WB projects 4.5pc growth

KATHMANDU, APR 10 -

The World Bank (WB) on Wednesday projected Nepal’s economic growth at 4.5 percent for this fiscal year—one percentage point lower than the government’s projection of 5.5 percent.

Recently, Asian Development Bank (ADB) had also projected Nepal’s growth at 4.5 percent for the year.

The WB said in its report titled “South Asia Economic Focus” that Nepal could, however, achieve the 4.5 percent growth only if capital spending picks up in the second half.

As of April 2, only 28 percent of the capital budget (Rs 24.11 billion) has been spent, according to the Financial Comptroller General Office, an agency that keeps income and expenditure record of the government.

The WB report says Nepal is the only country in South Asia to have budget surplus, particularly due to the government’s failure to spend.

Besides increased agriculture output, better performance of the services sector as result of increased remittance inflow could help spur growth this year, according to the WB.

The WB has stressed on the need for introducing structural reforms for sustainable higher rate of economic growth.

For the purpose, it has suggested the government’s role in boosting the private sector confidence. “Nepal’s new government will need to define the clear priorities and selectively invest its energy in catalytic interventions,” states the WB report.

The global lender said despite having buoyant revenue growth, modest indebtedness and high liquidity as a result of large remittance inflows, the country is struggling to attract investment. “Investment growth is really the only means by which it can substantially and durably accelerate the pace of economic activity,” it said. At a time when the country is facing critical infrastructure investment gaps, the WB stressed for an effective public policy to unlock public investment, and initiatives to implement projects related to energy and transport sectors. A recent WB report titled “Reducing Poverty by Closing South Asia’s Infrastructure Gap” showed Nepal needs $13-18 billion from 2011-2020 to bridge investment gap in infrastructure.

The WB has also sought clear policy goals and priorities to attain the objective of graduating Nepal to a developing country by 2022.

Nepali authorities have not articulated the vision for development that would underpin that achievement, nor has identified the policies and reforms that are the most important and urgent, states the report.

The report has highlighted the financial sector’s health as the single most important macroeconomic risk of the country. Despite having adequate liquidity, the sector has not been able to boost investment.

The multilateral lender said the ability of the financial sector to provide adequate credit to deserving borrowers is hampered by numerous

factors such as the lack of proper policies, low levels of effective access to finance, poor risk management practices by monetary authorities, inadequate information to banks and limited alternatives for banks to find protection from offending borrowers.

Aurelien Kruse, senior country economist for Nepal at the WB, said the monetary policy issued by the Nepal Rastra Bank should play a crucial role in safeguarding investment of mainly those banks that are not performing well.

“The banks should also have to identify areas that pose long-term risks for their investment. They have to make small and medium enterprises realize the risk bearing sectors while providing credit to them,” he said.

Source: The Kathmandu Post