Kathmandu, October 27:

Dismal economic indicators in Nepal threaten to affect further economic progress of the country and hamper the possibility of meeting development goals.

Nepal’s GDP growth has been the lowest in the South Asian region, thanks to its weak institutional mechanism, conflict and deteriorating revenue performance.

Economists have warned that if the existing dismal economic performance continues even after the post-conflict period, Nepal would certainly fail to meet the deadline for development targets as set under Millennium Development Goals (MDGs) by 2015.

As per the Asian Development Outlook (ADO) 2006, Nepal’s GDP growth stood at only 2.3 per cent in 2005 and its estimated GDP growth is going to be only two per cent.

In countries like Bangladesh and Bhutan, the GDP growth for 2005 stands at 5.6 per cent and 8.8 per cent, respectively.

As per the indicators, Nepal’s macro-economic stability does not seem to be moving on the right track.

India’s GDP growth stood at 8.1 per cent in 2005 whereas Pakistan’s GDP growth in the same year stood at 8.4 per cent.

Given such a bad economic scenario, Nepal’s economic future may get stuck in limbo, commented Prof Bishwambher Pyakuryal, president of Nepal Economic Association (NEA) while talking to The Himalayan Times.

The government’s expenditure in fiscal 2004-05 increased by 14.5 per cent which is more than double compared to 2003-04. In 2003-04, the government expenditure growth stood only at 6.5 per cent, Prof Pyakuryal noted.

Revenue performance is weak and has not been diversified. Pyakuryal stressed on the need for special efforts to strengthen institutional mechanisms.

Even the consumer price index has reached eight per cent in 2004-05 due to hike in prices of goods and beverages that alone occupies 53.2 per cent of the total price index, said Pyakuryal.

Dr Rudra Suwal, economist at Central Bureau of Statistics (CBS), also hinted that Nepal’s economic future hangs in balance, as indicators are not encouraging.

GDP growth is not encouraging while the trade sector (mainly merchandise exports) stands only at 10.3 per cent in 2005 compared to more than 15 per cent in India, Bangladesh and Bhutan as per Asian Development Outlook 2006.

Trade needs to be balanced to for sustainable development as envisaged by MDGs. Trade and investment, which are termed as an engines of economic advancement and for sustained development, have to be expedited through investment by private sector, Suwal said.

He was of the view that Nepal should start working on boosting service sector in the days to come which will have backward and forward linkages and help in achieving overall development targets, as other countries have already identified their sector. Prof Pyakuryal stressed that political and economic restructuring must be taken as national priorities to ensure sustainable peace.

Nepal’s debt servicing is 40 per cent of the total GDP which stands at Rs 539 billion. In addition, Nepal’s foreign loan in total aid regime is going up that also pushes the debt servicing liability up, Pyakuryal pointed out. He commented that during the post-conflict environment, economic transaction cost comes to be three times higher than normal times.