Kathmandu. Stakeholders have been pushing for a long time to revive the sluggish economy. However, the liquidity accumulated in the bank has not been utilized.
The continuous dialogue between the Prime Minister and the Finance Minister with industrialists, businessmen and economic sector stakeholders in recent times also indicates that the state is now persuading investors to ‘have money, invest’. However, it does not seem that the businessmen have easily believed this request of the government. Bankers, businessmen and economic experts have their own analysis and understanding of why this situation has arisen and what are the deeper reasons behind it.
According to bankers, more than Rs 13.36 trillion has accumulated in the financial system for loan disbursement. This is the highest point in the current financial year and the average interest rate has also come down to 6.5 percent.
Such a low interest rate and sufficient liquidity should be considered a golden age for investment. However, the decline in demand for credit after 2022 has not yet recovered. Bankers believe that banks are now very cautious and are strategizing to invest only in “good and safe” places. Although the banking sector is a positive aspect of finding a safe landing rather than risking it in the future by issuing loans haphazardly, it has not helped in keeping the market moving.
On the question of why the investment environment has not been created, businessmen say that cheap interest rates alone cannot attract investors. According to them, the most important factor for investing is the “environment of trust”. Which has become very weak at the moment.
They complain that the recent crackdowns by government agencies and investigations without evidence have created an atmosphere of fear in the private sector. Businessmen argue that as long as the state does not guarantee the private sector to work in a dignified and fearless manner, no one will take the risk of opening new industries or expanding investment. Entrepreneurs say that the lack of ease of PPA especially in big sectors like hydropower and delay in payment of construction sector have also obstructed the money cycle in the market.
On the other hand, experts say that the increasing number of borrowers on the blacklist is the biggest challenge of the moment. The number of blacklists, which used to be around 6,000-7,000 a year a few years ago, has now increased sharply to 60,000.
According to experts, when a large number of businessmen are blacklisted, their banking accounts are frozen and they cannot make new investments even if they want to. This has created a ‘deadlock’ in the market, where there is no money to operate. According to experts, the stoppage of land plotting and the slowdown in major capital mobilization sectors like real estate have also taken a big hit to both revenue and investment.
In this context, the officials of the Ministry of Finance seem optimistic that the situation will improve by the end of October. They claim that the government has initiated policy and legal reforms and amendments to the Public Procurement Act will help increase capital expenditure. However, economic experts say that without government activism and financial intervention, it is difficult for the economy to gain momentum.
It’s not enough just to ask the government to invest. The government itself has to create demand in the market by increasing development expenditure. Unless money reaches the ground level and the purchasing power of the common man does not increase, the businessmen will not be in a position to increase production and take more loans from the bank.
