KATHMANDU, 18 April 2013 — Countries in South Asia, including Nepal, will have to overcome a number of development challenges, including large concentration of poverty and hunger, rising inequality, poor levels of human development, wide infrastructure gaps, lack of diversified base for high value added products and exports, widespread food and energy insecurity, and high risk of disaster, in order to realize development potential.
Low growth in Nepal in recent years has largely been due to political instability, frequent strikes, persistent labour problems, and acute electricity shortage, said United Nations Economic and Social Commission for Asia and the Pacific (UN ESCAP) report ‘Forward-looking Macroeconomic Policy: For Inclusive and Sustainable Development,’ released in Nepal by the UN Information Centre.
Though gross domestic product (GDP) growth improved to 4.5 per cent in the last fiscal year from a fiscal year ago’s 3.8 per cent, it could not ensure equality due to the failure of the macroeconomic policy, said National Planning Commission (NPC) Vice Chair Deependra Bahadur Kshetry, launching the report in Kathmandu.
Economic growth alone can hardly address poverty, he said, adding that growth should benefit the people. “If the growth is not shared by the society, it will invite conflict as economic insecurity has also risen amid rapid growth in Asia and the Pacific, where more than one billion workers are in vulnerable employment.”
Nepal, out from a decade of armed conflict — also due to social disparity — has not been able to post promising growth post-2006, when the armed party came into mainstream politics agreeing to draft a Constitution that would guarantee people their fundamental rights including economic freedom. But the frequent change in government has failed the people in ensuring policy stability that could attract more investment and boost exports.
Nepal’s exports stood at Rs 51.01 billion in the first eight months of the current fiscal year 2012-13, against imports of Rs 360.56 billion, making a trade deficit of Rs 309.55 billion, according to Nepal Central Bank’s data.
“With a large merchandise trade deficit and slowdown in growth of overseas remittance, the current account balance has turned into a deficit in recent years,” the Report said, adding that the cost of production of agriculture and industrial products has been rising due to acute electricity shortages and rising labour wages due to increasing export of labour.
Supply side constraints and rise in cost of production have pushed inflation to a double digit currently, when inflation in India has come down to a single digit.
“Inflation stood at 10.2 per cent in the eight months of the current fiscal year,” according to Nepal Central Bank. However, UN ESCAP’s report noted that inflation in Nepal is closely linked to inflation in India because of fixed exchange rates between the currencies of these countries as well as the close economic ties among them, apart from about two-thirds of Nepal’s total trade taking place with India only.
The rising inflation has also pushed people towards poverty. “Without inclusive growth, poverty cannot be eradicated,” Kshetry said.
Not only Nepal, but South Asia’s economic, social and environment priorities must be balanced in favour of eradicating extreme poverty and hunger, the report prescribed, adding that the tax-to-GDP ratio has been improving due to growing tax revenue lately.
The ESCAP Report 2013 was presented by Ms. Mia Mikic, Chief of Trade Policy and Analysis Section, UN ESCAP Bangkok. The welcome remarks was delivered by UN RC a.i Mr. Terrence D. Jones.
The Report launching was followed by a “Policy Dialogue” on the Report which was participated in by some 30 eminent economists and senior government officials of Nepal including Hon’ble Mr. Deependra Bahadur Kshetry,Vice Chairman, National Planning Commission and UNDP Economic Advisor Dr. Basudeb Guha-Khasnobis. The Policy Dialogue session was moderated by the Governor of Nepal Central Bank Dr. Yubaraj Khatiwada.