Economic Review of Nepal

Application of Instruments of Fiscal Policy in Nepal

2023-03-08T17:06:56+00:00

Fiscal policy is an important component of government policy to bring high, broad based and sustainable economic development. Budget, taxation, public expenditure and public debt are the instruments of fiscal policy and these instruments are not using appropriately, effectively and efficiently in the context of least developed countries so that they trapped as a low-income nation. In Nepalese context, government of three-layer formulating and implementing budget to mobilize national, provincial and local level resources and to follow the norms of decentralization. The ratio of capital expenditure in relation to recurrent expenditure is high indicator of low economic development in the coming years. In eleven months of fiscal year, only 50 percent of the development expenditure can utilize is the symbol of gloomy situation of our economy. Regarding to tax base and rate, it has some regressive nature so that collection of tax became difficult task. People are interested to evasive tax due to administrative hurdles and its poor utilization policy. Resources can divert into productive sector due to better public expenditure policy. Government of Nepal can utilize the resources of its citizen on the basis of the trust of government. Ultimately better fiscal policy can pave the way for higher, sustainable and broad-based economic growth rate. We can graduate our nation in the list of developing nation by 2030 as well as can fulfill sustainable development goals.

Reshaping the Future of Nepal’s Economy

2023-03-08T17:11:20+00:00

Nepal’s economy has not been of any great success and satisfactory. Nepal has encountered inherent development constraint, which includes poverty; widening income inequality; unemployment and underemployment; rise in leisure class; decrease in production and productivity, capital flight; extensive corruption; absence of rule of law and order; institutionalized crime, BOP deficit, environmental degradation etc. The failures in economy have been more than the achievements and the problems created have been more than the problems solved, so ordinary people are unable to get the fruit of development. In these years every one use to feel development works do not seem satisfactory related to rapid increase in the economic problem normally day by day plus especially after the pandemic. However, it does not mean Nepal’s economy is heading towards wrong direction and we should abandon the path of economy. But the pace of heading is slow. So, for the reshaping the economy the Government need to be more liberal as well as strict where production, income and employment can be increased and be more watchful in disciplining both private and public sector and use of PPPs model for improving its efficiency especially in agriculture sector.

Contribution of Foreign Direct Investment to Trade Balance

2023-03-09T16:06:16+00:00

This article on contribution of foreign direct investment on trade balance in Nepal during the study period 1995–2018 shows the significant positive relationship between inflows of FDI and trade balance. The main objective of this study was to investigate the impact of FDI on trade balance of Nepalese economy. This study has employed Ordinary Least Squares Method to explore relationship between FDI inflows and trade balance in Nepal. The results indicate that there is significant and positive relationship between FDI and trade balance in Nepal. This study has its implication for policymakers to raise FDI inflows to keep the trade balance in Nepalese Economy. To raise the inflows of FDI, it is necessary to make investment friendly environment for foreigners that lead to raise the export and trade moves towards favorable.

Resource Gap Analysis in Nepalese Budgetary System

2023-03-09T16:10:50+00:00

Resource gap analysis in the Nepalese budget system has attempted to focus on both the situation at the current level and the estimated future value. Therefore, the study has applied both the OLS and ECM models, to look at the GNS and GCF relation to GNI. The result has been compared to the current situation and the target level of performance in the future. With the analysis of unexplained residual factors, RGA in budgetary operation has been examined between GNI as a resource and what rate of resource would be needed to satisfy future needs at the national level. However, these models gave the same conclusion that resource gaps have got irregular with the rate of 12 per cent speed of disequilibrium. With this performance of resource gap, the government agency and others rigorously understood the resource it currently has and the need for resources to meet the goal. The forecasting further would also provide valuable suggestions for expanding other areas of development by diverting their capacity to correct the resource gap in the budgetary system.

