Nepal Walking in The Footsteps Of Sri Lanka

Abstract

There is growing speculation that Nepal’s economy will disintegrate like Sri Lanka’s as the country's foreign exchange reserves have shrunk and inflation has soared with rising fuel prices. For the first time since the 2000s, foreign exchange reserves have dropped to around $9 billion, which is barely enough to fund imports for six months, down from 11 months. Economic Forum shows that, like Nepal, Sri Lanka depends excessively on a handful of export products such as tea, rubber, and readymade garments. Nepal's increasing external imbalances would be of less concern had growing credit growth raised alongside economic growth. Nepal government and firms have been borrowing wildly. In this paper, the cost-effective performance of both countries (NEPAL and SRI LANKA) and the reason behind the inclination of Nepal from India to China has been explained.