03/25/2015, 00.00
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Political uncertainty hampers Nepal’s economic growth

by Christopher Sharma
In its 2015 report, the Asian Development Bank ranks Nepal 132nd out of 147 countries in terms of competitiveness. Capital investments are limited and the government does not invest in growth. Political interference and frequent staff turnover are blamed.

Kathmandu (AsiaNews) – In 2014, Nepal had a 5.2 per cent growth rate, which the government expects to rise to 5.5 per cent this year. However, in its latest report, the Asian Development Bank (ADB) said growth for 2015 should not exceed 4.6 per cent, with climate change and political uncertainty among the main causal factors.

The report, titled ‘Asian Development Outlook 2015’, was released yesterday. In it, ADB stressed the need for infrastructure development, noting that lower capital expenditures will worsen the economic situation.

“Nepal’s capital expenditure is much lower than what is required to close the infrastructure deficit,” the report stated.

Chandan Sapkota, an ADB economics officer, agrees. “The economic growth rate is worsening. If the country fails to take the necessary measures, Nepal’s economic future is uncertain,” he said.

The country requires capital spending to reach 8.2-11.8 per cent of GDP, but in the last four years, this has been just 3.3 percent, the ADB said.

Low capital investment had a severe impact on energy, transport, water supply and sanitation, irrigation and telecommunications.

Despite the government’s commitment to public-private partnerships to meet infrastructure needs, project spending averaged only 71 percent of the budgeted allocation in the past decade. What is more, the government has failed to allocate funds on time.

ADB blamed political interference and frequent staff turnover for weak project planning, resulting in a funding gap of US$ 13-18 billion in infrastructure between 2011 and 2020, this according to a World Bank report.

Overall, the Asian Development Outlook 2015 rated Nepal as one of the least competitive countries in the world, ranking it 132nd out of 147.

 “These dismal figures indicate that Nepal needs more and better investment to foster innovation, make the economy competitive and enhance the efficiency of markets for goods, labour and finance,” the ADB report said.

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