The truth about the “economic crisis”

Last week, at a social gathering, someone sipping an expensive single malt whiskey asked me how deep the economic crisis was. I just told him that if there was a real economic crisis or a big crisis looming, he wouldn’t be sipping whiskey here, but queuing for fuel or essential groceries. In Nepal, negativity sells well when virtually every conversation in family or society revolves around speaking ill of someone, society, ethnic groups, religious groups, caste, businesses or institutions. Therefore, it is nothing abnormal for people to talk about the end of the Nepalese economy this week or maybe the next. We well remember the ‘Nepal is going to be a failed state’ campaigners who built many houses and sent their children to expensive schools around the world selling the idea of ​​a failed state. Perhaps there is a whole new generation that will make a fortune talking about an economic crisis. To add to that, here are five reasons why the story of the economic crisis has spread like wildfire.

Why History Sells

First, the Sri Lankan crisis, which is completely different from that of Nepal, is being used to launch a veritable China-bashing frenzy; and in India, it has become awkward not to blame China for the Sri Lankan crisis. And why not put Nepal in the same bag? Even Indian media correspondents like Nikkei Asia Review have done this. Also, WhatsApp University in India and Hindi channels are easier to quote in Nepal because many fake news spreaders in Nepal are well versed in Hindi and never read English research reports published by the Bank. world, the International Monetary Fund or other international organizations. establishments. So Nepali people don’t need much effort just share messages from India in Hindi or just put Nepali translation and share. Media houses closely linked to the Indian federal government continue to make sensational news. News channels like India Today group’s Aaj Tak, known for sparking #GoBackIndianMedia, are back to their storytelling antics of Nepal’s economic crisis.

Secondly, there is not much research in Nepal that is sponsored by the private sector, as the sponsorship of events where alcohol is flowing and expensive entertainment takes priority over funding research institutions or the creation of internal research teams. Banks have an average market capitalization of $1 billion, but we don’t hear about in-depth analysis and research. Therefore, C-Suite people and board members depend on WhatsApp University and YouTube videos to tell the reporter what they think about the crisis, and they also tend to amplify the story. of the crisis.

Third, there is a liquidity crisis in the formal sector which is regulated by the central bank, but there is money available in unregulated cooperatives and informal cooperatives. Many of these cooperatives have links with people in the formal banking sector, so they can recommend where to get higher rates for deposits or high-interest loans. In a country where nearly a billion dollars of grafts accumulate each year, there is no problem of liquidity. It’s just that the formal sector has no money.

Fourth, in a country where trade rules and arbitration activities are protected by cartels under the guise of associations, people find something to praise in a crisis. Like how vegetables in the market suddenly become more expensive when news of a landslide arrives, it’s important how you come to spread the news of a crisis and get higher prices for them. goods in stock. Plus, you can get help from the government to stop imports and ensure you have a gala moment. So if you have a snack company that produces snacks with the same brand name as an Indian brand, you can get the government (of course you have to take care of the politicians) to ban their import as luxury items, and you can sell contraband for higher prices. Who said the crisis was bad for business? It’s just a good time to get rid of your stocks at higher prices due to the crisis and make sure that no new stock arrives for a while. Of course, after July 16 there is a new fiscal year and the rules will change again.

Finally, the crisis is a good time to find scapegoats and fire the people you don’t like. The finance minister tried to fire the central bank governor, but the Supreme Court made it impossible. In election-year coalition politics, it’s all about the money. It’s about who can pay to get someone fired. And then you can ask the other group to pay more for not shooting. It’s the best company to be in. And the multi-party mechanism is very effective in managing these win-win moments.

What awaits us

The International Monetary Fund and the World Bank have both made it clear why this is not a crisis that is projected. The Central Bureau of Statistics tells us that Nepalese are earning more money than in previous years. Formal remittances are increasing, but there is an equal amount of informal remittances which are now used to make payments at higher exchange rates as there are foreign currency restrictions. In an election year, we’ll see more populist agendas coming in, and we’ll see an increase in government spending in the last two months of the fiscal year, like in previous years, as only 28% of the spending budget of investment was spent in the first nine months.

In an environment where banks collude to fix exchange rates and interest rates, they are not indicative of the state of the economy as in other countries. As long as weddings and other social celebrations take place, as long as people spend money in restaurants, as long as people buy gold and jewelry, and as long as people don’t abandon construction projects , we must understand that there is no economic crisis.

Comments are closed.