Nepal - Financial stability with economic growth

Report No. 6653-NEP Nepal Financial Stability with Economic Growth March 12,1987 South Asia Programs Department FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS a/ (Annual Averages) NRs per US$1.00 US$ per NRs 1.00 1980/81 12.000 0.0833 1981/82 12.936 0.0773 1982/83 13.796 0.0725 1983/84 15.260 0.0655 1984/85 17.800 0.0560 1985/86 19.80C 0.0505 PRINCIPAL ABBREVIATIONS AND ACRONYMS AIC - Agricultural Inputs Corporation GDP - Gross Domestic Product IMF - International Monetary Fund NARCC - National Agricultural Research Coordination Committee NARSC - National Agricultural Research Services Center NFC - Nepal Food Corporation MPC - National Planning Commission PEs - Public Enterprises SAF - Structural Adjustment Facility SAL - Structural Adjustment Credit UNDP - United Nations Development Program FISCAL YEAR July 16 - July 15 a/ Until the end ot May 1983, the Nepalese Rupee was pegged simultaneously to the US Dollar and the Indian Rupee at fixed exchange rates. On June 1, 1983, NepaL introduced a trade-weighted basket peg arrangement with the US Dollar as the intervention currency. On May 20, 1986, the Indian Rupee was added to the basket.  FOR OFFICIAL USE ONLY TITLE : NEPAL: FINANCIAL 3ITABILITY WITH ECONOMIC GROWTH COUNTRY : NEPAL REGION : SOUTH ASIA SECTOR : COUNTRY ECONOMIC REPORT TYPE CLASSIF MM/YY LANGUAGES 6653-NEP CEM Restricted 03 87 English PUBDATE : 8703 ABSTRACT : In the three years commencing 1982/83, pronounced year-to-year swings in economic performance - mainly attributable to the monsoon - combined with heavy budgetary reliance on domestic bank financing, led to a serious drain on Nepal's foreign exchange reserves. As the financial situation worsened, the authorities introduced a program of financial stabilization followed by one of economic structural adjustment. Part I of the report presents the historical context for these developments; Part II discusses the financial stabilization program; Part III, the structural adjustment program; and Part IV, the associated foreign assistance requirements and implications for future actions. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Page I of 2 COUNTRY DATA - NEPAl. AREA POPULATION OSITY 147.181 sq. km. 17.2 million (mid-1986) 117 per sq. km. Rate of Growth: 2.72 (from 1971 to 1984) 394 per sq. km agricultural land POPUI ATION CIDACTBRISTICS 1979L 1980 Ctude Birtb Rate lper '000 43.6 Popula.ion per Physician 2 30.060 Crude Birth Rate (per '000): 19.8 Population per Hospital Bed: 6.390 Infant Mortality (per 1000 live births): 147.7 INCOME DISTRIBUTION DISMRIBUTIONs OF LAND (MNUDSIP 2 of National Incose, highest quintile: 59.2 S Owned by Top 102 )f Ovners lowest quintile: 4.6 2 Owned by Smallest 102 of Olwnes ACCESS TO PIPED WATER (1976) ACCESS TO BLECTRICITT (1987) 2 of Population - urban t 812 2 of Population 6.0 rural t 52 NUTRITION (190)Q EDUC4TION (1980) Calorie Intake as 2 of Requirements 86 Adult Literacy Rate : 19 Per Capita Protein Intake (grams Prieary School Enrollment : 91 per day) 45 GNP PER CAPITA IN 1984: US$160 GROSS DOMESTIC PRODUCT IN 1984/85 ANNUAL RATE OP GR08T.H 1974/75-1984/85 (S, consatnt pricesa USS Mln. S GDP at Market Prices 2.350 100.0 3.0 Gross Domestic lnvestment 486 20.6 Gross Domestic Saving 264 11.2 Current Account Balance (exc. official grants) -222 -9.4 Ezports of Cocda. NFS 302 12.8 Imports of Goods. MYS 509 21.6 OUTPUT. LABOR FORCE AND PRODUCTIVITY IN 1982/83 Value Adade Value Added Labor Force a/ Per Worker US$ Mltn. Mln. 2 US$ Agriculture 1.286 56 6.3 91.0 204 Industry 277 12 0.2 3.0 1.385 Services 725 32 0.4 6.0 t,813 Total/Average 2.282 100 6.9 100 331 GOVERNMD4T FINANCE CE1TRAL GOVERNMS _NRse. __l_. 2 of GDP 1981/82 1982/83 1983/84 1984/85 1985/86 1985/86 Current Receipts 2.668 2.805 3.346 3.850 4.481 9.0 Regular Expenditures 1.627 1.900 2.107 2.720 3.281 6.6 Current Surplus 1.041 905 1.239 1.130 1.200 2.4 Development Expenditure 3.727 4.982 5.164 5,489 5.993 12.1 External Assistance (Net) 1.723 2.028 2.492 2.609 3.446 6.9 MONEY, CREDIT AND PRICES 1981 1982 1983 1984 1985 1986 (Million NRs. outstanding mid-July) Money and Quasi Money 6.308 7.459 9.222 10.456 12,297 15.120 Bank Credit to Government 1.263 2.062 4,090 5.029 6.470 7.420 Bank Credit to Public Enterprises 946 840 1,137 953 1.163 1.600 Bank Credit to Private Sector 2.952 3.142 3.264 3,842 4.848 6.343 Money and Quasi Money as 2 of GDP 21.7 22.9 27.4 27.4 29.3 30.4 General Price Index (1974/75 = 100) 145.9 161.2 184.1 195.6 198.6 230.3 Annual Percentage Changes in: General Price Index 13.4 10.4 14.2 6.2 1.5 16.1 Bank Credit to Government -0.4 57.1 93.8 24.2 27.9 14.7 Bank Credit to Public Enterprises 33.3 1.0 44.0 -10.9 20.8 37.6 Bank Credit to Private Sector 26.9 2.4 3.7 16.9 22.1 30.1 Note: All conversions to US dollars in this table are at the average exchange rate prevailing during the period covered. Fiscal year data are for Nepalese fiscal year, July 16 - July 15. e/ Total labor forces unemployed sr. allocated to sector of their normal occupation. _/ Includes mining. manufacturing. construction and utilities.  Page 2 of 2 1982/83 1983/84 1984/85 1985/86 MERCHANDISE EXPORTS 1984/85 (USS Million) USs MIn. Z BALANCE OF PAYMENTS Agricultural products 91.7 59 Eports 250.4 275.0 302.1 328.2 Manufactures 62.8 41 Merebandise f.o.b 82.3 112.1 154.5 160.2 Non-factor Services 168.1 162.9 147.6 168.0 Total 154.5 100 Imports 521.6 505.1 524.1 590.6 Merchandise c.i.f 459.0 428.2 437.0 501.6 EXIERNAt DEBT, DECEMBER 31, 1985 Non-factor Services 62.6 75.9 87.1 89.0 US$ MDn. Resource Gap 271.2 227.1 222.0 262.5 Public Debt. inc. guaranteed 527.3 Net factor Income 13.0 3.2 0.2 -0.5 Non-Guaranteed Private Debt Net Current Transfers 41.7 45.3 42.8 51.2 Total Outstanding & Disbursed 527.3 Current Account Deficit 216.5 178.6 179.0 211.8 Official Grant Aid 79.0 57.4 51.9 71.4 DEBT SERVICE RATIO for 1984/85 1 Net MLT Loans 68.0 105.9 94.8 106.8 Public Debt. inc. guaranteed 5.0 Disbursements 71.5 109.5 98.7 115.1 Repayments 3.5 3.6 t.9 8.3 Capital Flows N.E.I. 16.4 0.6 -20.7 48.6 IBRD/IDA LENDING, September 30, 1986 Overall Balance -53.1 -14.7 -53.0 15.1 US$ Mln. Change in Net Reserves 53.1 14.7 53.0 -15.1 IDA (-increase) Outstanding & Disbirsed 241.9 Undisbursed 396.0 Outstanding, incl. undisbursed 637.9 RATE OF EXCHANGE From March 20. 1978 From September 19, 1981 From December 17, 1982 to September 18, 1981 to December 16, 1982 to May 31, 1983 June 30, 1984 a/ December 31, 1984 US$1.00 = NRa 12.00 US$1.00 : NRs 13.2 US$1.00 = NRs 14.3 US$1.00 = NRs 16.4 US$1.00 = NRs 18.0 NRs 1.00 = USS 0.083 NRs 1.00 = Us$ 0.076 NRs 1.00 = US$ 0.070 NRs 1.00 = US$ 0.061 NRs 1.00 US$ 0.056 March 31, 1985 June 30. 1985 September 30, 1985 December 31, 1985 June 15, 1986 US$1.00 = NRs 18.1 US$1.00 = NRa 18.1 US$1.00 = NRs 17.3 US$1.00 = NRs 20.9 US$1.00 = NRs 21.2 NRs 1.00 = US$ 0.055 NRs 1.00 = USS 0.055 NRs 1.00= US$0.058 NRs 1.00= US$ 0.048 NRs 1.00 = US$ 0.047 a/ Since June 1. 1983, the Nepal Rastra Bank announces the exchange rate daily. based on a trade-.eighted basket, with the US dollar as the intervention currency. The rate shown here is the mid-rate on the date indicated. South Asia Programs Department February 20, 1987  NEPAL FINANCIAL STABILITY WITH ECONOMIC GROWTH Table of Contents Page No. List of Annex Tables Preface I: OVERIEW ....................a..e o II: FINANCIAL STABILIZATION . . . . . . . . . . o. . . . 2 III: THE STRUCTURAL ADJUSTMET PROGRPI . . . . . . ... . 4 Kacroeconom ic Policy ................ e * * 5 Agricultural Policy . . . * .e . . . .0 . . . . a . 7 Industrial and Trade Policy . . . . . *. . ... . 8 Public Enterprise Policy. . .. . . . . . . . . . . 10 Project Implementation . . . . . . . . . . . . . . . 10 IV: FOREIGN ASSISTANCE REQUIREMENTS . . . . . . . . . . . . 13 Annex Map This report was prepared by Eric Cruikshank.  LIST OF ANNEX TABLES Page No. Table A1: NATIONAL ACCOUNTS SUMMARY (Historical) . . . . . . . 20 Table A2: GOVERNMENT BUDGET (Historical) . . . o * . a a . 0 0 21 Table A3s BALANCE OF PAYMENTS (Historical) . . . . . . . . . . 22 Table A4: NATIONAL ACCOUNTS (Projected) . . . . . . . . . . . 23 Table A5s: NATIONAL ACCOUNTS (Projected as I of GDP). . . . . . 24 Table A6s GOVERNMNT BUDGET (Projected) . . . . .... .. 25 Table A7: GOVERNMENT BUDGET (Projected as Z of GDP) . . . . . 26 Table A8: BALANCE OF PAYMENTS (Projected) . . . . . . . . . . 27 Table A9: BALANCE OF PAYMENTS (Projected as X of GDP) . . . . 28 Table AlO: FOREIGN AID COMMITMENTS (Historical) . . . . . . . . 29 Table All: FOREIGN AID DISBURSEMENTS (Historical) . . . . . . . 30 Table A12: EXTERNAL PUBLIC DEBT by Type of Creditor . . . . . . 31 Table A13: EXTERNAL PUBLIC DEBT - Iransactions . . . . . . . 33 Table A14: SOCIAL INDICATORS . . ..... ....e 34  PREFACE This special economic report was prepared as background documenta- tion for the 1987 Nepal Aid Group meeting to report on the Government's progress in undertaking a program of structural adjustment as well as the associated external financing requirements for the next five years. Because of its specific focus, this report has been prepared with only selective treatment of topics directly relevant to its central theme. More comprehensive treatment of various development issues confronting Nepal can be found in Country Economic Memoranda prepared by the Bank on public administration (1981), trade (1983), and options for accelerating growth (1985). A Sector Report on Issues and Options in the Energy Sector prepared jointly with the UNDP was circulated to the Government and aid donors in 1983 and a report on project implementation and monitoring was prepared for discussion with the Government in 1984. It is envisaged that in the course of supporting the Government's structural adjustment efforts, the Bank will undertake in-depth analyses of key macroeconomic and sectoral issues crucial to this effort and will make its findings available to the Government and the aid donors on a timely basis.  