06 September, 2024
Nepal Infrastructure Summit 2022
Since the last NIS in 2019, Nepal’s economic growth has contracted by 2.37 percent in 2019- 20 owing to Covid-19 pandemic. Due to the pandemic, the economic activities came to a standstill, globally, and the world experienced unprecedented supply chain disruptions that undoubtedly affected Nepal’s economy as well. While the economy was slowly recovering from the pandemic, the ongoing Russia-Ukraine war has further added challenges to the situation by increasing fuel and commodity prices causing inflation to soar. This has subsequently contributed to currency devaluation, recorded current account deficit, and depletion of foreign reserves, leaving the country to grapple for balancing external position Despite such setbacks, Nepal has set an ambitious economic growth target of eight percent for FY 2022/23 while the growth rate for current fiscal year is estimated to be only around 5.84 percent. To attain such targets, Nepal needs to devise and implement bold and innovative policy measures and financing mechanisms. One of the compelling arguments that have emerged as a stimulus post Covid -19 is investment in climate resilient infrastructural development. The need for resilient recovery has been fortified by factors like an uncertain global economic environment, escalating climate vulnerability, increasing economic cost of climate change, and the urgency for all countries to reduce their carbon emissions. All these, cumulatively compel Nepal to use this window of opportunity, not just to internalise environmental externalities but also to proactively pursue long-run multipliers for meeting its sustainable goals. Against this backdrop, the NIS 2022 seeks to reinforce the idea that in the path to economic recovery and growth, the best bet is investments in infrastructure with focus on green infrastructure and financing.
Objectives:
Concept Note While public funding of capital projects in Nepal has increased in recent years, there is still disparity. According to a recent study by CNI and IIDS, there is a need of investment between USD 77 billion and 136 billion until 2030, in four concerned sectors: energy, transport, urban development and water and sanitation. However, the pandemic and the ongoing Ukraine-Russia war have forced countries to redistribute the budget earmarked for infrastructure to other urgent priorities, and Nepal is no exception. The current world situation is causing global supply chain disruptions, energy and fuel crises, trade wars, economic sanctions, protectionism, and fragmentation leading to soaring commodity prices. The IMF expects global prices to rise by 8.7 percent in developing economies. Similarly, according to the data by Nepal Rastra Bank (NRB), inflation in Nepal in June 2022 stood at 8.56 percent, the highest in the last five years. Inflation along with currency devaluation has contributed to record current account deficit, making things further exigent for Nepal, as the nation relies heavily on imports. Therefore, the country is impelled to divert the resources required for infrastructure investment towards balancing the external position. To add to this, Nepal is currently undergoing a liquidity crunch pushing the interest rate very high. The increased interest rate on government treasuries have posed additional challenges in mobilising resources for infrastructure investment. Considering these circumstances, the NIS 2022 seeks to fill the imposing gaps through a constructive dialogue on innovative financial instruments and modalities by taking both local and international investors into confidence. A stronger network and connectivity in the region in the form of new air routes, better roads, transmission lines, electricity grid as well as policies regarding trade will not only address some of these challenges but also protect from external shocks, provide a foundation towards greater regional integration, and lead the country towards sustainable long-term growth.
Key Focus:
Broadening the scope of infrastructure: The summit lays special focus on ICT. Nepal, although wellendowed with natural beauty, has difficult terrain and topography for connectivity. Being landlocked, both internal and external movement of goods and people is costly and inefficient. ICT is one area where goods (services) are independent of distance and weight. Further, the pandemic has increased the dependence on digital infrastructure for connectivity. NIS 2022 believes that investment in digital infrastructure and technology integration will help Nepal ride the digital wave, develop a competitive edge and be part of the global value.
NIS 2022 will revive the zeal for policy reforms: The innovative financing modalities, foreign direct investments, further engagement of the private sector, technology adoption and digital transformation require a solid foundation of policies, strategies, and governance - accompanied with a zeal for sweeping legal and economic reforms spearheaded by the central government in coordination with its subnational counterparts. To this end, NIS 2022 is designed to ensure participation of provincial representatives, which will bring a bottom-up approach to development and enable reforms for inclusive growth.
Participants:
Government of Nepal, diplomats, development partners, foreign dignitaries, private sectors, think tanks, investors, consultants and builders.
Note: This article is from Nepal Infrastructure Summit 2022 Souvenir.