Nepal Faces Economic Woes

The New Republic is Facing Rising Inflation and High Fuel Cost

Jun 9, 2008

Nepal, one of the poorest countries in the world, is facing economic woes after years of instability. The current environment of confusion is hurting the economy.

World’s youngest republic, Nepal, is now faced with serious economic woes. After ten years of civil unrest started by the Maoists in 1996 ended in 2006, the country had hoped for a revival in both political and economic scene. Unfortunately, politicians are still bickering over the format of new government and the unstable environment is hurting the economy.

Numbers Don’t Lie

Out of Nepal’s 11.11 million labor force (2006 estimate), around 70% are employed in the agricultural sector, and rest are employed in services and industry. Unemployment is approximately 40% and the country severely lacks skilled manpower.

Agricultural sector, country’s largest employer, is largely subsistence based, with very little mechanization and use of modern farming techniques. Access to fertilizers, high quality seeds, irrigation facility is very limited. Farmers don’t get adequate training and support to safeguard from crop failure or bad harvest.

Those looking for employment outside agricultural sector are faced with a manufacturing sector that registered just 0.18 percent growth this year. The near non-existent growth is a result of limited investment in the sector over concerns over investment security and political turmoil in the country.

Squared One

Press Trust of India reported on economic data released by Nepal's Central Bureau of Statistics on June 09, 2008 ,that Nepal’s economy is on the recovery path with 5.56% growth in current fiscal year, most impressive performance in last seven years. Per capita income now stands at $470, increase of 11%.

Growth shown by the numbers becomes less obvious when the steep rise in inflation rate is considered. Nepal’s inflation rate now stands at 9%, so the gains made by 11% rise in per capita income will not make much difference in a common man’s daily life.

To add to the pain caused by high inflation rate and rising price of food, Nepalese government decided to raise the price of fuel on June 9, 2008. This after India, Nepal’s largest supplier of petroleum and natural gas, hiked fuel prices by almost 10%.

Some Bright Spots

Despite Nepal’s troubles, the country has tremendous potential to balance its check book and raise its wealth. Blessed with beautiful mountains, wildlife reserves, lakes and cultural heritage, Nepal’s tourism sector can boost its economy. The country has number of rivers suitable for hydro power generation and its proximity with Asian giants India and China could be utilized to boost trade and commerce.

Heritage Foundation has ranked Nepal’s economy as 54.7% free, the country ranks 19th among 30 Asian countries.

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