Aakash Shrestha has watched business at his Camera Mart in Thamel plummet about 60 percent in the last nine years. "I didn't sell a camera yesterday and I probably won't sell one today," the young man said early one recent evening. "Maybe tomorrow," he added with a smile and a slight shrug.
Such an attitude might work for a retail businessman but those entrusted with managing Nepal's economy should do more than happily count the $1 billion sent home by the growing number of citizens working overseas, says a recent report. In fact, if the government doesn't start balancing its books, it could soon be bankrupt, adds the paper by the Institute of Development Studies (IfDS).
After a decade of conflict, the only economic bright light here is the export of labour overseas. The roughly 130 workers who leave the country daily help boost overseas earnings. Remittances now contribute at least 15 percent of the country's GDP.
But look beyond the influx of workers' dollars deep into the country's finances and there are unsettling signs. Even remittances are showing signs of weakening, says IfDS, suggesting that some families supported by overseas wage-earners have decided to invest their dollars in India, where the political situation is stable. "If the available information is any guide, it will lead to a sharp decline in receipts from remittances," it predicts.
More bad news is that a Rs 4 billion surplus predicted in last July's budget (excluding development spending) will actually be a Rs 3.6 billion deficit, thanks to tariff cuts announced in January's supplemental budget, economic activity since July and based on the accuracy of the Ministry of Finance's past forecasts, adds the report.
'As the World Bank and the International Monetary Fund have decided not to release additional resources under the Poverty Reduction Growth Facility, the government (will have) no independent resources at its disposal,' says the IfDS report, and will have no choice but to borrow from the Nepal Rastra Bank.
With inflation soaring, the trade deficit widening and draining reserves of Indian currency, the fear is that the problem could get out of control and ignite social anarchy. "We are not trying to criticise the government," IfDS Executive Director Raghab D Pant told us, "we are just trying to point out the political implications of the current economic situation."
It's not only the government that is ignoring the risks, says Pant, the main opposition political parties hold a belief that once the country's political problems are solved its economic knots will naturally unravel.
State Minister for Finance Roop Jyoti called two press conferences earlier this month to repudiate the findings, dismissing the IfDS report as the product of "political bias". He said revenue in the first sixth months of the fiscal year grew over last year's figures and public expenditure was within the limits and criteria set by the annual budget.
"These figures indicate that the government will be able to achieve its set goals and ensure economic stability," Jyoti added. An IMF report released in February didn't sound any alarm bells, but did project a revenue shortfall and predicted the government would need to take domestic loans equal to 1 percent of gross domestic product (GDP). The economy would grow 2.5-3.5 percent, it added.
With political stability, better security conditions and structural reforms, "Nepal could see a gradual return to growth rates of 5-5? percent through 2009/10," added the IMF, "but if the conflict persists and the political impasse stalls reform implementations the fiscal and external position could deteriorate, and international reserves could be lower."
But recent economic figures have been unsettling. The trade deficit grew by more than 24 percent in the first six months of the fiscal year, as imports rose faster than exports. And the NRB reported that in the first seven months, revenue went up just three percent, much below the government target of 15 percent. The central bank also revised its inflation prediction for the year to seven percent from the previous five percent.
Tourism which saw a healthy rebound during the autumn 2005 ceasefire is in deep gloom. Trekking bookings are being cancelled because of the uncertainty and Maoist threats during the peak season.
At Camera Mart, Aakash Shrtestha like most other Nepalis is resigned: "I'm waiting, and hoping for peace to come soon-it's been so long."