‘ADB will continue to work with the government to minimize COVID-19 impacts’

Nepal could not remain untouched from the COVID-19 pandemic which has affected not only business and economic growth across the world but also people’s lives largely. At this context, countries across the world, development partners and other agencies are actively into saving people’s lives and the economy. Among different multilateral donor agencies, the Asian Development Bank (ADB) is supporting the government to help come the crisis situation and revive the economy. Though the crisis has assured that economic growth of countries across the world, including Nepal will be tepid, ADB is closely working with the governments across Asia, including in Nepal to fight economic and business challenges resulted by the pandemic. Against this backdrop, Sujan Dhungana of Fiscal Nepal talked to Mukhtor Khamudkhanov, country director for ADB, Nepal, to know various details. Excerpts:

The COVID-19 pandemic has severely affected economies across the world, including Nepal where semi lockdown still prevails and businesses activities are yet to resume properly. How is ADB looking into Nepal’s economy and its growth?

Nepal’s economy this fiscal year 2021 will be affected by this pandemic. After the lifting of nationwide lockdown since 22 July 2020, economic activities had begun returning to normalcy. But with sudden spike of COVID-19 cases lately, it has been necessary to take more stringent measures such as the lockdowns in some cities and districts imposed by district administration offices. The outlook for this year will depend on the trajectory of COVID-19 within Nepal, as well as regionally and globally. If we assume that stringent measures will last for 3 months during the year, then growth for FY2021 could be around 3.1%. Economic growth may slow further if stringent measures last longer.

ADB has already projected bleak growth of economies across South Asia, including Nepal while the government seems to be too optimistic in terms of growth in the current fiscal year. What do you have to say on this?

Predicting economic growth is particularly difficult this year because one of the main factors – spread of COVID-19 and the measures necessary to contain it – is unpredictable. The actual growth rate that Nepal will achieve in FY2021 will depend on this and the response to mitigate the effects of COVID-19. If the COVID-19 spread is contained soon, economic growth could be higher than our forecast. Considering the COVID-19 developments recently across countries, that seems unlikely.

What is your evaluation on the response of the government towards economy amid the current crisis?

The Government of Nepal has taken timely action to provide support to the affected people, including women and the elderly. The government’s National Relief Program, which includes measures such as providing food for the poor, employment support for returning migrants, tax relief, and extending subsidized loans for hard-hit small and medium-sized enterprises,is a step in the right direction. In addition, the monetary measures announced by the government will also provide some relief to banks, and financial institutions, and to businesses.

ADB has remained one of long standing and trusted partner of Nepal and its development process. How is ADB responding to the COVID-19 crisis in Nepal? Any future supports in the offing?

ADB is committed to supporting Nepal to control COVID-19 and will continue to work with the government to minimize the health, social and economic impacts of the pandemic in the country.

ADB’s response so far includes a $250 million concessional loan to strengthen the country’s public health systems and mitigate the adverse economic and social impacts of the pandemic, particularly on the poor. The assistance package was drawn up after intensive consultations with the government on the impacts of COVID-19 on health, economy, and the welfare of the people.

ADB’s funding will support the government to strengthen the country’s public health systems and mitigate the adverse economic and social impacts of the pandemic. The program will also support the government to extend its social protection program to distribute food assistance to the poorest and vulnerable households and provide employment support to the unemployed, especially women, returning migrant workers and those from the poorest households. ADB’s support will also include the economic recovery of affected industries and entrepreneurs through better access to finance for micro, small, and medium-sized enterprises.

ADB’s response also includes a $300,000 grant to purchase emergency medical supplies and equipment for health care staff and others in the frontline.

ADB also approved a $3 million grant from its Asia Pacific Disaster Response Fund (APDRF) to further support Nepal in its fight against the COVID-19pandemic. The grant, which is financed by the Government of Japan, will be used for emergency support for the improvement of quarantine facilities to effectively manage the inflow of returning migrants, especially in the border areas. It will also support the procurement of laboratory and medical equipment, medicines, and infection control supplies.

ADB is also working closely with the Government of Nepal and other development partners to provide policy advice and develop measures to deal with social and economic impacts of the pandemic. ADB stands ready to continue to support the Government and people of Nepal in the fight against COVID-19.

How far has the ongoing crisis affected ADB supported projects in Nepal?
The work is ongoing in national pride projects, for example Gautam Buddha International Airport and the Melamchi Water Supply Project, albeit at a slower pace. Major works in other ADB-supported projects have generally slowed for now due to restrictions on the movement of labour, 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.

More than 70 percent of ADB’s portfolio in Nepal focuses on infrastructure. To what level do you expect the COVID-19 crisis to affect ADB’s portfolio performance in Nepal this year?

The measures taken by the government Nepal to contain the spread of the COVID-19 pandemic were necessary no doubt. But the impact of lockdown, flight suspension, border closure, etc.disrupted the availability of labor, materials, and equipment, and are likely to continue doing so even as they ease. Infrastructure projects have been hit particularly hard, with worker absences and supply-chain disruptions.

The impact varies per project, as in some cases the work could continue and in other cases work was halted or slowed down as workers went home. With the lifting of some of the restrictions, projects have resumed work. With the support from the government, projects aim to minimize the impact of challenges like mobilization of international consultants, inter-district labor mobility, and supply of construction materials, especially coming from oversees.

ADB is supporting the projects in preparing Standard Operating Procedures to facilitate contractors to commence work with required safety measures. On average we cautiously assessed that in 2020 disbursement for infrastructure projects will be to a certain extent less (although still reasonable) than originally expected. However, ADB does expect a record high overall disbursement for Nepal in 2020, as we were in a position to provide special support of $250 million to assistthe government’s response to the COVID-19 pandemic. It is encouraging to note that awarding new contracts continued and that the investment projects will come close to the target set at the start of the year. This will hopefully ensure that, once the COVID-19 curve is flattened, the development work can start immediately.