Economy & Peace

THE latest findings on Nepal’s economy by Asian Development Bank only reconfirms what has all along been well-known—that our economy is not doing too well. Very little in it came as a surprise, but the forecast on Nepal in the Asian Development Outlook 2002, released by the Bank on Tuesday, nonetheless served the purpose of letting known the challenges the Nepalese economy is facing, while the overall Asian economic growth is expected to record a fairly positive growth. Nepal’s economic growth is expected to decline to 3.5 per cent this year from five per cent last year. As agriculture accounts for an overwhelming contribution to the Gross Domestic Product, the fact that growth in the agriculture sector will decline to three per cent this year on account of uneven monsoon rains has a major role to play in the overall expected downturn in the national economy. But agriculture in Nepal has always been dependent on the vagaries of weather and consequently erratic rains in a particular year means poorer economic growth for that year. However, the added factors in economic downturn in recent years, as ADO also pointed out, have been that manufacturing, tourism and trade suffered a great deal from insurgency and external conditions. Indeed, the effects of the insurgency are there for all to see. It has been quite instrumental in scaring tourists away as well as in affecting the manufacturing and trade sectors. The destruction by Maoists in more recent times of infrastructure and the government’s compulsion to divert more and more resources to security operations to fight the insurgency is bound to have a further negative impact on the economy this year.

ADO’s forecast that inflation will only be moderate in the next few years, if there is no external shocks to the economy, is one of several consolations contained in the report. Also, the forecast notes it as a plus that the Nepal-India treaty renewed earlier this year has ended the uncertainty surrounding Nepal’s exports to India. But in order to extract full benefits from this development, apparently Nepal’s industries would require to be more competitive to maintain their export growth. Ultimately, what it boils down to is this: Nepal desperately needs peace in order for it to arrest the economic decline. That forms part of ADB’s suggestion too when the report says that Nepal needs to restore law and order, achieve more rapid and broad-based economic growth, while carrying out structural reforms including improved governance and domestic resource mobilisation. Peace evidently is the first requisite. Nepalese may not know when peace will be fully restored, but they have some consolation in the fact that the present government is fully focussed on achieving it.

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