The Maoists won the election with the slogan "new ideology and new leadership for a new Nepal". They will have their plate full delivering that.
Immediately after taking office, the Maoist government will have to deal with an urgent food and fuel crisis. As we go into the dry season, grain stockpiles are seriously depleted and there has been a dramatic rise in food prices ('Not just supply and demand', #394).
Gas lines have started again. There are shortages everywhere and latest one is of cement, as India bans the export of klinker and cement. Nepal imports 80 percent of its cement and all its petroleum from India.
While prices of basic daily necessities are rising, incomes remain low. The Nepal Rastra Bank record for January-February this year shows the price of grains and cereal products, which in total absorbs 18 percent of public expenditure, has increased by 13.5 percent in the last year. The price of food commodities almost doubled in the past three months.
"The first task for the new government will be to address poverty," says economist Raghab Dhoj Pant of the Institute for Social Development (IfSD), "we need to create jobs in fast forward." Nepal's economy is propped up by remittances from workers abroad, amounting to 20 percent of GDP.
Nepal will need at least seven percent annual GDP growth to keep up with population growth and the need to create jobs for the 500,000 young people who enter the labour force every year. The country is suffering from acute stagflation as the people's purchasing power is wiped out by inflation. The US dollar exchange rate has decreased and Indian rupee reserves need for imports are depleted.
The Maoists have promised in their manifesto to raise the per capita income from $270 to $3,000 in the next 10 years. But many see that as utopian, as the Maoists will be too preoccupied with economic crisis management.
Even Maoist ideologue Baburam Bhattarai admits it will be tough. He told Nepali Times in an interview: "It makes me somewhat anxious, thinking about whether we can do it or not. There are sleepless nights."
Bhattarai says his party has listed priority areas: agro-industries to keep people in farms, tourism, hydropower and infrastructure development for job-creation and development of the service sector.
Although two-thirds of the country's population depends on near-subsistence agriculture, production grew at only 1.7 percent last year. Growth in the non-agricultural sector was 2.8 percent in 2005-06, up from 2.1 percent in 2004-05.
Despite misgivings from business (see interviews alongside) Bhattarai insists the investment climate, labour-management situation will improve once the Maoists are in government. "The country's economy will take off once there is political stability," he says.
Interview with Dr.Baburam Bhattarai
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