Nepal’s Strategies for Pro-poor Growth:Modalities and Lessons

Yuba Raj Bhusal

Member Secretary

National Planning Commission, Nepal

New Delhi

March 05, 2012

Contents1.Socio-economic Indicators

2.Status and Incidence of Poverty

3.Pro-poor Growth Strategies and Priority Areas in the TYP

4.Recent Efforts

5.Lessons Learned

1. Socio-economic Indicatorsa) Social Indicatorsi. Land area: 147,181 sq. km.

(arable land: 16.07% only).

ii. Population: 26.6 m (2011), @ 1.4%(urban 17%, rural 83%).

iii. HDI position: 142• Literacy rate: 63.7%• Net enrolment ratio (primary schools) 93.7%• Infant Mortality rate (1000): 44.54• Child mortality rate (1000): 30• Use of contraceptives 48%• Safe drinking water provided 80%• HIV infected (persons): 64,000• Life expectancy (years): 67• Provision of electricity (household) 56.1%

b) Economic Indicators

i. Occupation:

• Agriculture and allied activities 74%• Industrial 11%• Service 15%• Unemployment rate 2.1%• Labor force 18 m

(about 2 m gone for overseas employment)

ii. Contribution to GDP• Agriculture 35%• Manufacturing 13%• Service 52% • GDP per capita PPP USD 1200 • Per capita GDP USD 642• Per capita Gross National Disposable Income USD 797

iii. Economic Growth rate 3.5 (2011),

(estimated 5.1 for 2012)

iv. Inflation rate: 8.6%

v. Exchange rate: (USD1= NPRs. 80)

vi. International Trade • Imports: USD 5.26 bn• Exports: USD 901.9 m

(major exports are cotton garments, woolen carpets, oil seeds, pulses/lintel, hides/skin, niger seeds, jute/jute products, handicrafts, leather goods, tea, paper/paper products, silverware, jewellery, tooth paste, polyester yarn, toilet soap, pashmina, herbs, vegetable ghee)

• Current account balance: USD -449 m

2. Status and Incidence of Poverty

a) People living below poverty line 25.16% (2011) (42% in 1996, 31% in 2003, Consumption based Gini-coefficient declined to 0.33 from 0.41).

b) Incidence of Poverty:

• Rural Areas: 27.43%; Urban Areas: 15.46%;

• Ecological Zones: Mountains (42.27%) & Hills (24.32%);

• Development Regions: Far- west (45.61%) & Mid –west (31.68%);

• Caste/Ethnicity: Severe in Dalits & hill Ethnic Minorities;

• Family: Large sized families and Women headed households;

• Occupation: small holders (Agriculture) and informal sector workers.

c) Incidence of Poverty further aggravated by:

• Climate change impacts• Accelerated deforestation• Use of agricultural land for settlements• Natural disasters (earthquake, fire, floods, lightening, landslides,

torrential rainfall, high winds, hailstorms, cold wave, epidemics) also

impose severe consequences.• The consequences of earthquake of Sept 2011 and

other disaster within the last10 months:

440 persons died, 470 injured, 118 missing; 30,000 buildings, houses and cowsheds damaged; many cattle died; almost 33 districts were affected.

• Trafficking in human being (India, gulf countries) a serious threat to human right.

3. Pro-poor Growth Strategies and Priority Areas in the Three Year Plan, TYP (2010-13)

a). From 1956 to date

Nepal embarked on Planned Development since 1956. Up to now 11 plans already implemented and the 12th Plan (TYP) is in progress in line with MDGs (The Tenth Plan was itself a PRSP).

The Thirteenth Plan to be prepared within a year.

b). Socio-economic indicators show encouraging results though need to rectify some ignored areas of concern.

c). The Three Year Plan (2010-13) is in progress.

i. In order to achieve MDGs/ targets by 2015 and LDC commitments, the TYP focuses on:

• generating dignified and gainful employment opportunities,

• reducing economic inequalities, • securing regional balances, • eliminating social deprivations,• improving the living standards of the people, • achieving sustainable economic growth, and thus • reducing absolute poverty from 25.16% to 21%.

ii. Objective and Strategies

• Objective

Enable people to feel change in their livelihood and improve the quality of life by supporting poverty alleviation and establishment of sustainable peace through employment centric, inclusive and equitable economic growth.

