ADB is fully committed to assist Nepal in this pandemic

The Asian Development Bank (ADB) is fully committed to assist Nepal in its challenging struggle against Covid 19, said Mukhtor Khamudkhanov, ADB’s Country Director for Nepal. In an exclusive interview with Lokpath.com, Country Director Mukhtor Khamudkhanov, said that ADB is working expeditiously to further assist Nepal in collaboration with other development partners under the 20 billion dollar expanded COVID-19 relief package announced on April 13, 2020.

Here is the edited part of the interview between executive editor of Lokpath.com, Lavesh Pyakurel and The Asian Development Bank, ADB’s Country Director for Nepal Mukhtor Khamudkhanov,

How you are observing the situation of Covid-19 pandemic across the globe and Nepal in particular?

Globally, ADB is concerned about the impact of COVID-19 on people’s health and well being. ADB is also concerned about the social and economic impact of COVID-19. The impact is more dire than initially expected. For Nepal, the number of actual infection cases is thankfully not many, at the moment, compared to some other countries. With measures like the lock down, social distancing, testing, tracing and tracking, and quarantine, a rapid spread can be contained. While these measures are necessary for protecting people’s health, the global COVID-19 pandemic is causing disruptions in industry and services. Tourism, remittance inflows, as well as domestic trade and transportation have been hit hard. Especially poor and vulnerable people might suffer.

As you are aware, almost all sectors are in a standstill, and not operating, what will be the likely result after the lock down is lifted,and the scenario of the economic sector?

The effect on the economy will depend on the prolongation of both domestic and international measures imposed to contain the spread of COVID-19. The month-long nationwide lock down and travel ban has been necessary to contain infections, but they have had an adverse effect on almost all sectors of the economy. If the lock down prolongs for months, the economic loss would be huge.

If and when the lock down is eased, it has to be gradual and accompanied by credible measures to test and monitor the potential spread in infections.  Some sectors of the economy such as construction, manufacturing, wholesale and retail trade, agricultural activities are expected to resume partially. Due to supply chain disruptions as a result of the pandemic, it will take time (probably a couple of months) for these sectors to return to normal after they resume operations.

Travel and tourism, hotels and restaurants may continue to face challenges even after the lockdown is lifted. Despite the containment of COVID-19 and gradual opening of international and domestic travel, people may be reluctant to travel. 

The effect on Nepal’s economy will largely rest on how this pandemic evolves in neighboring India and China, and globally. If the containment in these countries is swift, Nepal’s international trade and overall domestic economic activities may resume to normalcy. At this juncture, it will be difficult to predict how the economy would fare, but the prolongation of this pandemic will definitely have a severe adverse impact on Nepal’s economy.

It is now clear that service sector, mostly tourism and remittance are finding hard hit, what will be the impact on our economy in the short term, medium term and long term?

The impact of tourism and remittance income losses on the economy will be more prominent in the medium to long term. Though the direct contribution of tourism to GDP is mere 2%, the overall contribution to GDP is around 8%. There are many enterprises associated with the tourism sector and the collapse of such enterprises would lead to revenue losses and thousands of people losing their jobs.

Remittance has helped maintain Nepal’s external stability. A substantial loss of remittance income due to COVID-19 pandemic could lower the country’s foreign exchange reserves, undermining its import capacity in the future. Under such circumstances, the country may have to increasingly resort to external borrowing in the short term.

What is the growth outlook? Does the projection in ADO need to be revised downward given the scale of economic disruption ?

The outlook, including globally, has been less favorable since the time of preparing the ADO. The Central Bureau of Statistics estimates, released on 29 April, suggest that growth in Nepal may fall to 2.3% in FY2020. With the prolongation of COVID-19 pandemic, ADB anticipates that growth may substantially fall in FY2021 as well from the pre- COVID-19 estimate of 6.4%, depending on how long the pandemic lasts. The growth projections that will be revised most likely in June 2020 will give a better understanding on potential growth outlook.

What will be your suggestions to the government to move ahead effectively in addressing health and economic problems of Nepal? How the private sector can really cope-up with this pandemic and sustain their businesses in the long run?

To contain the spread of COVID-19, the existing testing facilities should be further increased nationwide. The medical equipment, testing kits and protective gears for medical and frontline personnel must be procured in a timely and efficient manner.

On the social protection front, in addition to the food supply and employment support through the Prime Minister’s Employment Program, in case of a prolongation, cash-transfer programs could be used to supplement social protection measures.

On the economic front, the previously announced relief package could be supplemented with more programs aimed at supporting the private sector such as hotel and restaurant, small and medium-size enterprises, that have been worst affected by this pandemic. If the domestic containment of disease improves significantly, then certain sectors of the economy, such as manufacturing and construction, could be partially opened to kick start the economy. Distribution channels also need to be partially opened with social distancing and hygienic measures in place.

Is there a plan to extend support by ADB to GON? How much additional lending is expected? Policy-based loan as budget support or regular project-based loans, which will be the most effective for a country like Nepal tohandle such situation?

ADB is fully committed to supporting Nepal during these challenging economic times. ADB has already provided a $300,000 grant to procure medical supplies, in close collaboration with UNICEF. ADB is currently in discussion with the government to provide support anchored around relief and recovery programs announced so far. In close collaboration with other development partners, ADB is accelerating its efforts in providing further support to Nepal from the expanded COVID-19 response package of $20 billion that has been announced on 13 April 2020, with approved measures to streamline its operations for quicker and more flexible delivery of assistance. ADB stands ready to provide further financial assistance and policy advice.

How is COVID-19 pandemic affecting ADB’s projects, including the Melamchi Water Supply Project ?

The work is ongoing in national pride projects, albeit at a slower pace. Most of the civil work activities under construction of Gautam Buddha International Airport handled by the Civil Aviation Authority of Nepal were stopped after the lock down was announced. However,some interior works relating to flooring, interior finishing of an international terminal building, an air traffic control tower, administrative building are ongoing with limited number of workers who are living inside the airport premises, following the safety standard protocol of the Government of Nepal.

The execution of works under Melamchi tunnel and headworks contracts are ongoing, following the safety protocol and guidelines of the Government of Nepal, despite the lockdown. However, travel restrictions and safety protocols impacted the supply of materials and availability of the workforce at sites and slowed down the progress.

Also, travel restrictions in neighboring countries will likely to delay the import of some critical items and equipment. The Ministry of Water Supply is reviewing and monitoring the progress regularly, at the highest level, and taking proactive actions to minimize the impact.

Major works in other ADB-supported projects have generally halted due to restriction on the movement of labours, aggregates transportation and construction materials delivery.

At this stage, it is difficult to quantify the overall impact, considering the uncertainties involved with the current pandemic situation in the region.