constitution drafting?
No party has concentrated on these vital questions and now, on top of everything, Nepal’s coffers are empty.
The real cost of this political myopia – and it is monumental – is loss in credibility – both among Nepali citizens and the world at large.
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