• Strategies

The six strategies to achieve pro-poor growth are as follows:

Six Strategies

Priority Areas

Priority Areas (contd…)

iii. Economic Growth and Poverty Target

• Achieve 5.5% annual average economic growth rate (agriculture to grow by 3.9% and non-agriculture sector by 6.4% so as to achieve growth rate of per capita income by 3.5% and employment to increase by 3.6%).

• Inflation rate to limit at 7.0 percent per annum, • The population living below absolute the poverty line is targeted to

be reduced from 25.2% to 21%. • Net enrolment ratio (primary schools) 98%• Infant Mortality rate (1000): 38• Child mortality rate (1000): 23• Use of contraceptives 57%• Safe drinking water provided 85%• HIV infected (persons): 64,000• Life expectancy (years): 67 • Provision of electricity (household) 65%

Budgetary Constraints (2011-12): Deficit and Source of Financing (Rs. billion)

Total Deficit 137.19a. Foreign Grant 70.13b. Foreign Loan 29.65c. Domestic Borrowing 37.41

Total Budget Rs. 384.9 a. Revenue 241.77 Tax 209.2 Non-tax 32.57b. Principal Refund 5.93

iv. Operational Modalities

Two pronged strategy has been adopted for the pro-poor growth: One focusing on mega projects and second on community based small projects and targeted programmes (top-down and bottom up processes).

Some of the major programs and emphasis are as follows:• Emphasis on agriculture sector• Generate employment opportunities• Promote self-employment• Targeted programs for poor people• Establishment of Poverty Alleviation Fund; • Micro enterprise promotion and development• Provisions of micro finance,

Operational Modalities (contd…)• Community forestry programs• Emphasis on the use of labour intensive technology in

small infrastructure development• Women development programs• Tourism development• Social Inclusion as national agenda• Social protection programs (3% of total budget): (pension

scheme for elderly, single women, disabled persons, and endangered races like raute people, reduced age-bar for pension to Dalits/Karnali’s persons)

• Affirmative actions• Promote employment-centric investment

4. Recent Efforts:As per the right-based approach envisaged in the Interim Constitution 2007, Paris Principles, AAA, Busan commitments on aid effectiveness the GoN has been recently undertaking some assertive policies and programs.

• Social Inclusion a national agenda and the Bill,• Gender Responsive Budgeting (19 +46%=65),• Climate change and environment focused

budgeting (NAPA, LAPA also prepared),• Karnali Employment Program,• Employment Guarantee Bill (100 days

employment or 50%allowance),

• PAF as oversight agency for all poverty related programs,

• Immediate Action Plan for Economic Development 2012 focusing on national pride projects and other priority projects such as East-West/ North-South Highways, Fast-track, Electric railways, airports, mega irrigation and hydro projects etc. with timeline, benchmarks and well-defined responsibilities,

• Immediate Relief Program 2011,• Action Plan of Good Governance 2012,• Strong CIAA Act, Money Laundering Bill, Judicial uphold

to zero tolerance to corruption,• Media & civil society activation,

• Public auditing of publicly funded programs• Periodic progress review attended by the PM,• National Development Volunteer Services to

bridge human resource gap in the rural and remote regions,

• Internet service in all the Villages,• Gender Responsive, pro-poor budgeting,• Global and Regional level push: Nepal as the Chair

of LDCs, BIMSTEC/ SAARC Ministerial level Meetings on Poverty Alleviation in Kathmandu, Global Mountain Alliance meeting in Kathmandu,

• Road networks across the country.

Gender Responsive & Pro-Poor Budget (2011-12)

Budget Amount Percent

Directly Gender Responsive 73.33 19.05Indirectly Gender Responsive 176.22 45.78Gender Neutral 135.35 35.17

Total 384.90 100.00

Rs Billion

Budget Amount PercentPro-Poor budget 186.63 48.49

Neutral 198.27 51.51

Total 384.90 100

5. Lessons Learned1. Identification of the poor living below the poverty line/poorest

of the poor households be made so as to channelize poverty-focused programs;

2. Additional attention needed for disaster related programs. GoN needs earmark some percent of the annual budget while formulating periodic/annual plans, yet no contingency plans to address DRR;

3. Rural/remote areas expect more attention of the government and development partners to bring sensible programs to them;

4. Palatable population control measures to be applied;

5. Gender equality to be further accelerated in rural/ remote regions particularly in the far west;

6. Targeted programs also need third party independent evaluation.

7. Need to focus on domestic employment generation through creating investment friendly climate.

THANK YOU !