The Difference in Paddy Production Through Irrigation and No Irrigation: A Survey of Households in Phalelung Rural Municipality

2023-03-09T16:15:02+00:00

This study was designed to examine the difference in paddy production through irrigation and no irrigation, and to explore the problems faced by the farmers in the study area in Phalelung Rural Municipality, as well as their possible solutions. As for the method, this study used the descriptive tools (tables, percentage, means, and standard deviation) and inferential tools (t test and interval estimates (95% confidence interval) at the ∝ = .05 level. Kilograms were used as a unit of measuring the paddy produced by 50 households in both irrigated and no irrigated farmlands. Concerning the first objective, the study found statistically significant evidence in favor of the alternative hypothesis (H₁), at the specified ∝ = .05 level, that population annual-mean-(paddy) production from the irrigated farmland (μ1) became larger than that from the nonirrigated farmland (μ0). Regarding the finding of second objective, on the problems and prospects of farmers, this study found as main problems the lack of irrigation, faulty irrigation management system, lack of technology, monsoon-based agriculture, and low productivity. According to the farmers in the study area, the possible solutions of the problems could be managing irrigation facilities, providing credit, and providing agro-training to farmers.

Trends and Structures of Direct Taxation and its Share in Gross Domestic Product of Nepal

2023-03-09T16:25:33+00:00

This study tried to analyze trends and structures of direct tax in Nepal with the adoption of descriptive method. This study, based on secondary data published by the Government of Nepal covering a fiscal year between 1999/00 to 2019/20, also examined the contribution of direct tax in gross domestic product of Nepal. During the study period, direct tax seemed to be fluctuating but increasing overall by 94.44%, while the percentage sharing of all taxes to the gross domestic product was increasing even though it was fluctuating from time to time. Total direct tax was found rising by 16%, on average, over the last 20 years. However, the income tax seemed contributing significantly to both direct tax and gross domestic product during the study period.

Access to Energy Revealing through Socio-economic Status Survey of the Local People for Rural Electrification in Nawalparasi

2023-03-09T16:30:46+00:00

Rural electrification program seems to be crucial to improve living conditions and promote development. The main objective of this study was to identify the socio-economic status of the local people and also measure their perception on willingness to pay for hydroelectricity in two rural municipalities of Nawalparasi East district. The study has followed both qualitative and quantitative methods for socio-economic survey. Household questionnaire survey, Focus Group Discussion and Key Informant Interview techniques have been applied for primary data collection. In addition, secondary data has been compiled through published and unpublished documents from field as well as central level. Agriculture and livestock rising have been found the major sources of income in this area. Therefore, the non-farm source of income is very low. However, remittance from foreign job playing vital role as another source of income for the livelihood of the people. As being economically capable and socially aware with modern facilities and its implication on better and easier life support in future, the local peoples from the study area has been found encouraging. Whole area of the study site has not available electricity facility and their positive willingness to pay for hydroelectricity is the major finding and step forward for the future planning of regular and reliable power supply to uplift their socio-economic condition, reduce poverty and support on rural development activities.

Firm-specific Variables and Net Interest Margin in Nepalese Banks

2023-03-09T16:35:34+00:00

This paper examines the impact of firm-specific variables on net interest margin in Nepalese commercial banks for the period 2005/06-2018/19. Secondary source data were collected through NRB and data have been analyzed using descriptive and causal comparative research design. In this paper, net interest margin is used as dependent variable and bank-specific variables such as size of assets, deposit ratio, loan ratio, and capital ratio are considered as explanatory variables. The estimated correlation results of the paper reveal that equity capital, bank loans and deposits are positively related with net interest margin of Nepalese commercial banks. Moreover, the regression results of this paper indicate that equity capital, bank lending and deposits have significant impact on net interest margin of banks. Finally, this paper concludes that bank loans and deposit have strong explanatory power to explain net interest margin as profitability in Nepalese commercial banks. Policy makers are suggested to formulate sound bank policies and to adopt effective strategies to increase the size of bank deposits as well as bank lending to maximize the profitability (net interest margin) in Nepalese commercial banks.