NEPAL: FINANCIAL STABILITY WITH ECONOMIC GROWTH I. OVERVIEW 1. Difficult economic conditions continue to test the resiliency of the Nepalese people. Over the years, disease and malnutrition combined with an annual population growth rate of over two and a half percent, arduous terrain, physical isolation and a scant and fragile natural resource base have made the task of improving living standards an especially onerous one. Moreover, economic management has been wanting. Historically, the Government not only lacked the administrative capacity to manage the economy and the country's development program effectively, it also intervened in the economy in ways not conducive to growth. The confluence of these factors resulted in long-term economic growth barely keeping pace with that of population. And todays the country's social indicators such as those for life expectancy, infant mortality and adult literacy, remain well below the South Asian norm. 2. Although real economic growth accelerated in the first half of the 1980s (averaging between 3 and 4 percent per annum), it was accompanied by a pronounced deterioration in the country's budgetary and external finances, mainly attributable to the cumulative effect of years of weak economic management. 3. For a number of years, the Government ran large budget deficits and export surpluses dwindled as average yields on both existing and newly- cultivated marginal lands declined, while conditions of monetary and fiscal ease increased the demand for imports. Up until 1982/83, the authorities did not feel an acute need to correct these imbalances since concessional aid covered the budget deficits as well as a significant portion of the steadily widening trade gap. What concessional aid flows did not cover, service receipts and transfers were able to offset. In the three years commencing 1982/83, however, pronounced year-to-year swings in economic performance - mainly attributable to the monsoon - combined with heavy budgetary reliance on domestic bank financing, led to a serious drain on the country's foreign exchange reserves. The long open border with India, in combination with the free convertibility maintained between the Nepalese and Indian currencies meant that any expansion of domestic monetary demand easily spilled over into the country's balance of payments with India. 4. As the financial situation worsened, the authorities recognized the need for prompt action - both to stabilize the country's finances in the short term and to adjust the structure of the economy over the medium term - so that the growth required to maintain and improve living standards would be possible. They knew that with Nepal's severely limited capacity to incur external debt, they would not be able to solve the problem by borrowing commercially. Thus, they first introduced a program of financial stabi- lization followed by one of economic structural adjustment. A principal theme in these programs is to change the role of the Government in relation to the economy - strengthening macroeconomic and sectoral development policies and i.'proving the efficiency of public sector expenditures, while at  -2- the same time reducing detailed interventions and regulations that have been ineffective and sometimes counterproductive. Decentralized decision making will be promoted by fostering clearer market signals and the public sector will focus on those areas in which it is required to provide either essen- tially "public" goods or an orderly economic environment. 5. The authorities have demonstrated a strong commitment to making the necessary financial and economic reforms by already introducing a significant number of measures. This augurs well for the country's economic prospects, provided that their program can be maintained and the aid donors are willing to support this effort. II. FINANCIAL STABILIZATION 6. In late 1985, the Government introduced several policy measures designed to stabilize the economy. Effective November 30, 1985, the Nepalese Rupee was devalued by close to 15 percent and subsequently has depreciated slightly in nominal trade-weighted terms. Concurrently, the Government announced its intention to introduce a financial stabilization program and entered into a standby arrangement with the International Monetary Fund on December 23, 1985. The main features of the program have been: (a) a flexible exchange rate policy; (b) restraint on public expenditures; (c) strengthened tax administration; (d) restraint on the expansion of domes- tic credit; (e) maintenance of bank interest rates at positive real levels through more flexible interest rate policy; (f) increases in the prices charged by public enterprises and a significant reduction in their subsidies; (g) restraint on commercial external borrowing; and (h) several procedural and institutional reforms - including more import licences - to liberalize and rationalize the trade and exchange system. 7. With the financial stabilization program in place and with favorable external conditions, economic and financial performance improved in 1985/86. As a result of good weather, agriculture rebounded. Liberalized industrial licensing, combined with improved supplies of electricity, contributed to industrial erpansion. Tourism receipts also rose rapidly. Real economic growth for the year was 4.2 percent. 8. As anticipated, the impact of the devaluation was immediate and strong. Inflation accelerated from 18 percent in ?ovember 1985 - on the basis of annualized seasonally-adjusted data - to 38 percent in February 1986, but it decelerated to about 10 percent during July-October 1986. Domestic inflation, however, continues to be an area of concern. The overall budget deficit was reduced and the share of domestic bank financing of the deficit was halved to about 2 percent of GDP. Additionally, the overall balance of payments showed dramatic improvement, recording a surplus of about US$15 million in the fiscal year ending in July 1986 compared to the deficit of approximately US$53 million of the previous year. Gross international  -3- reserves also increased from just over 3 months' imports of goods and serv- ices at the end of 1984/85 to about three and a half months' coverage by the end of 1985/86. 9. Unfortunately, despite the authorities' strong efforts to improve economic management, performance in 1986/87 is unlikely to be as favorable because of prolonged drought in the terai followed by flooding which damaged major irrigation facilities. The resulting shortfall in food production is expected to hold real GDP growth to less than 2 percent for the year. Table 1: SELECTED ECONOMIC INDICATORS 1982/83-1985/86 1982/83 1983/84 1984/85 1985/86 Real GDP Growth Rate (Z) -2.0 7.8 3.0 4.2 Agriculture -1.1 9.5 2.4 4.7 Non-agriculture -5.8 4.9 4.0 3.4 Balance of Payments Current Account Balance (Z of GDP) -8.8 -7.1 -7.6 -8.2 Average Exchange Rate: NRs per US$ 13.8 15.3 17.8 19.8 Consumer Price Index (Annual % Change) 14.2 6.2 4.1 15.8 Gross Investment (Z of GDP) 20.1 19.4 20.7 19.0 Private 12.1 12.1 13.7 13.1 Public 8.0 7.3 7.0 5.9 Gross National Savings (Z of GDP) 11.3 12.3 13.1 10.8 Private 11.5 11.3 13.5 11.5 Public -0.2 1.0 -0.4 -0.7 Memorandum Item: GDP at market prices (NRs Million) 33,761 38,184 41,738 49,710 Source: Nepal Rastra Bank.  -4- III. THE STRUCTURAL ADJUSTMENT PROGRAM 10. Many difficult development problems challenge the country, including geographical disadvantages, a limited natural resource endowment, extremely low use of commercial energy sources, low levels of human resource develop- ment and the rapidly declining economic and ecological viability of those parts of the country under intense population pressure. Overcoming most of these will require a very long-term effort. At the same time the authorities recognized that a short term financial stabilization program would need to be complemented over the medium term by a policy package, encompassing a broad range of macroeconomic and sectoral measures, to stimulate output in order to avert a serious decline in Nepal's living standards. They set targets of achieving real per capita GDP growth of close to 2 percent per annum and of raising real per capita consumption growth from its average of 0.7 percent per annum over the last five years to almost one and a half percent by 1990191. 