Oped»
Please don’t go
JUL 22 -
It has been learnt from recent news published in the vernacular media that the International Monetary Fund (IMF) is closing its Nepal Resident Mission and shifting the office of the resident representative, whose functions will be looked after from the New Delhi office. The IMF pull out which will have far reaching consequences on Nepali economy. What
has the government of Nepal done to revert the decision? Is there any
possibility that the decision will be taken back, and how is Nepal Rastra Bank working and lobbying to get IMF to stay?
At a time when the credentials of the governor is being questioned, why is the IMF shifting office? Some may say that the existence of the resident representative does not have a significant impact on Nepal. But is this true given the context that most of the donors, whether bilateral or multilateral, put emphasis on the data and analysis generated by the IMF? So the aid component and other assistance based on the IMF analysis may be hampered from this decision. The Ministry of Finance and NRB are, some say, keeping mum on this issue. This has raised further queries among the general public. Nevertheless, it has been learnt that NRB has written a letter and is pursuing the matter. Let us hope that a positive result will come of it.
As per the IMF’s recent decision, about 20 offices are going to be closed or shifted in various countries including the Dominican Republic, Cambodia and Nepal. It has been learnt that the technical assistance provided by the IMF will remain unchanged. This is also a diplomatic answer to a logical query. As there is much hue and cry that Nepal is going to be a failed state, some are of the opinion that this closure will give a boost to that saying. This has been taken by many as a continuation of the practice followed by embassies in Kathmandu to issue visas from New Delhi.
What will happen if the Breton Woods twin—the World Bank—also follows the same practice, and the UN agencies also follow in the same footsteps? As the country is going through a serious transition phase, the concerned agencies and or bodies from the government side should seriously take up this issue and consider the country’s reality and the need for more IMF Nepal technical assistance to alleviate Nepal’s poverty in an inclusive growth approach, which is the need of the hour.
Though some may be sceptical of the IMF’s role in developing countries’ economies, Nepal needs to make urgent economic reforms which are politically impossible. Only the IMF’s intervention and pressure could make that
possible. India benefited from the IMF’s intervention when it went through its balance of payments crisis in 1990-91. It was forced to liberalise its economy—and the rest is history.
The IMF has had a long and cherished relationship with NRB ever since Nepal joined it in 1961. The IMF has had an office at NRB since 1977, this being the sixth oldest IMF office anywhere in the world. The primary mission of the IMF is to provide financial assistance to countries that experience serious financial and economic difficulties using funds deposited with the IMF from the institution’s 186 member countries. Member states with balance of payments problems, which often arise from these difficulties, may request loans to help fill gaps between what countries earn and/or are able to borrow from other official lenders and what countries must spend to operate, including to cover the cost of importing basic goods and services. In return, countries are usually required to launch certain reforms, which have often been dubbed the “Washington Consensus”.
For example, nations with severe budget deficits, rampant inflation, strict price controls or significantly over-valued or under-valued currencies run the risk of facing balance of payments crises. Thus, the structural adjustment programmes are at least ostensibly intended to ensure that the IMF
is actually helping to prevent financial crises rather than merely funding
financial recklessness. In Nepal, the structural adjustment programme implemented during the late 1980s and the liberalisation, privatisation and deregulation polices prescribed by the IMF is testimony to this fact.
Indeed, technical assistance is one of the most important services the IMF provides to its members. The IMF’s technical assistance to Nepal is in three main areas. In the fiscal sphere,
the IMF has been advising Nepal on improving the tax policy and administration, including improving legislation such as the Income Tax Act. The second area is the financial system. The IMF has been quite active in improving macro economic statistics. Its timely and high quality data help in policy formulation and analysis. To sum up, Nepal at this juncture needs the resident representative office. For this to happen, political will and the lead role of the concerned government agencies will be of crucial importance.
[Singh is general manager of Nepal Stock Exchange Ltd (NEPSE)]
Posted on: 2010-07-23 08:26
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