‘Nepal’s growth projection is likely to be revised downward’

Nepal has not been spared by the huge economic toll of the coronavirus pandemic that has upended every aspect of life in general. Against the backdrop of the deadly virus not only halting the progress but even reversing the achievements of the past years, Faris H Hadad-Zervos, the World Bank country director for Nepal, Maldives and Sri Lanka, shared with The Himalayan Times his insights on the current scenario, the challenges ahead, among other issues. Excerpts:

What is your analysis of the evolving COVID situation in Nepal? Are you satisfied with the response to the pandemic and the measures put in place to mitigate its impact?

Nepal’s health response capacity has definitely increased with the expansion of laboratory capacity for testing and allowing the private sector for diagnosis and treatment. At the same time, considering the rising number of new cases in the country and in Kathmandu valley, the existing human resources capacity seems to be under tremendous pressure.

While the government is trying its best to improve its health sector response, more needs to be done towards case investigation and contract tracing, extending testing at the community level, human response mobilisation at sub-national levels for community engagement, and protecting frontline workers and their families. Also, the public has an equal role to play by practising social distancing, wearing masks, and hand-washing, and by cooperating with the response teams for contact tracing.

As part of the economic response, the immediate relief and fiscal and monetary measures undertaken by the government are commendable. We hope that the government’s broader relief, restructuring and resilient recovery plan supported by development partners, including the World Bank, will help further mitigate the impacts of the pandemic on the country’s economy and people’s livelihoods.

During the launch of the ‘Youth Employment Transformation Initiative’ project, concerns were raised about misuse of funds for aligning it with the Prime Minister Employment Programme. Can you give any update on the project?

The implementation of the Prime Minister Employment Programme (PMEP) and the Youth Employment Transformation Initiative (YETI) project is primarily the responsibility of the local levels. Funds allocated to the local levels under the YETI project were sent to all the 753 local levels as conditional grants together with directives prior to the local level planning process. The conditional grants include financing for cash benefits for 100 days of work to 100 of the most vulnerable unemployed in each local level. The project also supports the addition of capacity in each employment service centre for which the process to hire project-financed technical assistants has started at the local levels. This additional support will help the local levels and the employment service centres to manage and monitor local level activities, its funds and ensure quality and transparent implementation. Despite the challenges, the Ministry of Labour, Employment and Social Security has also begun orientation of the local levels virtually, which will cover all the local levels in a phased manner.

As part of the response to COV- ID-19, the government has expanded the coverage of the PMEP to reach 200,000 unemployed individuals this fiscal year which include those most affected by the pandemic, such as unemployed migrants and returnees. The World Bank’s support will help ensure there is a robust monitoring information system to support planning, management, and monitoring of the activities and the finances. The system is also developed to ensure a transparent prioritisation of those registered, so that the most vulnerable unemployed get the opportunities first.

Are there any areas in which the World Bank is mulling over further support to help Nepal tackle the ongoing pandemic and the rising number of cases in the country?

Our immediate health response to the pandemic in Nepal is through a $29 million IDA credit for the Nepal COVID-19 Emergency Response and Health System Preparedness Project to strengthen national systems for public health preparedness in the country. Our ongoing portfolio is being repurposed and restructured, which will make available $310 million for COVID-19 relief and recovery efforts, while more than $100 million has been disbursed as advances from our three Programme-for-Results operations.

Our pipeline projects amounting to about $700 million planned for this fiscal year are expected to further support COV- ID-19-related priorities and the country partnership framework focus areas for Nepal.

What is the likelihood of the World Bank’s earlier growth projection for Nepal being revised down?

In our latest Nepal Development Update, we projected growth of 2.1 per cent for fiscal year 2020-21 (under the baseline scenario). This is likely to be revised downward considering the periodic and localised lockdowns in key economic areas like Kathmandu valley and the likelihood of these lockdowns, although partially relaxed, to impact the festive season. The Nepal Development Update does note the possibility of a contraction (depending on the trend in infection rates). This is included in our downside scenario, and the contraction could be as much as 2.8 per cent. Nepal’s score in the recently unveiled Human Capital Index has improved. What are the chances those gains have been wiped out due to the pandemic? How is the World Bank planning to support the government to recover the lost ground? The World Bank Group’s 2020 Human Capital Index shows that pre-pandemic, most countries were making more and better investments in healthcare and education. This includes Nepal where a child born today will be 50 per cent as productive when she grows up as she could be if she enjoyed complete education and full health. This is higher than the average for South Asia region and lower middle-income countries.

However, countries, including Nepal, now face a possibility of human capital gains being wiped out by the global pandemic. The pandemic makes clear the importance of well-designed and resourced health systems, resilient and flexible education, and social protection programmes, particularly for those close to the poverty line or without access to savings or workplace protection.

In Nepal, the World Bank is supporting the education sector to sustain education and improve learning and the health sector to strengthen health systems and security and improve the health financing landscape. We recently signed a financing agreement for an additional grant of $10.85 million to the government’s School Sector Development Programme, which will help maintain access to basic education and continued learning for children amid the pandemic. The bank is also helping strengthen government systems and expand coverage of social security allowances and civil registration to support vulnerable communities.

How has the transition in the Ministry of Finance affected development works?

From our perspective, Yubaraj Khatiwada’s time in the Ministry of Finance (MoF) saw some profound changes and deepening in an already strong relationship with the World Bank. The MoF was able to articulate, both internally and for the international community, a clear development narrative and prioritisation that allowed us to organise our support better. There were also significant fiscal and public financial management reforms during this period, which will be important for Nepal’s development and the rolling out of federalism.

This reform-minded approach in the MoF continues, as does our strong collaboration. We are in regular discussions with the secretary and joint secretary with whom we have a very productive engagement and pipeline of activities. We very much look forward to the valuable guidance and support of the Prime Minister’s Office and are particularly grateful for the continuity being provided by Khatiwada as the special economic adviser there.

A version of this article appears in e-paper on September 29, 2020, of The Himalayan Times.