Nepal at present stands highly vulnerable to the unfolding COVID – 19 pandemic. Although several measures have been taken by all the three tiers of government to respond to the crisis, there is an urgent need to strengthen the existing health system in order to handle any sudden surge of outbreak and standardize the facilities like quarantine and isolation. Along with that, it is also significant to capacitate the concerned stakeholders on mitigating the socio-economic impacts and prepare for a long-term solution.

To start with, it is crucial to enhance public awareness on pandemic through communication mechanisms. Focus needs to get shifted to management of quarantine and other health facilities through proper monitoring and assessment and providing logistics support wherever needed. The frontline responders need to be supported with sufficient health supplies and necessary protective gears. Alongside, experts who have the technical knowhow must carry out rapid assessment of socio-economic impact and recovery needs considering both macro and micro perspectives. Short-term employment programs need to be in line for the workers associated with the hard hit sectors like tourism, trade and production linkages, supply and health. Effective and efficient cash-for-work schemes need to be introduced for livelihoods recovery and job creation.

The situation seems alarming considering the global economic fallout. Although we are yet to experience the full impact and aftermath of the pandemic, this worldwide threat has already created economic uncertainty among all of us. While Nepal is still suffering the brunt of decades of political instability and a devastating earthquake, the pandemic has further added to its misery. Nepal is ill equipped to prepare for and respond to such outbreaks as access to even basic services are limited, social protection and a safe working environment is lacking, public  institutions are weak and social dialogue is impaired. Hence, the crisis is likely to ignite or exacerbate grievances, mistrust and sense of injustice over inadequate access to health services, loss of jobs and livelihoods, and drive a conflict undermining development, peace and social cohesion.

Notwithstanding the inconvenience caused over a broad spectrum of different social classes, the pandemic and subsequent economic crisis has had an overly disproportionate impact on the most vulnerable segments of the population, worsening inequality and deepening the chasm. Now, the immediate concern should be to tackle the devastating social and economic dimensions of the crisis focusing on the most vulnerable by designing policies that advocate for providing health and unemployment insurances and social protection while also padding up businesses to prevent bankruptcies and job losses. Considering the national solidarity, social cohesion needs to be prioritized and there should be a provision of fiscal stimulus for the most vulnerable along with support to micro, small and medium enterprises (MSMEs), work and education.

The Central Bureau of Statistics (CBS) estimated that for FY 2020 Nepal’s economy, at basic prices, will grow at 2.3% down from 6.7% revised estimate for FY 2019. This estimate is fundamentally based on the assumption that the COVID -19 affected economic activities will start to pick up from mid-May except for tourism activities. More than 90% of the economic activities have come to a hiatus. The growth rate of agricultural, industrial and service sectors, stands at 2.6%, 3.2% and 2% respectively, significantly lower than they experienced in the last fiscal year.  The outbreak of coronavirus in the second half of the fiscal year has exacerbated the situation to a greater degree, especially when we take into account the weak capital spending and the absence of an investment conducive environment. Activities where work from home strategy does not apply will continue to face productivity losses for quite some time. The COVID – 19 outbreak has also resulted in a declining remittance and FDI flow. A decelerating trend in remittance inflow and decline in imports are affecting retail and wholesale trade. Retail and wholesale trade accounts for the second largest share in the GDP which was growing at 11.1% in the last fiscal year and is now projected to grow at 2.1%. The entire service industries; tourism, aviation and hospitality sectors have been hit hard by the outbreak. Similarly, financial institutions, real estate and businesses and education sectors have also been  adversely affected.

Considering the development statistics projection and the uncertainties over the containment of the pandemic, revenue mobilization will be very much lower than the estimate and there will be minimal growth in the nominal GDP for some quarters. Also, the workforce employed under informal sectors has been affected to a very significant extent contributing to the rise in the unemployment rate. For the country which was already facing higher and increasing unemployment rate and labor underutilization rate, the increase in the number of migrant workers returning to the country in the coming weeks is likely to exacerbate the unemployment status and issues concerning social protection. 

 In the fast changing and uncertain context, prolonged outbreak and the consequent lockdown would further decelerate and contract services and industrial production. Due to the rise in unemployment shock the burden on the workforce needs to be lowered and the aggregate demand needs to be stabilized by expanding social protection and regulating financial constraints. Production capacity needs to be increased and if possible be shifted to producing import-substituting goods. In addition, it is necessary to diversify the sources of economic growth and the major contributing constituents in the GDP. Budget allocation needs to be meaningful and should contribute to the measures to contain the pandemic. Also, the budget needs to consider necessary relief and recovery packages for businesses, workers and other vulnerable groups, health care spending, subsidies, working capital to MSMEs, social security, minimal wages to workers, employment generation, among other priorities.

In order to neutralize the situation and find a sustainable solution to the crisis, macroeconomic policies are fundamental and other unconventional monetary and fiscal policies such as low interest rates and fiscal stimulus seem necessary to enhance productive capacity. Balancing trade-off between containment policies and economic policies are deemed necessary. It is recommended for policy makers and the implementing bodies to adopt expansionary fiscal policies combined with monetary stimulus targeting people worst hit by the freeze on economic activity, to keep the credit flowing in the economy, once the lockdown subsides. Relevant policy administration and management along with short and long term strategic action plans considering both health and socio-economic paradigms, among others, should top the priority list of the relevant stakeholders. 

In addition, the government and the concerned authorities must adopt temporary measures for the time being and coordinate with international financial partners in order to avoid unsustainable fiscal deficits and long-term debt levels. A national mechanism needs to be established where political leaders, economists, development specialists, business community and mid-career professional bureaucrats need to have a common shared vision and analyze the impact of the pandemic and come up with a national framework for strategic planning and budgeting to revive the economy as required.