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Kathmandu Thursday January 31, 2002 Magh 18, 2058.
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Mid-term growth prospects
bleak: WB
Post Report
KATHMANDU, Jan 30 Despite some improved economic
performance in the nineties propelled mainly by economic stability and the first round of
economic liberalisation, the medium term prospect of growth is somewhat bleak mainly due
to slower and uneven implementation of reforms.
According to an Economic Update 2002, prepared
by the World Bank (WB) on the eve of Nepal Development Forum (NDF) scheduled to be held in
Nepal for the first time from February 4 to 7, the medium term prospects for the
non-agricultural sector appear gloomy.
The report presented today by Ahmad Hasan,
Economist at the World Bank for the South Asian region, blames deteriorating security
condition of the country, which has worsened the business climate inside the country, and
global economic slowdown as the reasons behind the export slump.
Similarly, continued political instability,
growing fiscal pressure because of the falling revenue collection, increasing domestic
borrowing and shrinking export market are some of the major challenges faced by the
economy for recovery.
The newly released report also points out that
despite some progress made in the human development index, poverty reduction in Nepal has
been slow in recent years mainly due to the low per capita growth averaging 2.2 per cent
per annum.
The report also points out that progress with
the implementation of the reform programs committed during the last NDF meeting has been
mixed and far slower than was expected.
"Though some progress have been seen in tax
and infrastructure regulatory reforms, reforms in the areas of financial sector,
decentralisation and public expenditure has been slow," stated the report.
It also strongly urges the government to speed
up reforms to withstand the twin challenges posed by Maoist insurgency and sliding
economic and fiscal condition. "Restoring security is a major hurdle for the
effective implementation of policy reforms for which, apart from security measures, steps
should be taken to reduce rural poverty and unemployment and to boost the processes of
decentralisation and community based development schemes," observes the report.
The report also paints a gloomy picture on the
economic growth front, which it predicts to tumble to less than 3 percent dragged down
mainly by the non-agricultural sector, which is projected to decelerate by one-third along
with contraction in value addition in the manufacturing sector.
On the fiscal sector front, the report clearly
states that financial sector development lags considerably behind the neighbouring
countries and cautions that the future development of the sector is challenged by poor
health of the banking system. It also expresses satisfaction over the upcoming agreement
of the management hand-over of the two largest banks to the private sector, albeit with
long delay.
The report also presents some positive picture
on the economic and development fronts of Nepal. It says that despite the slowdown in
exports, the current account and balance of payments position of Nepal is still strong.
Similarly, it praises the improvement in the
fiscal management sector and progresses made in the implementation of regulatory reforms
to expand infrastructure with active private sector participation.
The report also points that Nepal has one of the
more advance legislative framework for decentralisation in the whole South Asian region,
albeit the implementation is weak.
Speaking on the occasion, Sadiq Ahmed, Chief
Economist at the World Bank, for the South Asian Region, stressed on the need to improve
the aid effectiveness in the developing countries and said that the aid amount depends on
performance.
He also praised the Medium Term Expenditure
Framework and said that it is a positive development towards speeding the national
development but stressed on the effective implementation of the policy.
He also stressed on good governance to improve
the results of the development efforts and urged the government to pay due attention in
that direction.
Speaking from the chair, Finance Minister Dr Ram
Sharan Mahat said that restoring security is the main challenges and it has posed a major
hurdle in achieving a sustainable development.
"If normalcy does not return soon, the
economy will have to bear great consequences," he warned. He also said that the
private sector has played an appreciable role in the economic development of the country
and added that the private sector is well developed in Nepal.
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