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Economic ruin staring Nepal in the face

An economist's prediction that the Nepal government could be bankrupt by June seems to be coming true.

india Updated: Apr 15, 2006 16:37 IST

An economist's prediction that the Nepal government could be bankrupt by June seems to be coming true with the kingdom's main business artery remaining choked by anti-king protests since the last 10 days.

Birgunj town in Bara district, the hub of business and major entry point for raw materials from India, remains disconnected from Kathmandu since an indefinite nationwide closure called by the opposition parties since April 6.

The protest snowballed with professionals, government employees and workers throwing their weight behind the agitation.

Since April 9, there have been no domestic flights to the Simra Airport in Birgunj. Three airlines that used to operate six daily flights have suspended their services.

After government ministers and other VIPs were ferried to Birgunj April 8 to attend a controversial pro-king meeting organised by an organisation even as the Kathmandu valley remained paralysed by daytime curfew, angry protesters blockaded the airport and threatened to set it on fire.

Road transport too has come to a standstill with protesters putting up barricades on the highway.

Factories, shops and educational institutions have been closed since April 6.

An economist, Raghav Dhoj, director of the Institute for Development, warned in February that the government could go bankrupt by June.

The current Minister of State for Finance Rup Jyoti is himself feeling the pinch of the protests with several of his family businesses in Birgunj shut due to the protests.

To add to the minister's humiliation, about 2,000 employees of the mill threw their lot with the anti-government protesters and raised slogans against the mill management.

With customs employees also on strike, customs points have stopped functioning. Cargo is piling up at the Birgunj inland container depot with no one to unload or transport it to its destination.

Jyoti's budget relies heavily on the 13 per cent value added tax for revenue. But with shops and businesses closed, there has been virtually no collection in Birgunj and other cities.

Banking transactions have been paralysed both by the strike as well as curfew imposed by the government. Telecom employees are also on the warpath after the government suspended mobile phone services for four days, causing the exchequer a loss of millions.

On the cards is a shortage of petro-products with tankers from India unable to move freely across the border.

The opposition parties are asking people not to pay taxes or any other government dues.

While Jyoti has vigorously rejected the bankruptcy warning, he had no answer when the Asian Development Bank this month warned that Nepal's GDP growth had fallen to two per cent and the country needed reforms and stability for revival.