11. To begin, the authorities designed a program to address five impor- tant areas of structural weakness in the economy, selected because the type of action to be taken is now clear and has the political support to make it effective. First, macroeconomic management, significantly improved with the introduction of the stabilization program, is to be strengthened further. In particular, domestic resource mobilization is to be increased and recurrent expenditures and domestic borrowing controlled. Second, structural weaknes- ses in the agricultural sector are to be addressed and public-sector inter- ventions better directed. Changes in the regulation of forest activities are to encourage individuals and communities to assume greater responsibility for protecting the nation's endangered forests. Third, past industrial and trade policies have not only been ineffective in controlling trade deflection to India, but have also constrained industrial development. A new industrial and trade policy is aimed at mitigating these problems. Fourth, the poor output performance, financial weakness and heavy indebtedness of many of the public enterprises (PEs) have placed a sizable drain on the budget and the domestic banking system. Actions to strengthen this sector are being introduced. And fifth, weaknesses in the Government's financial control functions and implementation of the development program have, in many cases, been responsible for very slow disbursement of foreign aid and project completion. Additionally, the composition of the development program has been a problem. Not only has the Government tended to take on more projects than it can manage effectively, it has continued to seriously underfund essential operations and maintenance activities. Management processes are being introduced and specific measures taken to improve both the quality as well as the rate of implementation of the development program. To achieve its medium-term growth objectives, the Government will have to address these five areas with an effectiveness not previously achieved in Nepal. Success over the longer-term, furthermore, will require both reinforcing achievements in all of these areas as well as extending the focus of structural adjustment to others with the continued application of sound policies and much improved development administration being essential.  12. Macroeconomic policy. The principal focus of macroeconomic policy, reflected in the objectives of the stabilizaticn program, is improving budgetary policy, carefully controlling net cradit expansion and non- concessional external borrowing and maintaining a realistic exchange rate. A main objective of budgetary policy is to increase the public sector surplus available to help finance development expenditures. In 1984/85, the surplus was less than 3 percent of GDP while net foreign assistance inflows were slightly over 6 and net domestic borrowing over 4 percent of GDP. Table 2: SUMMARY OF DEVELOPMENT EXPENDITURE FINANCING 1984/85, 1985/86 and 1990/91 (% of GDP) 1984/85 1985/86 1990/91 Development Expenditure 13.2 12.1 16.0 Financing 13.2 12.1 16.0 Budgetary Surplus 2.7 2.4 4.7 (Government Revenues) (9.2) (9.0) (12.0) (Regular Expenditures) a/ (6.5) (6.6) ( 7.3) Foreign Assistance 6.3 6.9 9.6 Net Domestic Borrowing 4.1 2.5 1.3 Net Lending (repayments) 0.1 0.3 0.4 a/ Public expenditures in Nepal are reported in terms of the regular budget (internally-financed) and the development budget (external aid-assisted). While most recurrent outlays are in the regular budget, some operations and maintenance expenditures are included in the development budget. Source: Ministry of Finance. 13. In 1985/86, regular expenditures increased slightly as a percent of GDP, while revenues and the surplus available for financing development expenditures both declined. Restraints on development expenditures and an increased use of foreign assistance, however, allowed net domestic borrowing to be reduced. 14. Over the next five years, the authorities are undertaking to hold the overall government deficit at about 11 percent of GDP. Although this would be no lower than the average during the first part of the 1980s, it would represent a healthier budgetary picture than previously for three reasons. First, the growth of regular expenditures would be kept from significanvly  -6- exceeding that of the economy primarily by controlling the government wage bill. 1/ Second, development expend4tures, targeted to rise significantly, is to be oriented toward completing high-priority projects that will generate faster growth in the short-to-medium term. And third, the financing of development expenditures is to improve through the generation of larger budgetary surpluses, improved aid absorption and less use of domestic credit. To this end, the authorities have identified additional revenue measures - including a broadening of sales taxes, a reduction in personal income tax deductions, the introduction of a flat corporate tax rate, higher import duties on petroleum products and, most recently, increases in airline landing fees and the price of gasoline - which together with improvements in tax administration will generate some 0.7 percent of GDP in 1986/87. It will be essential to the success of the structural adjustment program for the authorities to identify more measures to generate similar increments in revenues each year thereafter until 1990/91. If external assistance flows rise to almost a tenth of GDP, this would allow domestic financing of the budget deficit to drop to less than one and a half percent of GDP by the end of the period. 15. Since the inception of the stabilization program, the Government has had some difficulties in limiting the expansion of net domestic credit, largely because of long delays in receiving information from the commercial banks on credit flows. As the authorities gained experience with the program, however, and in so doing were confronted with the problem of over- shooting credit targets, they took prompt action to introduce the necessary reporting systems and controls on the monthly lending activities of the commercial banks - for example, they required the commercial banks to submit weekly reports on their transactions. Additionally, the authorities intend to limit the public sector's use of non-concessional external borrowing by absorbing faster the slightly more than US$1 billion pipeline of concessional external assistance already committed. 16. The Government intends to maintain a flexible exchange rate policy which will take into account the differential between Nepal's rate of infla- tion and that of its main trading partners, and to provide improved incen- tives for both exports and efficient import substitution activities. Exports will be vigorously promoted. It is expected that the measures described below (paras 26-30), will help exports grow at an average of about 5 percent per annum in real terms over the next five years. Additionally, actions taken to promote tourism - including the upgrading of tourist facilities, liberalization of air charter arrangements and improvement in domestic air services - are expected to enhance the country's tourist receipts 1/ The recent Rs 100 across-the-board monthly increase in civil service salaries was, on average, not a real increase, but a response to almost three years of declining real wages in the public sector and was offset in many cases by reductions in allowances.  -7- significantly. Imports, particularly raw materials, are expected to increase substantially as a consequence of improvements in the use of foreign aid and import liberalization. The external current account deficit is, therefore, expected to rise from the 1985/86 level of 8.5 percent of GDP to just under 10 percent by 1990/91, consistent with the expected support from foreign assistance. 17. Agricultural policy. The Government is introducing agricultural policy measures that will promote private sector initiative. The public sector's role will be concentrated on providing essential support functions within the sector. Modern inputs will be made more readily available and public support services more effective and reliable. Annual budgets will provide explicitly for any subsidies or transfers that are considered essen- tial for achieving social and economic objectives within the sector. The initial reforms are focused on fertilizers, seeds, foodgrain mark-ting, agricultural research, and private and community forests and are of two types: (i) those to strengthen the public sector institutions in agriculture; and (ii) those aimed at liberalizing prices and the regulatory system to encourage private expansion. 18. To strengthen public sector institutions, the Agricultural Inputs Corporation (AIC), which procures and wholesales all fertilizers in the country as well as distributes other inputs such as seeds and pesticides, and the Nepal Food Corporation (NFC), which operates the Government's special food programs, are being put on a sounder financial and managerial footing. The two corporations are currently receiving technical assistance to strengthen their accounting, financial control and management functions, and steps have been taken to collect amounts owed to them as well as to fund their own outstanding debt. 19. A National Seed Act has been prepared for submission to Parliament. This act would establish a consistent legal basis for all activities in the seeds subsector as well as provide for the establishment of a National Seed Board to oversee seed production, processing and marketing. Additionally, the Seed Division of AIC has been upgraded with increased financial and operational autonomy, enabling it to provide better services to farmers regarding the production, processing, certification and distribution of high-quality cereal seeds. 20. To improve the efficiency of public foodgrain procurement, the cooperatives (Sajhas) are now participating in NFC's foodgrain procurement activities by operating depots. This has enabled NFC to expand the number of depots that can be effectively managed. 21. To provide high-level guidance to the country's diverse agricultural research activities, the Government intends to create an autonomous National Agricultural Research Council or Board by the end of the decade. In the meantime, to better plan, manage and monitor agricultural research, the Government has formed a National Agricultural Research Coordination Committee  -8- (NARCC); a permanent secretariat is being staffed and all positions are expected to be filled by July 1987. The main research units under the pur- view of the Department of Agriculture have been combined into a National Agricultural Research Services Center (NARSC). 