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Economic liberalization in Nepal


The basic values of liberalism have been practiced in Nepal for a long time, but the practice of economic liberalization is considered to have been after 2046. This article will discuss the history and practice of economic liberalization in Nepal. In particular, it will be mentioned about the budget of the financial year 2048/49, which is considered to be the beginning of economic liberalization in Nepal. Other dimensions of liberalism and its use and development in Nepal will be discussed in the articles after this.

Liberalism is a political philosophy that recognizes the rule of law, the protection of individual economic and personal rights, the right of individuals over property, and the creation and promotion of an open and competitive environment. In the context of Nepal, no political party embraces liberalism as its political principle. However, the Rastriya Swatantra Party, formed in 2022, has mentioned ‘liberal economy and pluralistic democracy with social justice’ as the ideal principle of the party. All the political parties of Nepal are showing themselves to be socialist and public welfare, but they are neither extremist socialist and public welfare nor liberal. Regardless of the principles, in practice they are working on a mixed concept. Although the political parties do not mention liberalism and its features as a basic principle, important steps have been taken for liberalism in Nepal.

Liberalism is closely related to the lives and daily activities of citizens. More liberalism promotes individual freedom and economic rights. The most important thing is that every person should focus on earning money. The thought that it is possible to make a country rich only if individuals are rich is a liberal thinking.

Although there are many economic liberalization works in Nepal based on the principles of liberalism, no political party has been able to adopt the institutional adoption of liberalism. On the other hand, the principles of liberalism are still seen as an imported agenda in Nepal. As a result, the legacies of liberalism in Nepal have disappeared, and the common people feel that liberalism is really imported.

In 1951 (2007B.S.) Rana regime ended and democracy was established in Nepal. On Falgun 7th, the establishment of a democracy was announced in the country with the announcement that the government would be governed by the people’s system, not the dynasty of the Ranas. With the establishment of democracy in 2076 Baisakh, “Republic Democracy” is used instead of “Democracy”. However, the then King Mahendra deposed the government of the elected Prime Minister B. P. Koirala on 1st Poush 2017 and established an autocratic Panchayat system. The historical people’s movement of 2046 restored democracy in the country. The Constitution of Nepal 2072 with federalism, social justice, equity, equality, individual freedom along with fundamental rights has been issued and is currently being implemented. This is an important political step.

The then Minister of Finance Mahesh Acharya brought the budget for the financial year 2048/49 on 27th Ashar 2048. It is said that the formal institutional beginning of economic liberalization in Nepal is from this budget. This budget is considered as the starting point of the first phase of economic reforms in Nepal.

Since the beginning of the process of economic liberalization in Nepal, various steps have been taken in the industry and trade sector. After the implementation of the Privatization Act in 2050, about 30 public institutions have been privatized until now. Looking at the statistics of the year 2074, all public institutions and companies of the state were in losses.

The process of privatizing the public institutions and companies that are spending from the state funds and taking them to profit has started since that time. Economists and leaders of current political parties also consider it as an important achievement. Former Vice President of National Planning Commission and Economist Bishwo Paudel said in an interview that because of this policy, more industries have opened in Nepal. He said that the entry of private sector in privatization, education, health, insurance, finance, water resources etc. has changed Nepal.

What was in the budget brought by Mahesh Acharya?

In the year 2048, the per capita income of Nepal was 4,815 rupees. Whenever about 42.5 percent of families below the poverty line have an annual income of 3,285 made their living. The main reason mentioned for the decline in gross consumer savings over the past few years is the decrease in the efficiency of the government and non government sectors, delayed return on investment and large increase in unproductive spending. It was mentioned in the budget that the private sector must play a major role in market-oriented and competitive economic activities to increase production. The objective of the budget was to make the national economy more liberal and dynamic by increasing the participation of the private sector.

It was written in the budget, “Experience around the world has shown that the economic development rate of the country cannot be accelerated without the maximum utilization of the entrepreneurship, hard work, discretion, skills and work efficiency of the private sector. Therefore, even the countries that previously believed in the planned economic system are now moving towards a market-oriented economic system. Even in Nepal, the level of work efficiency existing in the government sector and the experience up to now confirm this need. Government institutions now have more than three Arba rupees of equity investment and more than 7 Arba rupees of loan investment. The dividends and interest received from this large investment are minimal. Most of the institutions are not in a condition to run without government subsidies. The capacity utilization of government industries is also not satisfactory. The government received only 1 crore 24 lakhs rupees in dividends from its investment in institutions last year, which is only 0.1 percent of the total investment. In the financial year 2046/47 Out of total 64 government institutions, 27 institutions were in loss and the total loss for that year was 79 crore 69 lakh rupees.”

Referring to the above background, in the said budget, reducing the government’s role in government industries and other institutions and reducing the government’s expenditure burden and management burden and gradually making the private sector a participant in such areas, in addition to studying the methods and methods related to privatization, three government institutions and five government agriculture firms will be privatized in the coming year. In accordance with the policy of making the private sector more active in economic development, it was mentioned in the budget that finance companies including commercial/Banijya bank will be allowed to be fully owned by the private sector. On the other hand, the budget adopted the policy of attracting foreign investors in Nepal and encouraging investors in industrial investment as it takes a long time to get industrial license.

The history of Nepal’s liberalization combines political changes, economic reforms and socio-cultural changes. Nepal’s economic liberalization has brought significant changes even in the period of rapid system change, political instability, conflict and transformation. Reforms including active participation of the private sector and inclusive political participation seem to be a positive beginning of liberalization in the context of Nepal.

 In a study titled Nepal: An economic political analysis, It has been mentioned that there has been a good economic growth in since the mid of 1980 in Nepal. Steps such as infrastructure development, inclusive participation have been mentioned as positive work. The budget brought by the then minister of state for finance Mahesh Acharya is seen as milestone of liberalization especially economic liberalization in Nepal. In conclusion, the budget that came after 2046 seems to have led Nepal on the path of economic liberalization. Although the aspect of economic liberalization developed only later, other dimensions of liberalism have been practiced in Nepal since ancient times.

 In the second article of this series, it will be discussed how individual freedom was viewed as an important dimension of liberalism in this history of Nepal and how individual freedom was mentioned in the cultural and historical documents of Nepal.