Nepal is as back as Sri Lanka was in 1960, says ADB

Kathmandu, June 15

Asian Development Bank in a study said that Nepal has underperformed all other South Asian economies and is now where Sri Lanka was in 1960.

"In terms of per capita GDP, Nepal is now where Sri Lanka was in 1960, Pakistan was in 1970, and India and Bhutan were in 1980," the ADB said in its latest study.

In 2007, per capita GDP at the 2000 prices for Nepal was estimated at USD 243, compared with USD 439 for Bangladesh, USD 660 for Pakistan, USD 686 for India, USD 1,144 for Sri Lanka, USD 1,277 for Bhutan, and USD 3,668 for Maldives, it said.

The study has also concluded that Nepal have been held back due to weak governance, slow recovery from the civil war, inadequate infrastructure, labour market rigidities and inability to address market failures.

"Moreover, the global recession threatens to drastically reduce the inflows of remittances and tourists," the ADB said in the study "Nepal: Critical Development Constraints" conducted jointed by the Asian Development Bank, DFID & International Labour Organization.

"Economic performance has been lacklustre, despite some important reforms in 1990s and 2000s and reduction in below-the-poverty line population from 42 per cent in 1995-96 to about 31 per cent in 2003-04." highlighted the report.

Cautioning the further deterioration of economy, the ADB said that despite poverty reduction, evidence suggests that Nepal’s recent economic growth has had limited inclusiveness with social, geographical and economic dimensions.

Besides, it said poverty may remain high and climb if the global recession reduces remittances. An emerging concern is the sharp rise in inequality, the bank said. It said expanded employment opportunities may not lead to major poverty reduction unless growth is inclusive and inequalities in access to development opportunities and jobs are reduced.

Overcoming inadequacies in infrastructure and inequalities will need substantial increases in expenditures, requiring creation of fiscal space, the bank said.

"The challenges Nepal faces in achieving its growth potential are compounded by the slow transition from a kingdom to a republic and the related political processes," the study said.

Effective governance, the rule of law, control of corruption, and accountability can climb back to their levels prior to the civil war only after political stability comes, the international lending agency concluded.