22. The price and regulatory environment has also been improved. Fertilizer wholesale prices have been realigned to levels that discourage its informal export to India. Monthly monitoring of border prices and regular price review by the authorities will permit timely future adjustments. To improve the availability of fertilizer throughout the country, distribution is being opened up without geographical restriction to cooperatives and private dealers. Licenses are being freely issued to those establishing their bona fides. Allowable dealer margins on the retail sale of fertilizer have been increased as well. This, however, is an area that the authorities will have to monitor closely, as it is likely that further decontrol of fertilizer prices will be required to allow the other liberalization measures in this subsector to have full effect. Additionally, measures are being taken to improve the efficiency of procurement and sales pricing systems for cereal seeds and foodgrains. 23. A newly-functioning foodgrain price stabilization program, in which NFC undertakes open market operations, is being operated in the Kathmandu Valley. It will be later replicated in other parts of the country. Excessive and poorly focussed foodgrain subsidies have been phased out and the authorities are mounting a program to identify groups that are vulnerable to food shortages. Logistical arrangements for distributing food to them when required are being planned and will soon be implemented; procurement of the required supplies will be at prices providing incentive to farmers while taking into account those prevailing across the border. 24. In forestry, regulations are being modified to allow forest user committees to retain 100 percent of the revenues they earn from sales of wood from Panchayat Protected Forests. The authorities are also undertaking to legally entitle the forest user committees to employ staff and spend monies required to conduct their day-to-day business. Additionally, the administra- tive regulations concerning the ownership of trees on private lands are being reviewed to ensure that landowners have a clearly-established right to grow, cut and sell trees on their land. The impact of these measures is expected to be significant since, under the current system, established in the 1950s, private land owners and local communities have had neither the financial incentive to protect the forests nor control over their management. All of the above measures in agriculture and forestry together are expected to contribute significantly to the authorities' target of achieving sustained growth of about 3 percent per annum in agricultural value added over the next five years. 25. Industrial and trade policies. Consistent with the objectives of structural adjustment, the authorities have devised a new outward looking strategy for industry and trade. They intend to shift the industrial and  -9- trade regime to provide Nepalese producers with improved incentives for both exports and import substitutes. To achieve this, a realistic exchange rate is being maintained in combination with an appropriate system of industrial and export incentives - a system of duty drawback will be introduced as will selective sales tax rebates. Industrialists are being assured of access to necessary factors of production and inputs at prices free of undue distortion. Excessive reguilatory controls are being removed, with more reliance being placed on tariffs; administrative arrangements are being strengthened and simplified. A timetable for reducing licensing, however, will be needed, taking into account the special problem of trade deflection. 26. In May 1986, the authorities liberalized interest rates; this action, combined with a decline in inflation, helped raise real interest rates to positive levels. Moreover, some anomalies in both the term structure of interest rates and between some deposit and lending rates were eliminated. Commercial banks now have considerable freedom to set rates although deposit rates are subject to minimum levels and some lending rates to maximum levels such as for loans to cottage and small industrial, agroindustrial and service establishments. Commercial banks are also no longer required to demand large amounts of collateral for export financing. 27. The trade regime reforms are already underway. The Government intro- duced an import passbook system for industrialists to import certain key raw materials, placed three important raw material imports (raw wool, iron bil- lets and gypsum) under open general licensing and also placed a significant number of consumer goods, intermediate goods and some raw materials under the recently-established auction system for import licenses. 28. To remove excessive regulatory controls, the Government has now identified specific items for which industrial and export licensing will be required; all other items will be free from licensing. Moreover, even for those items subject to industrial licensing, provision has been made for those with modest raw material import requirements to be licensed automati- cally once the bona fides of applicants have been established. 29. Procedural aspects of export transactions are being expedited by an export development committee, comprising senior officials of the principal economic ministries and the Nepal Rastra Bank. This committee is convening regularly to coordinate those interagency activities required to ensure smooth export trade. The allocation of the US garment quota, has also been streamlined. 30. The authorities are also planning to introduce bonded warehouses, an export processing zone and improved financial facilities for exporters, as well as to streamline the current system of export and import regulatory procectures. These measures, together with those concerning the public enterprises, are expected to contribute significantly to targeted real growth in non-agricultural value added of about 6 percent per annum over the next five years.  -10- 31. Public enterprise policy. Generally, Nepal's 53 fully state-owned public enterprises have not performed well (although 6 joint ventures have fared comparatively better). The PEs are distributed across a range of activities; 25 of them are engaged in manufacturing; 8 in trade; 6 in finance and insurance; and 7 each in the categories of public utilities and social services. The PEs were established without a coherent policy for public sector involvement. Indeed, many were set up at the insistence of donors who wanted separate administrative arrangements for their projects. Poor perfor- mance can be attributed to rapid staff turnover - especially in key positions - political interference in their operations, and a lack of clear guidance concerning their role. Many entities have accumulated substantial debt, and arrears, to the banking system. 32. To improve financial control over the PEs, the authorities have recently started developing individual borrowing plans to determine permis- sible borrowings from the domestic banking system. This not only will help stay within credit ceilings established under the stabilization program but will also limit the Government's liabilities incurred through more judicious use of tbe government guarantee. A system of rewarding and penalizing PE managers according to performance has begun. And, in addition to the inten- sive efforts to strengthen the two food and agriculture PEs (NFC and AIC), the Government intends to implement policies to reduce the size of the public enterprise sector through divestiture and closure. In some cases, however, considerable managerial and financial strengthening will be required before the enterprises can be sold; moreover, those PEs that remain in the public domain will also need a better financial and operational footing. To achieve these reforms, the authorities are drawing up an action plan; management audits will be conducted to formulate individual programs for each PE. These programs will aim at strengthening tta finances (including revision of prices), management - and in some cases - the marketability of the enterprises. To this end, technical assistance, for ihich a source has yet to be determined, will be required. 33. Development Expenditures and Project Implementation. Nepal could benefit considerably over the next few years from accelerating the rate of project implementation. This would allow project-related aid disbursements to remain at roughly one-fifth of the pipeline of project-aid commitments, which are projected to grow at 5 percent annually in nominal terms. Project implementation in Nepal has suffered from numerous problems. Although, for the most part, these are well known to both the Government and donors, l/ the best way to correct them has not always been clear. For example, in January 1986, the Government provided senior ministry officials and project managers with more authority regarding spending and staffing decisions. Nepal's personnel policies for the civil service, however, are not oriented to 1/ See World Bank Report No. 5867-NEP, Chapter IV.  -11- evaluate performance against agreed programs and the measure produced little change in management practices. For managers and their staff to become more performance oriented, the appropriate personnel policies and practices to realign the prevailing internal discipline will need to be implemented. This calls for introducing new management processes. While an increased delega- tion of managerial authority is needed, directives to achieve this will be unlikely to change managers' behavior until complementary public administra- tive reforms (e.go, performance evaluation systems, remuneration and promo- tion criteria linked to performance, improved job security, etc.) are in place. 