NATIONAL 3 -(Spotlight Weekly)

Road Less Traveled By

Minister Acharya manages to ensure donor community's support for the reform agenda. The test lies in its implementation

By BHAGIRATH YOGI

Finance Minister Mahesh Acharya has no time to spare. He was addressing the Nepali press in Kathmandu in a video-conference from Paris on the afternoon of April 19. Next morning, he was already in his office at Bagh Durbar clearing files.

Minister Acharya : Promises to keep

The determination of the young minister seemed to be paying at the first-ever Nepal Development Forum meeting (earlier known as the aid group meeting) in Paris (April 17-19). Backed up with the new government's commitment to kick-start now stalled economic reforms program, Acharya spoke his mind to the exclusive club of Nepal's development partners. "I see no other alternative except to proceed with the reform agenda. We cannot afford to roll back the reform process. Rather, we have to further intensify and consolidate it," he said.

The Nepali Congress government led by Girija Prasad Koirala and Acharya as

Minister of State for Finance had started economic reforms program in the early nineties with encouraging results. But with ensuing political instability after the mid-term polls of 1994, reform process virtually came to a stand still. Coming back to power with majority once again, Koirala-Acharya duo have expressed their resolve the keep the ball moving.

"The government is in its way to re-design and implement a comprehensive, yet coherent strategy for poverty reduction. Achieving the rate of growth of even above 8 percent and sustain it for a considerable period of tome may not be impossible for Nepal where tremendous development opportunity exist," said Acharya addressing the NDF meeting.

In the Paris meeting, the government outlined its plans to design an enhanced poverty reduction strategy for Nepal and to establish a Poverty Alleviation Fund as a mechanism to expand grassroots-led development activities and to fund special targeted development outreach in the remote areas.

The donor community has been equally responsive. "The challenge we share in our partnership with Nepal is to reduce poverty, substantially, in one generation or less," said Ms. Mieko Nishimizu, Vice President, South Asia, of the World Bank, who headed the NDF meeting. "The country memorandum has said all the right things about what needs to be done. But when you return to Nepal it will be the time for bold and decisive actions," she added.

Though the donor community pledged a support of US$ 1250 million for a

period of two years till 2000-01, much less than the government's demand of US$ 2.1 billion over the same period, the meeting hinted that there wouldn't be dearth of resources if the government was committed to go ahead with the reform agenda. "Nepal's development partners reaffirmed their resolve to assist the people of Nepal in addressing the challenge of poverty reduction and economic growth, in line with performance on accelerated policy and institutional reforms. The aid levels could even be higher if the pace of reforms in accelerated," said a press release issued at the end of the meeting.

Therein lies the main test of the new government. The government also presented a plan of action to implement reform agenda in a time-bound manner. The document called "Priority Reform Actions" prepared by the Ministry of Finance has clearly charted reform action, expected outcomes and stipulated time frame in areas including macroeconomic and fiscal structure, private sector development, financial sector reform, decentralization, governance, civil service reform, aid effectiveness and the role of civil society.

In financial sector reform, for example, the government has said it would restructure Rastriya Banijya Bank and Nepal Bank Limited, promote insurance markets and privatize government-owned banks and non-bank financial institutions in medium-term (that is, within 24 months). Similarly, the government has expressed commitment to control terrorist activities and ensure effective law and order system immediately and consolidate CIAA in medium term. In civil service reforms, the government has said it will strengthen the merit-based, performance-oriented reward/penalty system, review existing incentive package for increasing compensation levels and right-size the government institutions at various levels. For ensuring aid effectiveness, the government has said it will start channeling all aid through Ministry of Finance for establishing national priority and effective aid coordination with immediate effect.

The donors, on their part, expressed their strong endorsement for the reform agenda and asked the government to continue with a participatory reform process, and to bring the poor to the center of the development process. In what might be the major achievement for the government, the development partners agreed that "they will steer away from 'donor-driven' behavior and put the government in the 'driver's seat,' and that the government will be the manager of donor coordination.'

To rally the donor support to its development agenda has been a major achievement of the Paris meeting for the Nepal government. To put its commitment into practice will be its real test.