Suffered by Gyanendra and Guerillas, Nepal Gets Inflation Headache

While former autocrat Gyanendra and Maoist Guerilla are stealing all the attention for all bad reasons, here comes yet another bad news for Nepal. The central bank says inflation stood at seven percent in the first six months of the current fiscal year where as the economy is expected to grow by 3.8 percent.

Central bank of the country, Nepal Rastra Bank (NRB), yesterday released the mid-term review of Monetary Policy, which leaves all monetary measures unchanged, giving up on efforts to curb rising inflation. Reckoning that inflation is spurred by supply factors including rise in prices of food items, the Policy concluded that taming inflation was not possible only through monetary means In the present context, it is not necessary to change monetary instruments for the purpose of containing inflation, states the Policy.

“Private sector’s investment has not picked up. The government’s expenditure remains contained. As a result, the aggregate demand of money is low. This justifies that money supply does not have any contribution to push up inflation,” states the Policy. The central bank has projected inflation based on consumer price index to grow to 6.6 percent this fiscal year, up from the earlier projection of six percent. Inflation stood at seven percent in the first six months of the current fiscal year.

The NRB has estimated that the country would see surplus of Rs 10 billion in balance of payment this year against the earlier estimate of Rs 16 billion. The central bank, in the mid-tern evaluation also stated that the rate of broad money supply (M2) will remain at 16 percent, the same rate as its earlier projection.

To further liberalize foreign currency transactions, the Policy gives a nod for commercial banks to provide exchange transfer facilities for up to US$ 2,500 for miscellaneous purposes. There has been simplification over the opening of letters of credit (LC) as well. The Policy introduced a provision to allow review of the LC on the basis of ‘already shipped documents.’

The economy is expected to grow by 3.8 percent this fiscal year due to slower-than-expected rise in capital expenditure, growing power load shedding and its subsequent impact on industries, states the Policy. Due to steep fall in paddy production caused by adverse weather, the Policy said that the agriculture gross domestic product would creep up by a nominal 0.7 percent. The Policy also envisages a plan to speed up the process pertaining to opening up the financial sector for foreign financial institutes. “The central bank has already prepared a study report over allowing branches of foreign banks to operate in Nepal allowing them to engage in wholesale banking transactions. Steps would be taken to implement the report,” states the policy.

In order to encourage banks to reopen their rural branches closed due to the conflict, the Policy states that contrary to the previous system, the banks do not need NRB’s prior permission. “They can just send information of resumption of the branches’ service to the NRB,” it said.
According to the Policy, the central bank purchased IRs 17.72 billion by selling US$ 390 million in the first six months this year to meet growing demand for Indian currency. Due to soaring trade deficit with India, the country has experienced paucity of Indian currency in recent periods.

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Maoist Guerilla, Without Guns, Go Out of Cantonments

Stay inside, Behave like Army if you Want to Get Paid Like ArmyThe Kathmandu Post Editorial

Maoist People’s Liberation Army (PLA) fighters leave the Shaktikhor cantonment site in Chitwan to look for jobs outside the camp on Wednesday (21 Feb). The Maoists said their soldiers would begin leaving their camps if the government fails to provide the necessary financial assistance and upkeep. Pic by Binod Tripathi

It is definitely not as simple as it looks. The Maoist cadres who waged guerilla warfare against the government for ten years braving hunger, rain, lightening and risk to life would not desert the cantonments merely for lack of food and facilities. Moreover, Maoist cadres would not dare to walk away simply at the call of Third Division commander Bibidh and without a strong go-ahead signal from the top leadership. Otherwise, it amounts to a revolt against their high command. Whatever, it is a blatant violation of the agreement of 8 December 2006 on the Monitoring of Arms and Armies. The agreement has clearly stated that unauthorized troop movement is a violation thereof. The UN Mission in Nepal has already termed it a violation of the agreement, and also mentioned that Maoist commanders are obligated to ensure that combatants under their command return to the cantonment site without delay. So what prompted the Maoists to adopt such an extreme move at such a crucial point?

The justification offered that the desertion is for seeking a livelihood is not convincing. Finance Minister Ramsharan Mahat has made it clear that the Maoists have been provided Rs 63 million per month to feed their 35,000 combatants in the seven cantonments. This money is at par with the army and police who get Rs 60 per day per head for their food requirements. The government has also provided separate money for infrastructure development, necessary logistics, uniforms, furniture and for miscellaneous activity. In total the government has provided Rs 350 million. So, food availability should not have been a serious problem. The poor infrastructure is definitely snagging the Maoists. Ian Martin, head of UNMIN and special representative of the UN Secretary-General, has also raised the issue with seriousness. However, the living conditions should not be any reason for desertion because the weather has improved greatly since December and January.

There could be two major reasons why the Maoists deserted the cantonments. First, they have been awe-stricken by their loss of control in Madhes. They must have realized that keeping all their political cadres inside the cantonments could cost them dear in the constituent assembly election in Madhes. So, they might have unleashed their political cadres to infiltrate the villages and strengthen the party network. Secondly, they might have felt that the result of the constituent assembly elections for them might be knee-jerk if held on time. As the Maoists are unable to directly broach the idea of postponing the election, they might have taken a detour to meet their objective. There is slim chance that both these reasons are baseless. For if that is so, then the Maoist leadership has lost real control over their cadres. Should this last presumption be correct, it would be more dangerous and disastrous than the previous two.

UN Mission in Nepal: This is a breach of the Agreement

Concerned at Maoist combatants registered with the United Nations starting to leave their cantonment, the UN Mission in Nepal (UNMIN) said Wednesday that it’s a breach of the arms agreement reached between the government, the Maoists and the UN. “UNMIN is concerned that large numbers of Maoist combatants have left the 3rd Divisional cantonment site in Chitwan today,” said Kieran Dwyer, the UNMIN spokesperson, in a statement. “This is a breach of the Agreement on Monitoring of Arms and Armies of 8 December 2006.” UNMIN has also urged the respective Maoist commanders “to ensure that combatants under their command return to the cantonment site without delay”.

The Maoist combatants had announced on Tuesday (20 Feb) that they would walk out from Shaktikhor cantonment in Chitwan, and threatened that their colleagues in all seven cantonments would begin deserting those camps from Wednesday to earn a living. Maoist spokesperson Krishna Bahadur Mahara has said that the party leadership allowed the Maoist combatants to go outside the cantonment sites to arrange their own food and lodging. Mahara said they would return to the cantonments “after basic facilities are provided” to them.