ADB projects 4.5 percent growth for Nepal

KATHMANDU, APR 12 -

The Asian Development Bank (ADB) has forecast Nepal’s economy to grow by 4.5 percent in the current fiscal year as a result of good weather conditions helping faster growth in agriculture and remittance and tourism income helping to expand the service sector. The ADB said in its Asian Development Outlook 2012 that the industrial sector would be absent as a growth driver due to lack of improvement in power supply resulting in sluggish performance.

The report released on Wednesday stated that good weather conditions gave a fillip to agriculture and the Gross Domestic Product (GDP) although its productivity has remained low. Besides these factors, the ADB said that timely completion of the peace process and drafting of the constitution would be crucial in helping to spur growth.

The ADB has predicted that inflation will remain at a moderate 8 percent due to a downturn in food inflation and mitigated global food prices. With Nepal dependent on foreign aid for three-fifths of its total capital budget, the ADB has suggested expanding the tax base and ending subsidies to state-owned enterprises. ADB Country Director Kenichi Yokoyama said that the subsidy amount could be channelised to the poor and investment in infrastructure. He particularly pointed to the government’s providing huge funds to Nepal Oil Corporation (NOC) that incurred a loss of Rs 11 billion in the last fiscal year.  “There is a need for wholesale reform in NOC with complete deregulation of oil prices and legal provisions to allow private survive providers in the market,” stated the ADB report.

The ADB has also asked the government to allow the Nepal Electricity Authority to set the power tariff itself that would induce investment and tackle its arrears.

Source: Kantipur