Relationship Between Macroeconomic Variables and Stock Market Price of Nepalese Insurance Companies

2023-03-09T16:40:02+00:00

This study has examined the relationship between selected macroeconomic variables and the stock market of price of Nepalese insurance companies listed on Nepal Stock Exchange [NEPSE] for the period of July 2003 to June 2018. Monthly stock market index of Nepalese insurance companies of Nepal Stock Exchange has been taken as proxy of stock market price of insurance companies and interest rate, gold price, money supply, equity market capitalization, are taken as proxy of macroeconomic variables. This study has used cointegration test to examine the long-run relationship between variables and stock market of price of Nepalese insurance companies. The stationarity of the variables has been examined by applying Augmented Dickey-Fuller [ADF] test and Phillips-Perron [PP] test. When variables are found to be same order of integration then cointegration test is used to determine long-run relationship. This study concluded that there exists long-run equilibrium among the macroeconomic variables and stock market of price of Nepalese insurance companies listed on Nepal Stock Exchange. Similarly, this study has also followed vector error correction model to capture the short-run dynamics.

Migration, Remittance and Poverty in Nepal

2023-03-10T08:40:45+00:00

This paper aims to explore whether poverty rate vary by remittance receiving status (yes/no) households and to explain the association between remittance status (yes/no) and poverty status (poor/non-poor) of households across the provinces of Nepal. Based on third round of Nepal Living Standard Survey (NLSS) data the proportion of remittance receiving households and poverty rate is described. The association between remittance status and poverty status of households' is explained using chi-square test of independence. From Nepal about 56 percent households are receiving remittance. Based on the results this paper argues that the poverty rate widely varies; lowest in Bagmati (20.6%) to highest in Sudurpaschim (45.6%) province, across provinces. Similarly, the poverty rate also varies across remittance receiving households (21.5%) to remittance not receiving households (29.4%). The poverty rate is low in remittance receiving households compared to households not receiving remittance. However, the poverty rate in remittance receiving households across also varies across provinces ranging from 12.9 percent in province-1 to 45.1 percent in Sudurpaschim province. There is significant association [χ2-value=230074.923 is significant (p=0.000<α=0.01) at 0.01 level of significance] between the status of households based on remittance and poverty. The households receiving remittance are less likely (β=-1.283) to be poor compared to the household receiving no remittance.

Small and Medium Scale Enterprises: Their Role in Economic Growth of Nepal

2023-03-10T08:46:44+00:00

Small and medium scale enterprises (SMEs) have historically played an important role in contributing to economic growth and development. Naturally, all businesses start as small businesses or even start out of small businesses initiated by individuals. It is imperative to give high priority to Nepalese labor, skill and raw material based domestic investments to promote national level industries for achieving economic growth in the course of SMEs. This study has used Johansen Cointegration, Vector Error Estimates (VAR) and Granger Causality test to investigate relative changes in the position of the Nepalese SMEs and investment to the real GDP since 1989 and 2018 based on secondary data regarding regression analysis. It has examined the dynamic relationship among the total SMEs and investment with real GDP of Nepal and found to be significant and positive relationship in between investment and real GDP of Nepal while insignificant and inverse relationship in between total SMEs and real GDP of Nepal. It implies that real GDP was seemed to be mostly influenced by investment rather than number of SMEs. However, it was and still is contributing significant role in economic growth in Nepal.

