Himalayan News Service

Kathmandu, April 10:

Human development indicators in Nepal have remained unsatisfactory in the year 2004, according to a recent survey.

Nepal ranked 140 out of 177 countries on the human development index in 2004 – lower than all other South Asian countries except one, according to the Asian Development Outlook.

With increased conflict in which the far-western and mid-western regions have fared the worst, regional disparity has been widening.

The economy has not been able to provide gainful employment to all of its rapidly growing population, though the situation has been ameliorated by the migration of labour to India, Southeast Asia and the Middle East.

It has been difficult for the government, says ADB, in the existing environment to improve efficiency in spending, more specifically in rural areas by improving utilisation of block grants to local government along with community-led development projects in the areas of health, education, and rural infrastructure.

With a view to stimulate the economy, Nepal Rastra Bank (NRB) has adopted accommodative monetary policy that has reduced the mandatory cash reserve ratio from six per cent to five per cent for fiscal year 2005, aiming to narrow the widening differential between deposit rates and lending rates.

The study says that the inflation rate is to be maintained at four per cent to facilitate the maintenance of the current parity peg with the Indian rupee.

Under the financial sector reforms , the non-performing loans (NPLs) of the two government-controlled banks being restructured under external management – Nepal Bank Ltd and Rastriya Banijya Bank – have declined from 61 per cent and 60 per cent in fiscal year 2003 to 52 per cent and 56 per cent in 2004, respectively, reports ADB.

“The efforts to improve the deteriorating financial health of these two banks has, however, substantially reduced banking services in rural areas, concentrating them in urban locations.”

The government has initiated restructuring of Agricultural Development Bank Ltd (ADB-N) to provide improved and affordable banking services in rural areas.