34. The authorities recognize the need to introduce sounder management processes. But they also recognize that processes take time to install while much needs to be done soon to achieve the development expenditure targets. Thus, they decided to fucus their effort iaitially on those processes that would produce early results. Two of these - program budgeting and program monitoring and control - have already been started. Program budgeting will focus on a "core" development program for the next fiscal year comprising a manageable set of high-priority development activities. These activities, which will account for about 70 percent of the 1987/88 development budget, will cover both development projects and operations and maintenance of exist- ing facilities. The projects are being selected on the basis of their for- eign aid content, nearness to completion, economic efficiency and strategic importance for the country's overall development program. The Government is already monitoring 78 projects on the basis of budget release and expenditure; 18 of them with physical and financial indicators. Technical assistance, being funded by the UNDP, will provide for expanding the coverage and introducing the permanent institutional capacity within the Government for both program budgeting and program monitoring and control. 35. Additionally, the authorities are setting up special units in key line ministries to monitor projects, anticipate problems and resolve dif- ficulties transcending the authority of a project manager. Similarly, an apex trouble-shooting unit has been established in the Cabinet Secretariat to resolve problems outside the purview of line ministries. Because project accounts and audits are critical to timely budget release, actions are also being taken to strengthen the public sector's capacity in accounting and auditing. Moreover, because of the importance of construction to project implementation, a study is being undertaken to identify and implement reforms to strengthen the domestic construction industry. 36. While these actions will help improve project implementation, they will need to be reinforced over the longer-term by improved project iden- tification and selection. This will require strengthening of the National Planning Commission (NPC) and the planning functions in line ministries. The implications for donors, in terms of commitment levels and of commodity and local cost financing are discussed below (paras 42-45).  -12- 37. Despite substantial progresr in introducing the above-mentioned measures, the pace of project implementation in the first half of 1986/87 has been slow. It is, however, still too early to make an assessment on the basis of only a few months' results; the authorities are rapidly gaining experience from both the program budgeting and monitoring exercises and are making important qualitative changes in various projects. Hopefully, these will translate the newly-gained experience and information into better and faster project implementation. 38. Although the development expenditure target (Table 2) is ambitious, it can be attained if the authorities are prepared to assign high-caliber senior staff to the full-time task of coordinating the development program, introduce the necessary management support systems, set realistic implementa- tion targets and require project managers to meet these targets. If they do this, two additional factors augur well for improving performance in this area. First, in contrast with the Covernment's historical practice of spreading its implementing capability thinly across many projects, the authorities intend to concentrate on accelerating the completion of a manage- able set of high priority projects. Secondly, the use of special units, both within ministries and within the Cabinet Secretariat, to anticipate and resolve problems quickly is unprecedented in Nepal and is expected to reduce significantly many of the delays that in the past occurred for lack of problems receiving the attention of the right people at the right time. 39. If the authorities implement their stabilization and structural adjustment programs with determination, the Nepalese economy can be expected to grow in real terms at a sustainable rate of between 4 and 5 percent per annum. To achieve this, investment would need to rise from its current level of 19 percent of GDP to about 24 percent by 1990/91; per capita consumption could grow in real terms over the medium term in line with the authorities' objective (para 10). National savings could grow from under 11 to almost 14 percent of GDP. Additionally, the annual rate of inflation could be halved from its current annual rate of 10 percent by 1990/91. 40. Key to these objectives will be export growth. The main sources of this growth over the next few years are expected to be in non-traditional areas such as carpets and garments, agroindustrial goods and tourism receipts. If exports grow at close to 5 percent per annum in real terms, the current account deficit could average about US$320 million a year in nominal terms over the next five years. Given Nepal's access in the past to mainly concessional external assistance, annual amortization payments on the exter- nal debt are expected to increase from only about US$11 million to about UJ$19 million over the period. If gross international reserves are to be held at about three and a half months' import coverage, the total foreign capital requirements would rise from about US$244 million in 1986/87 to about US$423 million in 1990/91, an annual average of about US$360 million.  -13- IV. FOREIGN ASSISTANCE REQUIREMENTS 41. From the preceding description of the structural adjustment program and its associated financial requirements, it is clear that Nepal has embarked on an ambitious undertaking. The transition period can be expected to extend well beyond the next five years. The authorities, however, have shown much resolve in introducing the necessary reforms. Consequently, IDA intends to support this program through a US$50 million Structural Adjustment Credit, to be considered by its Board before end-March. Further support would be a series of structural adjustment lending operations and possible sector loans tn reinforce the program and support initiatives in additional areas. Moreover, the authorities have commenced discussions with the IMF regarding possible support from a Structural Adjustment Facility (SAF) start- ing in 1987/88. The success of the program, however, is predicated on an overall availability of additional external resources during the next five years in amounts larger and in a blend different than the country has received historically. For these resources to materialize, the donors will have to be convinced that the Government's encouraging start will be con- tinued unrelentingly so that donor assistance will complement rather than substitute for domestic effort.  -14- Table 3: SUMMARY OF FOREIGN EXCHANCE REQUIREMENTS AND SOURCES 1986/87-1990/91 (US$ Million) Average Five 1982/83- Year 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 Averam REQUIREMENTS 206 244 347 397 383 423 359 Current Account Deficit 197 219 311 358 342 377 321 Loan Amortization 5 11 12 14 17 19 14 Increase in Reserves 4 14 24 25 24 27 23 SOURCES (Disbursements) 206 244 347 397 383 423 359 Project-related Finance 150 204 211 220 227 237 220 Grants 60 102 106 110 114 119 110 Concessional Loans 90 102 105 110 113 118 110 Suppliers' Credits - 0 55 * 55 * 0 0 22 Other Non-Pruject Finance 26 40 81 122 156 186 117 Decrease in Reserves 30 - - - - - - * Financing of new aircraft for Royal Nepal Airlines Corporation. Source: World Bank estimates. 42. Of the US$360 million per year required, about half is expected to come from the existing pipeline of aid commitments, and all of that from approved project loans and grants. About US$160 million per year in disbur- sements (US$40 million in project-related and almost US$120 million in non- project-related) would need to come from new aid commitments of about US$400 million per year (US$260 million project and US$140 million non-project). Disbursements for projects -- from both new and prior commitments -- would rise only a modest 2 to 3 percent yearly in real terms. Although Nepal should take on new projects very selectively to avoid straining the country's absorptive capacity, the $260 million in annual new project-related aid commitments reflect the country's requirements for several large but essen- tial infrastructure projects - e.g., the next hydroelectric generating sta- tion with ancillary investments - as well as the expected increase in implementing capacity. A little more than US$20 million per year is expected in the form of suppliers' credits.  -15- Table 4: AID PIPELINE 1986/87-1990/91 (US$ Million) Of which Loan Grant Total Non-Project Aid 1986/87 Opening Balance 706 380 1086 20 New Commitments 158 158 316 80 Total Disbursements 134 110 244 40 SI From 1985/86 pipeline 180 1987/88 Opening Balance 73?,( 428 1158 60 New Commitments 164 164 328 80 Total Disbursements 162 130 292 81 From 1985/86 pipeline 180 1988/89 Opening Balance 732 462 1194 59 New Commitments 213 213 426 164 Total Disbursements 192 150 342 122 From 1985/86 pipeline 180 1989/90 Opening Balance 753 525 1278 101 New Commitments 211 211 422 148 Total Disbursements 213 170 383 156 From 1985/86 pipeline 180 1990/91 Opening Balance 751 566 1317 93 New Commitments 256 256 511 224 Total Disbursements 233 190 423 186 From 1985/86 pipeline 180 5-Year Averages 1980/81 - 1984/85 Commitments 157 102 259 20 Disbursements 83 83 166 12 1986/87 - 1990/91 Commitments 200 200 400 140 Disbursements 187 150 337 117 Source: World Bank estimates.  -16- 43. During the past five years, the share of non-project assistance - both program and commodity assistance - has been less than 10 percent of total, or about US$20 million per year in commitments. The projected non- project financing requirements are larger than anticipated at the last Nepal Aid Group Meeting, primarily because of the more ambitious trade liberaliza- tion now underway. They now comprise roughly one-third of the total, both in terms of commitments and disbursements. Assuming that new non-project commitments currently have an average disbursement rate of two years, about US$80 million a year will need to be committed over the next two years; beyond that, new non-project commitments will need to rise sharply unless their associated disbursement rate can be accelerated. 44. In sum, the success of the program, in addition to the financing requirements set forth, entails a series of challenges for the Government: First, the Government should ensure that it mobilizes the domestic resources needed to finance its share of the program; the tax effort will be vital to achieving this. Second, it should increase its efforts to improve its development administration so that budget releases are not a constraint to the rate of project implementation. Third, it should move from improving the efficiency Lf ongoing projects to improving the selection of new development projects. Although new projects to be started during the next fiscal year will be included in the core development program for 1987/88 and thus reviewed, as applicable, in terms of the four criteria being applied to ongoing projects (para 34), effort needs to be made soon to expand the criteria for selecting new projects to include: (a) opportunity cost of foreign aid financing on very large projects, particularly where those aid resources are fungible; (b) domestic resource cost, particularly of large projects; (c) appropriate design criteria; new projects should be scrutinized carefully to ensure that project design is appropriate to local conditions. The design of integrated rural development, hill irrigation and forestry projects, in particular, should promote self-help among the people they are to benefit; (d) criteria for start-up and phasing of projects; although some long-gestating projects should not be postponed, they should at least be phased to maximize their potential economic contribution without exacerbating the country's budgetary and external finan- ces in the short-to-medium term;  -17- (e) criteria for recurrent costs; projects should be carefully evaluated to ensure that they do not place an excessive future burden on the country's public finances. Microeconomic criteria need to be developed for reducing operations and maintenance requirements through alternative project design; and (f) multi-year programming criteria; the program should be analyzed for its macroeconomic and social impact, since its success will much depend on an appropriate balance between socially-oriented and output-oriented programs and between programs yielding benefits soon versus in the future. Fourth, much of the Government's efforts will be frustrated unless it can improve decision-making processes; in particular, the Government should move as soon as possible to establish a multi-year programming process to complement the annual program budgeting process. The Gcvernment should strengthen the NPC, as well as those functions it shares with the line minis- tries and other agencies, as an important step in this direction. While this will take much time to accomplish, a comprehensive public sector investment review should be launched in parallel with this activity. 45. To complement the above, however, strong assistance from the donor comnunity will be needed. Specifically, the requirements over the next five years call for donors to contribute slightly more (about 8 percent) in project-related assistance in nominal terms than over the past five years and an additional half of this amount in non-project assistance, which is con- siderably more than in the past. Total required new commitments over the next five years, however, are on average, only half a percent of GDP higher than for the past five years (about 11.5 percent compared with 11 percent). In providing their assistance, the donors should take into account the fol- lowing additional considerations: First, about half of both project-related and non-project assistance will be needed in the form of grant aid. The country's external debt is currently about 20 percent of GDP and its debt service is less than 5 percent of exports of goods and services. Even with a strong effort by the authorities to improve economic management, the longer-term constraints to growth are challenges not to be underestimated. These and the country's need for respite from significantly larger debt service in the face of unforeseen external factors - such as the drought causing the 1986/87 harvest shortfall - warrant the degree of concessionality indicated. Second, close to half of newly-committed project assistance is required in the form of local cost financing and should be provided as in the recent past. In this regard, the willingness of donors to finance deferred maintenance and infrastructure rehabilitation projects would not only produce large economic benefits but would also provide valuable budgetary and balance of payments support.  -18- Third, technical assistance is required for introducing public administrative reforms. Most important will be to improve personnel policies for the civil service, strengthen planning, programming and budgeting, develop the domestic construction industry, implement programs of managerial assistance in the public enterprise sector and to study and implement policy and procedural reforms in tte agricultural and industrial sectors. The requirements for these technical assistance activities (already included in the projected aid flows) are estimated at between US$3 and 5 million annually over the next five years, depending on the mix of local and foreign consult- ing expertise. Fourth, donor recourse to increased co-financing would help to focus assistance better in those areas expected to contribute most effectively to meeting the country's development objectives. 46. In addition to providing financial and technical assistance, donors could increase the effectiveness of their assistance by lending their support to the current screening of ongoing projects to formulate the core develop- ment program. Some projects may best be modified to improve their contribu- tion to the country's economic objectives. 47. Additionally, donors could assist the Government's efforts to improve program/project monitoring and control systems. They could encourage their own expatriate project personnel to provide timely information and to respond to the authorities' efforts to correct problems as a valuable reinforcement of this effort. It is especially important that donors and their project staff recognize that the systems being developed are primarily to help Nepalese decision makers improve their management of the development program. At this early stage, some redundancies in information collection may arise and requirements may, in some cases, differ from those of the particular donor agency involved. Close cooperation and some compromise will no doubt be called for. 48. Finally, donor governments should also be willing to dissuade non- governmental groups in their own countries from applying undue pressure in promoting projects that do not conform to the country's stated priorities. This is particularly important in a sector such as power because of the sheer size of the amounts of money involved. Future investments should be strictly determined within the "least-cost" planning framework that the authorities are currently applying. 49. The authorities and donors will require a more frequent and open exchange of views. Thus, in addition to the meetings convened in Nepal between the Government and local representatives of the donors, it is proposed tc dse the occasion of SAL supervision missions for the Government, IDA and other donors to meet to discuss progress under the structural adjust- ment program.  -19- 50. If the Government's structural adjustment program is implemented along the lines described above, Nepal will be challenged by some austerity. The main adverse effects will be felt by those currently making large speculative profits or engaged in inefficient industriest but the overall social impact of the program is expected to be positive. The majority of Nepal's poor are engaged in the primarily non-monetized, agrarian sector of the economy, where aggregate demand and resource mobilization measures are unlikely to be felt directly. On the other hand, the measures to liberalize and improve the efficiency of agriculture could provide significant direct benefit to this group. Moreover, the measures in forestry are expected to benefit a broad segment of the rural population as well as preserve an endangered natural rcaource to the benefit of all Nepalese. Industrial and trade liberalization should also produce direct benefits in the monetized sector by stimulating growth and generating employment. If, however, the program were not to be implemented, the continued lowering of living stand- ards implied by output and consumption growth rates kept below population growth rates, together with a deteriorating financial situation, would not only foreclose Nepal's chances to overcome its current problems, but would mean that virtually all available donor assistance in the foreseeable future would go, not toward Nepal's development, but simply to deter a more rapid drop in consumption levels.  -20- Table Al: NATIONAL ACCOUNTS SUMMARY (NRs. Million) Revised ---- -----Actual--------------- Prelim, Estimate 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 Gross Domestic Product 27307.0 30988.0 33761.0 38184.0 41738.0 49710.0 Resource Gap 1834.0 2241.0 3745.0 3472.0 3670.0 5074.0 Imports (g + nfs) 5357.0 5827.0 7195.0 7661.0 9043.0 11417.0 Exports (g + nfs) 3523.0 3586.0 3451.0 4189.0 5373.0 6343.0 Total Expenditure 29141.0 33229.0 37506.0 41656.0 45408.0 54784.0 Consumption 24333.0 28131.0 30707.0 34254.0 36772.0 45339.0 Private 22983.0 25493.0 28144.0 31336.0 33228.0 41572.0 Government 1350.0 2638.0 2563.0 2918.0 3544.0 3767.0 Investment 4808.0 5098.0 6799.0 7402.0 8636.0 9445.0 Fixed 4299.0 5249.0 6747.0 6958.0 8148.0 9020.0 Changes in Stocks 509.0 -151.0 52.0 444.0 488.0 425.0 Domestic Savings 2974.0 2857.0 3054.0 3930.0 4966.0 4371.0 Net Factor Income 121.0 162.0 180.0 95.0 3.0 -10.0 Current Transfers 557.0 530.0 579.0 652.0 485.0 989.0 National Savings 3652.0 3549.0 3813.0 4677.0 5454.0 5350.0 Gross National Product 27428.0 30427.0 33941.0 38279.0 41741.0 49700.0 Source: Central Bureau of Statistics, National Planning Commission and the Nepal Rastra Bank.  -21- Table A2s GOVERNMENT BUDGET TNRs. Million) Revised ----------------Actual--------------- Prelim. Estimate 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 Current Receipts 2402.6 2667.6 2805.0 3345.7 3850.3 4481.0 Tax Revenue 2042.0 2218.3 2421.1 2737.0 3151.2 3752.0 Non-tax Revenue 360.6 449.3 383.9 608.7 699.1 729.0 Regular Expenditures 1349.8 1626.3 1900.2 2107.0 2720.2 3281.7 Surplus for Development Expenditure 1052.8 1041.3 904.8 1238.7 1130.1 1199.3 Development Expenditure 2731.2 3726.8 4982.1 5163.8 5488.7 5992.6 Net Lending -5.2 -3.6 -30.6 -67.1 -56.4 -126.7 Overall Balance -1673.2 -2681.9 -4046.7 -3858.0 -4302.2 -4666.6 Financed by: External Sources 1562.2 1723.2 2028.4 2492.0 2609.1 3446.2 Crants 868.9 993.3 1090.1 876.6 923.4 1380.8 Loan Disbursements (net) 693.3 729.9 938.3 1615.4 1685.7 2065.4 Domestic Borrowing 111.0 958.7 2018.3 1369.5 1694.1 1220.4 Note: Regular expenditures for 1980/81 and 1981/82 include amortization payments. Source: Ministry of Finance Budget Speech, several years.  -22- Table A3: BALANCE OF PAYMENTS (US$ Killion) Revised ------------- Actual--------------- Prelim. Estimate 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 Exports (g + nfs) 293.6 277.6 250.4 275.0 302.1 328.2 Merchandise f.o.b. 134.4 115.6 82.3 112.1 154.5 160.2 of which: Rice 2.0 6.7 0.0 5,0 14.1 4.6 Jute and Jute Goods 6.2 11.0 19.6 16.4 17.1 8.8 Carpets 4.7 6.5 1000 17.4 13.8 19.3 Garments 0.0 1.0 0.7 1.3 26.6 41.1 Non-factor Services 159.2 162.0 168.1 162.9 147.6 168.0 Imports (g + nfs) 446.4 450.5 521.6 505.1 524.1 590.6 Merchandise c.i.f. 370.2 382.5 459.0 428.2 437.0 501.6 Non-factor Services 76.2 68.0 62.6 76.9 87.1 89.0 Resource Gap 152.8 172.9 271.2 230.1 222.0 262.5 Net Factor Income 10.0 12.5 13.0 6.2 0.2 -0.5 Factor Receipts 13.3 15.2 14.7 6.2 5.3 3.1 Factor Payments 3.3 2.7 1.7 0.0 5.1 3.6 Net Current Transfers 46.4 40.6 41.7 45.3 42.8 51.2 Transfer Receipts 47.9 42,4 40.1 47.8 44.7 55.6 Transfer Payments 1.5 1.8 2.4 2.5 1.9 4.4 Current Account Deficit 96.4 119.8 216.5 178.6 179.0 211.8 Official Grant Aid 71.7 89.4 79.0 57.4 51.9 71.4 Net M&LT Loans 52.8 59.8 68.0 105.9 94.8 106.8 Disbursements 55.4 62.3 71.5 109.5 98.7 115.1 Amortization 2.6 2.5 3.5 3.6 3.9 8.3 Capital Flows N.E.I. -12.0 9.3 16.4 0.6 -20.7 48.6 Overall Balance 16.1 38.7 -53.1 -14.7 -53.0 15.1 Change in Net Reserves -16.1 -38.7 53.1 14.7 53.0 -15e1 (-= increase) Memo Items: International Reserves 195.8 232.6 227.0 199.6 141.8 165.7 (End of period) International Reserves in Months of Import Coverage 5.3 6.2 5.2 4.7 3.2 3.4 Source: Nepal Rastra Bank  -23- Table A4: NEPAL: NATIONAL ACCOUNTS (NRs. Million) Rev. Est. Projected 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 GDP (market prices) 49710.2 56510.6 63495.3 69470.2 76226.2 83639.1 GDP (factor cost) 46705.0 52990.9 58866.5 64051.5 69956.5 76333.3 Indirect Taxes 3105.0 3581.0 4692.3 5488.1 6345.8 7389.5 - Subsidies -99.8 -61.3 -63.5 -69.5 -76.2 -83.6 Resource Gap (M-X) 5074.0 5975.4 8031.0 8981.0 8520.4 9303.7 Imports (G+NFS) 11416.5 13963.7 16926.3 18820.7 19436.4 21448.7 Exports (G+NFS) 6342.5 7988.3 8895.2 9839.8 10915.9 12145.0 Resources Available Uses 54784.2 63099.4 70287.7 76948.1 83127.8 91195.7 Total Consumption 45339.3 50901.3 56601.9 61759.6 67214.6 73204.0 Private Consumption 41572.3 47366.9 50950.8 55507.3 60125.5 65258.3 Government Consumption 3767.0 3534.4 5651.1 6252.3 7089.0 7945.7 Total Investment 9444.9 11584.7 14924.4 16691.6 17532.0 19738.8 Private Investment 6528.4 6978.3 10098.8 11099.2 11205.2 12671.3 Government Investment 2916.5 4606.4 4825.6 5592.3 6326.8 7067.5 Memorandum T..ems: Domestic Savings (Ig+Ip-RG) 4370.9 5609.3 6893.4 7710.6 9011.6 10435.2 Net Factor Income -10.0 -20.0 -154.8 -306.9 -473.0 -526.1 Net Current Transfers 989.0 1170.0 1336.6 1403.4 1473.6 1547.3 National Savings (DS+NFY+Tfp) 5349.9 6759.3 8075.2 8807.1 10012.2 11456.3 Government Savings -366.0 585.8 -410.9 -120.7 23.3 372.7 Private Savings 5715.9 6173.5 8486.0 8927.8 9988.9 11083.6 Foreign Savings 4095.0 4824.4 6849.2 7884.5 7519.9 8282.5  -24- Table A5s: NEPAL: NATIONAL ACCOUNTS (as a percent of GDP) Rev. Est. Projected 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 GDP (market prices) 100.00 100l00 100.00 100.00 100.00 100.00 GDP (factor cost) 93.95 93.77 92.71 92.20 91.78 91.27 Indirect Taxes 6.25 6.34 7.39 7.90 8.33 8.84 - Subsidies -0.20 -0.11 -0.10 -0.10 -0.10 -0.10 Resource Gap (M-X) 10.21 10.57 12.65 12.93 11.18 11.12 Imports (G+NFS) 22.97 24.71 26.66 27.09 25.50 25.64 Exports (G+NFS) 12.76 14.14 14.01 14.16 14.32 14.52 Resources Available = Uses 110.21 110.57 112.65 112.93 111.18 111.12 Total Consumption 91.21 90.07 89.14 88.90 88.18 87.52 Private Consumption 83.63 83.82 80.24 79.90 78.88 78.02 Government Consumption 7.58 6.25 8.90 9.00 9.30 9.50 Total Investment 19.00 20.50 23.50 24.03 23.00 23.60 Private Investment 13.13 12.35 15.90 15.98 14.70 15.15 Government Investment 5.87 8.14 7.60 8.05 8.30 8.45 Memorandum Items: Domestic Savings (Ig+Ip-RG) 8.79 9.93 10.86 11.10 11.82 12.48 Net Factor Income -0.02 -0.04 -0.24 -0.44 -0.62 -0.63 Net Current Transfers 1.99 2.07 2.11 2.02 1.93 1.85 National Savings (DS+NFY+Tfp) 10.76 11.96 12.72 12.68 13.13 13.70 Government Savings -0.74 1.04 -0.65 -0.17 0.03 0.45 Private Savings 11.50 10.92 13.36 12.85 13.10 13.25 Foreign Savings 8.24 8.54 10.79 11.35 9.87 9.90  -25- Table A6: NEPAL: GOVERNMENT BUDGET (NRs. Million) Rev. Est. Projected 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 Current Receipts: 4481.0 5376.0 6596.5 7638.4 8768.8 10050.6 Tax Revenue 3752.0 4326.0 5524.1 6460.7 7470.2 8619.1 Direct Taxes 647.0 745.0 831.8 972.6 1124.3 1309.0 Indirect Taxes 3105.0 3581.0 4692.3 5488.1 6345.8 7310.1 Non-Tax (Adj.) 729.0 1050.0 1072.4 1177.7 1298.6 1431.5 Non-Tax Receipts (Unadj.) 869.0 1310.0 1352.4 1479.7 1623.6 1781.5 Loan Repayments received -140.0 -260.0 -280.0 -302.0 -325.0 -350.0 Regular Expenditures (Adj.) 3281.7 3799.8 4531.1 4980.3 5467.8 6080.6 Regular Expenditures (Unadj.) 3603.3 4202.6 4884.5 5379.0 5919.3 6506.5 - Loans and Investment -13.3 -13.8 -14.0 -14.0 -14.0 -14.0 - Payments of Principal -308.3 -389.0 -339.4 -384.7 -437.5 -411.9 Surplus for Development Exp. 1199.3 1576.2 2065.5 2658.1 3301.5 3970.0 Development Exp. and Net Lending 5865.9 7153.8 8940.8 10167.3 11580.3 13071.3 Development Expenditure 5992.6 7400.0 9206.8 10455.3 11891.3 13407.3 Net Lending -126.7 -246.2 -266.0 -288.0 -311.0 -336.0 Overall Balance -4666.6 -5577.6 -6875.4 -7509.1 -8279.3 -9101.3 Total Receipts 4481.0 5376.0 6596.5 7638.4 8768.8 10050.6 Total Expenditures 9147.6 10953.6 13471.9 15147.6 17048.1 19151.9 Financed by: External Sources 3446.2 4640.0 5868.3 6490.9 7199.9 8013.2 Grants 1380.8 1760.0 2504.4 2778.8 3125.3 3471.0 Loan Disbursements (net) 2065.4 2880.0 3363.9 3712.1 4074.6 4542.3 Loan Disbursements (gross) 2224.9 3130.0 3616.7 4015.4 4436.4 4968.1 Repayments -159.5 -250.0 -252.8 -303.3 -361.8 -425.9 Domestic Borrowing (net) 1220.4 937.6 1007.1 1018.2 1079.4 1088.1  -26- Table A7: NEPAL: GOVERNMENT BUDGET (as a percent of GDP) Rev. Est. Pro3ected 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 Current Receipts: 9.01 9.51 10.39 11.00 11.50 12.00 Tax Revenue 7.55 7.66 8.70 9.3 9.80 10.30 Direct Taxes 1.30 1.32 1.31 1.40 1.48 1.57 Indirect Taxes 6.25 6.34 7.39 7.90 8.33 8.74 Non-Tax (Adj.) 1.47 1.86 1.69 1.70 1.70 1.71 Non-Tax Receipts (Unadj.) 1.75 2.32 2.13 2.13 2.13 2.13 Loan Repayments received -0.28 -0.46 -0.44 -0.43 -0.43 -0.42 Regular Expenditures (Adj.) 6.60 6.72 7.14 7.17 7.17 7.27 Regular Expenditures (Unadj.) 