Reconstruction of Nepal-Challenges and Opportunities

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It is all too familiar tale that the maoists war has cost billions of dollars to the country. The damaged bridges, roads, public facilities including police camps are all in need of re-construction. And, this is surely going to demand hundreds of billions of dollars. But, how are we going to get it? A couple of alternatives:
1. Grants and loans and FDI from other countries as well as remittances-This is a good option if we get grants, however, we have to be careful with the loans as we have to repay them back. If the projects are not going to yield sufficient return on time, projects launched with loan money may proove too costly to the nation. Even with the grants, we should be able to prioratize the projects. Rapid transition to market economy is essential if we are to sustain growth initially boosted by foreign investment. Similarly, to trap remittances, we should create more incentives so that private sector invests.
2. Domestic Loans-This is a good option, however, I doubt if we can raise enough money to finance such high-order economic activities.
3. Increased money supply- It can be done in various ways by the intervention of central bank of Nepal. However, if we fail to grow the real output with the growth of money supply, we might find ourselves in spiriling inflation.
These are short term alternatives. In the long run, there has to be a well-developed financial system to foster market based economic activities. There has to be incentives for proper channelization of remittances as well as investment by NRN and even FDI as I mentioned above. State involvement has to be cut severely to those areas which direly need it. Other loss-making state enterprises should be privatized. So, this process “gradualism” towards market economy should proove the best alternative for Nepal.
What do you people think on this? What should be the initial priorities of the country? And, which would be the best source of funds for such activities?

3 Responses to “Reconstruction of Nepal-Challenges and Opportunities”

  1. sanobhai Says:

    There might be enough money within the country to fund a lot of projects. Lot of remittances coming in, nowhere to invest other than real-estate, have to wait for hours and hours when some company goes public – I think we have excess money supply, we need to tap it. I don’t know what the interest rates are on government bonds but my guess is they are very low.

  2. Freedom Lovers Says:

    Sanobhai,
    I don’t know about the interest rates but my guess is that we do need a lot of money from outside to finance our projects. Remittances would make a good point given a conducive environment.However, most of the remittances sent to the poor folks goes for basic consumption. Yet, there are a lot of areas to improve. Moreover, we should be able to encourage NRN investment, not just meetings.

  3. sanobhai Says:

    Right, we need investment for big projects. But time and again I have heard people saying there is no small scale good investment opportunity. For example, it is possible to raise money from the public for a company that specializes in micro hydro electric projects.

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