This article was first published in the The Reporter Weekly
The last staff report of the International Monetary Fund (IMF) in November strongly recommended structural reform in the Nepali economy with emphasis on productivity and growth. In principle, it argues in favor of need for some changes made for the Nepali economy to move ahead, but neither the IMF nor the Government of Nepal is clear about what really needs to be done immediately.
Structural reform for productivity and growth may not be a vague prescription, but senior economists and officials here are quite unable to decipher , and interpret it differently. "Banking sector risks have intensified as financial institutions proliferated in an environment of weak supervision," the staff report of IMF says. This line clearly shows the lack of efficiency on the CBN's part. Dipendra Bahadur Chhetri, Vice Chairman of National Planning Commission (NPC) and former Governor of the Central Bank of Nepal (CBN), says that the IMF's report has an implied meaning- the reengineering of CBN. Finance Secretary Krishna Hari Baskota does not agree with Chhetri.
Perhaps Baskota did not want to be caught in a controversy by making any statement about the recommendation of the IMF. He suggested that the Economic Affairs Division at Ministry of Finance (MoF) was a more competent body to respond to it. But for one who has already worked as a Revenue Secretary before moving to the helm of the Finance Ministry about what the IMF recommendation implies, is unfathomable .
CBN Chief Yubraj Khatiwada, who is an expert in monetary policy, has not given any statement on the IMF recommendation either . However, he does not conceal his disagreement that borderlines with disappointment with the IMF team, according to a highly placed source in the GoN. The source said that one specific meeting with IMF team had been particularly rocky. The staff report of the IMF which is released annually after the Article IV consultation meeting with Nepal, is implicitly directed towards Dr Khatiwada and the institution he is leading. But others don’t see that unusual.
In the words of vice-chairman of NPC, there is ample room for improvement in the CBN--this is where the IMF is pointing. The efficiency of CBN can be increased if there is willingness from the leader of the institution. But this is being taken by some others as Chetri’s attempt to shirk his responsibility.
As IMF emphasizes on productivity and growth, something directly associated with the NPC that should make Chettri more thoughtful and introspective, instead of blaming the CBN's leadership. At the same time, Finance Secretary Baskota needs to understand that he should have a clear take on issues raised by an international agency which is there to support Nepal when it is in a difficult situation.
Key technocrats in the three leading government institutions looking in there different directions, and not formulating a joint approach, to say it more precisely, reflects a situation of policylessness in the country in the given context. This difference shows lack of a harmonious relationship among these institutions and their leaders . Not being able to formulate a joint approach would mean their collective failure at a time when the nation faces a financial down turn.