Perceived Effect of Merger on Employee Satisfaction on Nepalese Commercial Banks

2023-03-10T08:51:03+00:00

The objective of this paper is to examine the perceived effect of merger on employee satisfaction of Nepalese commercial banks. Descriptive and casual comparative research design are used to estimate the relationship of employee satisfaction (dependent variable) with independent variables (pay remuneration, belonging, chain of command, training and development, employee performance, job security). Data are collected from 350 respondents of Kathmandu valley through structured questionnaires and descriptive and inferential statistics are used to analyse the data. The beta coefficients of pay remuneration, belonging, chain of command, training and development, employee performance and job security are positive and significant. According to respondents, increased size of the banks is the most important fact and improve employees’ satisfaction is the least important fact to merge of Nepalese banks. Similarly, most of the respondents’ states “change management of banks” is the major challenge of merged banks and “increased profitability of bank” is the least important challenge. It is observed that employees of banks ranked highest for belonging as the most important factor affecting their satisfaction of merged banks and it is also found that conceptualization of effect of merger and acquisition in Nepal is in the progressive stage and few institutions have been merged and are taking initiations on the broad aspects of employee satisfaction during merger as practices in developed countries.

National Microfinance Policy of Nepal: Perspectives on Women Empowerment

2023-03-10T08:55:25+00:00

This paper attempts to analyze the National Microfinance Policy of Nepal from women empowerment perspectives. It is the fact that there are no policies prepared exclusively focusing on women empowerment. However, this paper analyzes the National Microfinance Policy 2008 A.D. by exploring its implications and effects. The Policy is discussed as a part of microfinance development in favor of women entrepreneurship. Moreover, the problems and the issues have been generalized as the present issues are delaying the development of the microfinance sector to develop the nation. Furthermore, the need of microfinance policy is elaborated in the existing situation of policy preparation and updating them from government and other stakeholders’ sectors. Finally, vision and long-term goal have intended the level of people in microfinance after this policy was applied.

Foreign Trade and Economic Growth of Nepal: An ARDL Approach

2023-03-10T08:59:37+00:00

Nepal is a developing country having high degree of trade openness. Trade volume is highly increased and imports always dominated exports. Therefore, the key objective is to find out contribution of foreign trade to the economic growth of Nepal. Level data are not stationary so first difference data are used for regression analysis. Thus, ARDL technique is used for the estimation. The study shows total trade and foreign direct investment has significant determinant of Gross Domestic product that is economic growth in Nepal both in short run and long run. The Study shows foreign trade plays the significant role for the economic growth of Nepal. One percent raise in foreign trade (total trade) brings 0.62 percent raise in gross domestic production.

Contribution of Remittance in Poverty Alleviation

2023-03-10T09:03:37+00:00

Many Nepalese people used to go to foreign country to earn money. They send money to family member as remittance. Nowadays remittance become has one of the major sources of lively hood. Foreign Employment has become a major issue in the current economic and political discussion of Nepal. Another most important issue is the poverty alleviation from foreign employment remittance. The objective of this article is to describe the situation of poverty and analyze the contribution of remittance in poverty alleviation of Nepal. This study has been based on secondary data published by the Nepal government and covering a period between fiscal year 2011/12 to 2019/2020. The methodology to meet the objectives of this study is analytical and descriptive research design and writing style is also based on Publication Manual of American Psychological Association (7th ed.) This study shows the following findings During the study period, remittance was in increasing order and poverty is in decreasing order from FY 2011/12 to 2019/20.

Examining Digital Finance Service as an Instrument for Financial Inclusion in Nepal

2023-03-10T09:07:58+00:00

Financial inclusion is one of way to raise income and make inclusive economic development in all segments of the society. One of the good ways to expand financial inclusion is to adopt technological path which has potential to broaden the existing inclusion status. Nepal is gradually building infrastructure on Information and communication technology and formulating technology-oriented policies thereby creating digital base, creating new set of opportunities for development and financial Inclusion as well. The paper analyses relevant data on digital technology, financial access and financial products and services from secondary sources. Using multiple regression, this study found significant and positive relation between mobile and internet access on number of deposit accounts used as proxy for financial inclusion. The finding of this study is in favour of to promote mobile and internet usage by more and more population to improve financial inclusion.

Editorial Vol.2(1)

2023-03-08T17:01:54+00:00

No abstract available.