‘Lost’ GDP growth to be 1.7 per cent

Kathmandu, October 10:

A study has shown that ‘lost’ GDP growth will be about 1.7 per cent annually during the period between 2005 to 2009 if development expenditure declines at the rate of 4.2 per cent.

A latest assessment by the National Planning Commission (NPC) says the conflict has severely affected the GDP growth targets of Tenth Plan.

Nepal began implementing the Tenth Plan through Poverty Reduction Strategy Paper (PRSP) during the fiscal year 2002-03. Despite it having set a target for GDP growth at 4.3 per cent, it has not been achieved, thanks mainly to the conflict, says NPC in its report. As per the statistics of Central Bureau of Statistics (CBS), the real GDP growth currently stands at 1.9 per cent.

Dr Rudra Suwal, economist at CBS, said that the conflict has a major role in hurting GDP growth and limiting business and economic activities. Other factors for the downfall in GDP growth are attributed to policy constraints, weak implementation mechanisms and lack of investment climate, says Dr Suwal.

He called for a strong governance system to maintain sound investment climate and to ensure a fast decision making process. Our planning system seems defective as it does not have a long term vision, he thinks. If we could take a long term vision of 25 years, it will expedite development and achieve the targeted results, he said.

The NPC study shows that the government spending on development was 9.7 per cent less than the target in the first three years of the tenth plan. Despite a huge rise in revenue, it went mostly to finance the salary of government employees and the security bill.

Foreign assistance made up about 58 per cent of the total allocation for development programmes in 2004-05.

Though GDP has not contracted and the macroeconomic situation has remained stable, the GDP growth remains below average for 1990s as many grass-root development activities such as food-for work, infrastructure building programmes, community development, basic services in health, education and drinking water could not produce results as per expectations.

The NPC assessment states that rural unemployment, low wages and landlessness are the major issues facing the poor and excluded groups.These poor people lack skills needed for benefiting from opportunities available and do not have access to basic services provided by the public sector which have made their lives more miserable.