(Nepalnews Feature)
By Pratibedan Baidya

The call by the seven-party alliance (SPA) to the countrymen not to pay taxes and duties to the royal government and Nepalis working abroad not to send remittances back home is likely to deal a heavy blow to the already flagging economy. And this is sure to have a terrible impact on the banking sector.

After the employees of the state-owned Rastriya Banijya Bank (RBB) and public sector Nepal Bank Ltd. (NBL) went into strike supporting the opposition movement. The government then authorized NB Bank Ltd. and Everest Bank Ltd. to collect revenue on behalf of the government.

Works at Nepal Rastra Bank (NRB), which is the central bank, RBB, NBL and Agriculture Development Bank (ADB) came into a complete halt and works in joint-venture banks has also been partially affected due to the closure. As this is the time for paying the second instalment of annual income tax, the government is facing intense pressure due to the closure of banking transactions. In the absence of banking services and due to the strike of employees, collection of revenue has almost stopped.

While the banking sector of the country has come to a standstill, head of the research department of the NRB, Keshav Acharya, claimed that the banking sector was functioning well. He, however, said the disruption in banking services would have adverse impact in the national economy.

“It will have negative impact on the overall credibility of the banking system as well as in the service delivery to the customers,” maintained Acharya.

The country had received over 65 billion rupees in remittance last year. The figure of remittance in the last six months of the current fiscal year stands at more than 47 billion rupees.

When asked what would be the impact on national economy if Nepalis working abroad stopped sending remittance abiding by the call of seven parties, Acharya said, “If the country does not receive remittance it will be hard for the economy to function.”

“Remittance has been the lifeline of the national economy at a time when the gap between imports and exports is widening and it is only the means to make the exchange rate static. Therefore the stagnation in remittance flow will damage to the national economy.”

A manager at the remittance agency revealed to Nepalnews on condition of anonymity that the flow of remittance has declined by 50 percent in recent days.

He was of the view that the main reason behind the decline in the flow of remittance is mainly because of the prevailing disturbances in the banking system of the country and partly due to the call of the seven political parties.

Parsuram Kunwor, chief lending officer at the NBL said that not only the banking sector but also the whole economy has come to standstill due to the present political situation of the country.

“General people have not been able to deposit or withdraw their money and have not been able to clear their documents. This has had grave impact on every sector, which is very unfortunate for the banking sector and the national economy as such,” he added.

On Tuesday, Nepal Bankers Association (NBA), the umbrella organization of 18 commercial banks, said the banks would not be able to continue operations if the central treasury vault at the reserve bank remains closed.

Sources meanwhile said that representatives of the association met the NRB governor late in the evening on Tuesday to convey the decision.

The source added that the bankers also made it clear that closure of the central treasury vault for 13 days has greatly affected the cash position of the private and joint venture banks.

So far, the private and joint venture banks have turned deaf ear to the call made by four trade unions to join in the general strike, and have been operating through back door.

A recent survey carried out by the Kathmandu Research Centre revealed that the nation is running into net loss of 1.1 billion rupees everyday due to the disruption in services. It also said the multiple effects of closure account for over 3.85 billion rupees each day. In the face of all this, the political parties have been pressuring for closure as a means to push their demands.

Economists have time and again warned that it is hard to recover economic situation of the country even if political situation gets improved and have urged all to prioritise economic agendas. However, there is a general indifferent on the part of the political forces towards this concern.

The agitating political parties adopted the policy of economic blockade against the government and urged people not to pay taxes and other duties to the government could help them achieve their political objectives but their indifference towards the calls against the closure is likely to take a heavy toll on the national economy.

However, economist Dr Raghab Dhoj Pant is of the view that since problem is a political one so political solution is a must to resolve the economic problem. Earlier, Dr. Pant had forecasted that the government could turn bankrupt within three to four months if the problems facing the country were not addressed immediately.

“The country is for the first time witnessing such a situation so it is hard to predict the effect of total closure of financial institutions at the moment,” he added.