The Himalayan Times, 24th May 2017, Kathmandu
The World Bank today said that a comprehensive effort by the government to address different long-standing challenges is the only way for Nepal to escape its low-growth trap.
Unveiling the Nepal Country Economic Memorandum titled ‘Climbing Higher: Towards a Middle-Income Nation’ today, the World Bank said that the current development path of Nepal is not helping the country to get away from the low-growth trap despite rapid reduction in poverty.
“Following the delay in comprehensive reforms by the government to address the tepid growth, Nepal will probably not become a lower-middle-income nation before 2030,” the World Bank report states.
As per the report, development in Nepal is marred by a paradox as development in Nepal has witnessed modest growth but brisk poverty reduction while many countries in the world have experienced rapid growth but modest poverty reduction.
“Though Nepal has halved the poverty rate in just seven years and witnessed a significant decline in economic inequality, Nepal still remains one of the poorest and slow-growing economies in Asia with the per capita income of the country rapidly falling behind its regional peers,” the report said.
The report has highlighted Nepal’s poor policy choice resulting in the weak performance of the large agriculture sector, low public investment and capital accumulation, and low productive growth. The report also stated that Nepal’s average growth rate in the past 45 years (1970 to 2014) remained four per cent and the growth rate of per capita income was the slowest in South Asia, averaging just two per cent in the period.
The World Bank report has also mentioned that large-scale migration from the country and its inability to control it is a symptom of deep and chronic problems to the national economy.
“All these things show that Nepal could get stuck in a low-growth and high-migration equilibrium for years to come,” Damir Cosic, the senior economist of World Bank said, adding that a systematic assault is required to break vicious cycle and create balance between job creation at home and export of labour.
As per the report, Nepal’s comprehensive reforms should be started with breaking down the policy barriers to both boost investment and accelerate productivity in the country. World Bank has recommended the government to restructure its public investment programme and reduce the cost of doing business in the country to increase the pace of growth.
Similarly, the report has also suggested the government to unleash new sources of growth like attracting huge investment in the hydropower sector. However, the World Bank has also suggested the government to revitalise existing sources of growth by reforming the agriculture sector that will ultimately alleviate the country’s poverty further. The report also said that Nepal’s ability to use its human capital to productive use will ensure sustainable growth of the country.