Challenge of Reviving Nepal's Faltering Economy

The trade balance is heavily skewed, employment opportunities limited, and there is the ever looming threat of rising inflation. The worldwide increase in the prices of food grains and petroleum products has also hit the country very hard.

"A serious aspect is the declining of exports -- not just with India, but even with the rest of the world. Over the past few years, they have constantly been going down. Our exports are one-third of the imports. This is a very serious situation that we are facing. Another thing is inflation that is likely to cross double digits this year”, said senior economist Govinda Thapa.

Nepal is among the poorest nations in the world, with more than half of its population living below the poverty line. One of the country’s major sources of foreign exchange and employment was tourism but the long-running civil war scared away many visitors.

Struggling economy

Political instability also made it difficult to forge consensus and implement economic reforms. Even though the country is now at peace and there is a new constituent assembly, the economy is finding it hard to kick start.

"People are not getting jobs,” explained Thapa. “The private sector has been unable to expand. No new industries or businesses have been started up -- only a couple of departmental stores and some banks. The progress has been very slow so far."

The hardest-hit are the rural poor. There are several marginalized groups for whom achieving even the basic necessities for everyday life is difficult.

Barely scraping a living

Civil rights activist Basudha Gurung from the NGO Youth Acting for Change in Nepal, said that 35 of Nepal’s 75 districts are food insecure and there are problems everywhere.

“We have seen that there are so many communities, so many households, which are suffering from a lack of food. Their economic situation, resource base and competencies to get a decent livelihood are very limited,” Garung said.

Experts say it is not a question of money but of how funds are allocated. Nepal’s budget is in surplus, not least because of the huge amounts of annual foreign aid, but the government has not been distributing it evenly.

Misallocation of funds

“Developmental activities are mainly confined to Kathmandu and other cities outside Kathmandu. Rural areas have not received developmental aid for the past several years,” said Thapa.

Basudha Gurung explained that the many NGOs and foreign aid organizations based in Nepal are focusing on other issues right now.

“Because we are going through this transformation process, we have many agencies here that are working on peace-building, transformation and so on, which is good. But in that process we forget about the economic and social and cultural aspects of these vulnerable communities. Those are being somehow left behind again.”

Whether the new Maoist-led government will tackle the problems of marginalized rural communities is still a matter of speculation.