Nepal
Date: 10 May 2012
The event will be held in Kathmandu , Nepal , with the participation of distinguished participants from academia, government, civil society, international organizations, and the press. The list of well known participants making opening remarks, presentations and commenting on the publication includes:
Posh Raj PandeyExecutive Chairman
South Asia Watch on Trade, Economics and Environment
Country briefing note <download pdf file>
Higher GDP growth expected in 2012
• Slow growth in Nepal in recent years has largely been due to political instability, frequent strikes in the country, persistent labour problems and severe electricity shortages. GDP growth slowed to 3.5% in fiscal year 2011 compared to 4% in fiscal year 2010. The country's agriculture performance improved due to favorable weather conditions, but its industrial and services sectors recorded lower growth rates.
• GDP growth is projected to be about 4.5% in 2012. The economic revival in the country largely hinges on improved law and order, as poor security and political instability limit the government's capacity to spend money and boost rural income.
Inflation remains stubbornly high
• Inflation in Nepal is closely linked to inflation in India because of the fixed exchange rates between the currencies of the countries as well as the close economic ties between them.
• In Nepal , Inflation remained close to being a double digit, 9.6% in 2011 and in 2010. Weak supply of food items kept inflation high while at the same time, the cost of production of both agricultural and industrial products rose due to severe electricity shortages and rising labour wages stemming from the Overseas migration of Nepalese workers.
Budget deficit increased in 2011
• Budget deficits are generally high in most countries in South Asia . Growing tax revenue in Nepal led to an improvement in the country's tax-to-GDP ratio, which was higher than 14% in 2011 while its budget deficit is estimated to be 3.8% of GDP in 2011 as compared to 3.5% of GDP in 2010.
Current account deficit narrowed in 2011
• The economy of Nepal experienced a large merchandise trade deficit and a slowdown in growth of overseas remittances in 2010 and 2011. As a consequence, the country's current account balance has turned into deficit for both years after being in a surplus in the previous years.
• However, the current account deficit narrowed in 2011, mainly on the back of an improvement in exports accompanied by slower growth in imports.
Workers' remittances play a major and positive role in the economy
• Remittances from overseas workers are quite substantial and play a major role in the South Asian economies. Governments should consider some special and innovative institutional arrangements to protect migrants and provide social protection coverage. In this regard, a commission should be created to put forward a uniform stance of countries in South Asia to oversee migration and enhance its positive aspects.
• Once established, the South Asian Migration Commission could formulate the framework for a coherent and comprehensive response to the issues surrounding migration generally applicable to all the countries in South Asia . By looking into best practices regionally and internationally, the Commission could help in designing policies that harness the benefits of migration in the best possible way for all stakeholders and minimize their negative effects.
Severe energy shortages require urgent response
• On the physical infrastructure side, several countries in the subregion, such as Bangladesh , Nepal and Pakistan , are facing severe electricity shortages.
• To address energy shortages, the following measures must be undertaken urgently: setting up viable new power projects; minimizing transmission and distribution losses, including theft of electricity; increasing exploration of natural gas, crude oil and coal; tapping of regional markets and setting up infrastructure for energy imports; and incentivizing the development of renewable energy resources.
• Due to limited public resources, involvement of the private sector should be enhanced and public-private partnerships should be encouraged.
Widespread poverty continues to remain a major long-term development challenge
• Widespread poverty continues to be a major challenge in South Asia despite some notable success in reducing it over time. Even today, at least one in every three persons in South Asia is classified as poor.
• To fight against poverty, countries need to continue to implement economic reforms to improve productivity, strengthen public institutions, improve economic governance and build social safety nets to protect the more vulnerable segments of the population.
• To promote more inclusive growth, the provision of basic services, such as health care and education, should remain the principal priority in the policy agendas of all governments. Generating ample employment opportunities are crucial for the poor to earn a livelihood.
Policy brief: Living with high commodity prices <download pdf file>