7.25 7.44 - Loans and Investment -0.03 -0.02 - Payments of Principal -0.62 -0.69 Surplus for Development Exp. 2.41 2.79 3.25 3.83 4.33 4.73 Development Exp. and Net Lending 11.80 12.66 14.08 14.64 15.19 15.63 Development Expenditure 12.06 13.09 14.50 15.05 15.60 16.03 Net Lending -0.25 -0.44 -0.42 -0.41 0.41 -0.40 Overall Balance -9.39 -9.87 -10.83 -10.81 -10.86 -10.90 Total Receipts 9.01 9.51 10.39 11.00 11.50 12.00 Total Expenditures 18.40 19.38 21.22 21.80 22.37 22.90 Financed by: External Sources 6.93 8.21 9.24 9.36 9.46 9.60 Grants 2.78 3.11 3.94 4.00 4.10 4.15 Loan Disbursements (net) 4.15 5.10 5.30 5.36 5.36 5.45 Loan Disbursements (gross) 4.48 5.54 5.70 5.78 5.82 5.94 Repayments -0.32 -0.44 -0.39 -0.42 -0.46 -0.49 Domestic Borrowing (net) 2.46 1.66 1.59 1.45 1.40 1.30  -27- Table A8: NEPAL: BALANCE OF PAYMENTS (US$ Million) Rev. Est. Projected 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 Exchange Rate = MRs per US$ 19.800 22.000 22.000 22.000 22.000 22.000 Merchandise Exports f.o.b. 160.2 182.0 202.8 225.0 251.2 281.9 Merchandise Imports c.i.f. 501.6 540.5 665.7 742.5 760.0 839.9 Trade Balance -341.5 -358.5 -462.9 -517.4 -508.9 -558.0 Non-Factor Services (net) 79.0 86.8 97.9 109.2 121.6 135.1 NFS Exports 168.0 181.1 201.6 222.2 245.0 270.1 NFS Imports 89.0 97.9 107.7 117.4 128.2 140.2 Resource Balance -262.5 -271.6 -365.0 -408.2 -387.3 -422.9 Investment Income (net) -0.5 -0.9 -7.0 -14.0 -21.5 -23.9 Receipts 3.1 3.6 7.0 7.0 6.8 6.5 Payments 3.6 4.5 14.1 21.0 28.3 30.4 Private Transfers (net) 51.2 53.2 60.8 63.8 67.0 70.3 Receipts 55.6 59.1 Repayments 4.4 5.9 Current Account Balance -211.8 -219.3 -311.3 -358.4 -341.8 -376.5 Official Grants 71.4 126.5 129.9 151.8 171.2 192.0 Official Capital 106.9 105.2 152.9 177.5 194.1 211.9 Disbursements 115.1 115.8 164.4 191.2 210.5 231.2 Amortization 8.3 10.6 11.5 13.8 16.4 19.4 Miscellaneous Capital 48.6 0.0 55.0 55.0 0.0 0.0 Overall Balance 15.1 12.4 26.5 25.9 23.5 27.4  -28- Table A9: NEPAL: BALANCE OF PAYMENTS (as a percent of GDP) Rev. Est. Projected 1985/86 1986/87 1987/88 1988/89 1989/90 1990/91 Merchandise Exports f.o.b. 6.23 7.09 7.03 7.13 7.25 7.42 Merchandise Imports c.i.f. 19.51 21.04 23.06 23.51 21.94 22.09 Trade Balance -13.28 -13.95 -16.04 -16.39 -14.69 -14.68 Non-Factor Services (net) 3.07 3.38 3.39 3.46 3.51 3.55 N'FS Exports 6.53 7.05 6.98 7.04 7.07 7.11 N'FS Imports 3.46 3.67 3.59 3.58 3.56 3.55 Resource Balance -10.21 -10.57 -12.65 -12.93 -11.18 -11.12 Investment Income (net) -0.02 -0.04 -0.24 -0.44 -0.62 -0.63 Receipts 0.12 0.14 0.24 0.22 0.20 0.17 Payments 0.14 0.18 0.49 0.66 0.82 0.80 Private Transfers (net) 1.99 2.07 2.11 2.02 1.93 1.85 Receipts 2.16 2.30 0.00 0.00 0.00 0.00 Repayments 0.17 0,23 0.00 0.00 0.00 0.00 Current Account Balance -8.24 -8.54 -10.79 -11.35 -9.87 -9.90 Official grants 2.45 4.92 4.50 4.81 4.94 5.05 Official Capital (net) 4.16 4,09 5.30 5.62 5.60 5.57 Disbursements 4.48 4.51 5.70 6.06 6.08 6.08 Amortization 0.32 0.41 0.40 0.44 0.47 0.51 Miscellaneous Capital 0.06 0.00 1.82 1.72 0.00 0.00 Overall Balance 0.58 0.53 0.83 0.80 0.68 0.70  -29- Table AlO: AID COMMITMENTS (NRs. "..llion) 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 AID GROUP Austria - - - - - - Canada 58.4 221.0 - - 207.7 190.4 France 125.0 - 150.1 - - 247.5 Fed. Rep. of Germany 93.0 252.3 425.3 117.1 873.2 143584 Japan 390.0 772.6 652.1 435.3 375.5 810.9 Switzerland 238.2 73.6 9.0 46.3 44.9 115.2 United Kingdom - 117e9 - 129.6 600.0 United States 995.8 61.1 - - 286.2 300.4 ADB 558.6 487.4 459.6 1463.1 619.5 1828.3 IDA 938.4 204.7 314.6 723.8 1257.0 1061.0 UN Group 375.8 99.3 462.3 65.8 416.6 - Subtotal 3773.2 2289.9 2473.0 2981.2 4686.7 5989.2 NON-AID GROUP India 1.2 2.9 87.0 7.3 199.3 820.7 China 38.0 - - 0.7 200.0 - Other 238.3 301.3 538.9 110.4 911.4 1201.0 Subtotal 277.5 304.2 625.9 118,4 1310.7 2021.7 TOTAL COMMITMENTS 4050.7 2594.1 3098.9 3099.6 5991.4 8010.9 Source: Ministry of Finance  -30- Table All: AID DISBURSEMENTS a/ (NR8. Million) 1980/81 1981/82 1982/83 1983/84 1984/85 1985/86 AID GROUP Austria - - 0.2 - - - Canada 1.0 16.0 11.6 26.8 38.7 22.0 France - 30.5 19.7 36.3 261.0 43.9 Fed. Rep. of Germany 69.0 39.5 33.3 50.1 87.4 833.1 Japan 15901 142.4 211.1 264.7 190.7 322.4 Switzerland 46.0 74.5 40.6 54.1 58.7 63.4 United Kingdom 128.0 152.3 68.6 69.3 71.2 67.5 United States 61.4 118.2 121.7 138.5 180.4 122.3 ADB 147.1 310.5 287.2 861,7 731.4 815.1 TDA 382.6 514.8 363.9 530.7 527.0 949.1 UN Group 100.6 146.3 157.3 99.4 18.5 56.4 Subtotal 1094.8 1545.0 1315.2 2131.6 2164*9 3295.2 NON-AID GROUP India 213.7 241.7 239.8 210.8 156.3 300.4 China 50.5 25.4 158.1 124.8 96.7 42.4 Kuwait 117.9 41.5 - - - 33.3 OPEC Fund 0.0 93.1 - 43.6 3.7 9.4 Other 85.3 112,4 362.7 36.6 254.8 325.2 Subtotal 467.4 514.1 760.6 415.8 511.5 710.5 TOTAL DISBURSEMENTS 1562.2 2059.1 2075.8 2547.4 2676.4 4005.7 a/ Not including technical assistance and fellowships. Source: Ministry of Finance  Table A12: EXTERNAL PUBLIC DEBT - By Type of Creditor Page 1 of 2 EXTERNA1. PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC 31. 1985 INCLUDES ONLY DEBT COMMITTED 000000 - DEC 31, 1985 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (IN THOUSANDS OF U.S. DOLLARS) D E B T O U T S T A N D I N G I N A R R E A R S DISBURSED : UNDISBURSED : TOTAL PRINCIPAL : INTEREST ------------------------------- ------------ s--------------------------- CREDITOR TYPE . FINANCIAL INSTITUTIONS FRANCE 2,416 - 2.416 TOTAL FINANCIAL INSTITUTIONS 7.416 - 2.416 - - CREDITOR TYPE : MULTILATERAL LOANS ASIAN DEV. BANK 179.010 215.545 394.555 - - EEC 6.787 61 6.848 - - IDA 233,243 309.156 542.399 - - IMF TRUST FUND 10.523 - 10.523 - - INTL FUND ARG(IFAD) 12,787 38.383 51.170 - - OPEC SPECIAL FUND 13.308 8.870 22.178 - - TOTAL MULTILATERAL LOANS 455,658 572,015 1.027.673 - - CREDITOR TYPE : BILATERAL LOANS BELGIUM - 1.986 1.986 - - FRANCE 3.237 2.488 5.725 - - INDIA 113 - 113 - - JAPAN 40,787 39.670 80.457 - - KUWAIT 21.314 20.761 42.075 - - SAUDI ARABIA - 23.885 23.885 - - UNITED STATES 100 - 100 - - USSR 3.681 - , 3.681 - - ,~~~~~~~~~ .,. .TOTAL BILATERAL LOANS 69,2312' 88,790 158vQ22-- NOTES: (1) ONLY DEBTS WITH AN ORIGINAL OR EXTENDED MATURITY OF OVER ONE YEAR ARE :LUDED IN THIS TABLE. (2) DEBT OUTSTANDING INCLUDES PRINCIPAL IN ARREARS BUT EXCLUDES INTEREST IN ARREARS  Table A12: EXTERNAL PUBLIC DEBT - By Type of Creditor Page 2 of 2 EXTERNAL PUBLIC DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC 31. 1985 INCLUDES ONLY DEBT COMMITTED 000000 - DEC: 31, 1985 DEBT REPAVABLE IN FOREIGN CURRENCY AND GOODS (IN THOUSANDS OF U.S. DOLLARS) D E B T O U T S T A N D I N G I N A R R E A R S DISBURSED : UNDISSURSED : TOTAL PRINCIPAL : INTEREST FINANCIAL INSTITUTIONS 2.416 - 2.416 MULTILATERAL LOANS 455658 572,.i15 1,027,673 BILATERAL LOANS 69,232 9B,790 158.022 TOTAL EXTERNAL DEBT 527,306 680.805 1,189,111 * , 4 NOTES: (1) ONLV DEBTS WITH AN ORIGINAL OR EXTENDED MATURITY OF OVER ONE YEAR ARE INCLUDED IN THIS TABLE. (2) DEBT OUTSTANDING INCLUDES PRINCIPAL IN ARREARS BUT EXCLUDES INTEREST IN ARREARS  Table A13: EXTERNAL PUBLIC DEBT - Transactions SERVICE PAVMENTS, COMMITMENTS, OISBURSEMENTS AND OUTSTANDING AMOUNTS OF EXTERNAL P DEBT PROJECTIONS BASED ON DEBT OUTSTANDING INCLUDING UNDISBURSED AS OF DEC 31. 1985 INCLUDES ONLV DEBT COMMITTEn 000000 - 198512 DEBT REPAYABLE IN FOREIGN CURRENCY AND GOODS (IN THOUSANDS OF U.S. DOLLARS) * e e TABLE TOTAL * e * DATE DEBT OUTSTANDING AT T R A N S A C T I 0 N S D U R I N G P E R I 0 0 OTHER CHANGES END OF PERIOD DISBURSED : INCLUDING COMMIT- : DISBURSE- : S E R V I C E P A Y M E N T S CANCEL- : ADJUST- ONLY : UNDISBURSED MENTS : MENTS :---------- ----------- ------ - ---- LATIONS s MENT t : PRINCIPAL INTEREST TOTAL : (1) : (2) (3) (4) (5) (6) (7) (8) (9) 197012 2.868 28,588 17.085 546 2.065 130 2.195 177 - 197112 8.304 34,996 5,987 5.331 112 58 170 - 533 197212 11.596 60,127 26.318 3.854 161 94 255 450 -576 197312 19,536 81,749 21.961 8,054 276 197 473 - -63 197412 27.129 108,140 25,165 7,623 490 293 783 - 1.716 197512 33,740 119,838 16,830 9,178 1.197 449 1,646 1.000 -2,935 197612 44.278 236,487 117,741 11,915 1.069 636 1,705 - -23 197712 72,065 300,561 62,412 30.604 2.033 81S 2,851 2.309 6,004 197812 86.960 380.778 106.939 46,354 1,643 1.115 2,758 32,039 6.960 197912 123.137 446.798 71,510 38.436 1.789 1,537 3,326 650 -3.051 198012 173.946 538,834 96.850 55,545 2,134 1.860 3,994 4.642 1,962 198112 231.587 635.843 107,879 63,044 2,298 2,554 4,852 3,256 -5.316 198212 296.665 731,099 104.844 70,262 2,677 3.317 5,994 3.638 -3.273 198312 360.000 902,330 182,626 70,524 4,135 3,849 7,984 97 -7.163 1 198412 426.681 963,062 91,519 78,278 5.189 4.653 9,842 1.800 -23,798 w 198512 527.306 1,188,111 195,800 92,741 7.061 5.861 12,922 3.659 39.969 * * * * s eTHE FOLLOWING FIGURES ARE PROJECTED * * * 198612 636.268 1,177,924 - 119.145 10,185 7,878 18,063 - -2 198712 775.509 1,165,643 - 151,521 12,282 8,981 21,263 - 1 198812 893,272 1.152,505 - 130,899 13,137 9.889 23.026 - -1 198912 978.683 1.138.756 - 99.158 13.751 10,589 24,340 - 2 199012 1.032.748 1.122,155 - 70,671 16,610 11,036 27,646 - 9 199112 1,055,127 1.103,763 - 40,769 18.396 11,163 29.559 - 4 199212 1,058.471 1,081,192 - 25,915 22.570 11,141 33.711 - -1 199312 1,049.342 1,056,454 - 15.610 24,744 10.936 35.680 - 6 199412 1,025.880 1.027,360 - 5.637 29.097 10.614 39.711 - 3 199512 995.698 995,943 - 1,236 31.421 10,220 41.641 - 4 199612 963,610 963,855 - - 32.089 9.809 41.898 - 1 199712 930.843 931.088 - - 32.768 9.406 42.174 - 1 199812 898.605 898.850 - - 32.241 9.006 41.247 - 3 199912 865,662 865,907 - - 32.934 8.605 41,539 - -9 200012 833,013 833,258 - - 32,650 8.222 40,872 - I * PROJECTED AMOUNTS IN THIS COLUMN ARE AMOUNTS EXCLUDED FROM PROJECTIONS BECAUSE OF UNKNOWN TERMS. ** THIS COLUMN SHOWS THE AMOUNT OF ARITHMETIC IMBALANCE IN THE AMOUNT OUTSTANDING INCLUDING UNDISBURSED FROM ONE PERIOD TO THE NEXT. THE MOST COMMON CAUSES OF IMBALANCES ARE CHANGES IN EXCHANGE RATES AND TRANSFERS OF DEBTS FROM ONE CATEGORV TO ANOTHER IN THE TABLE.  -35- Table A14 1986 SOCIAL INDICATOR DATA SHEET NEPAL Reforence Groups (MAE) Recant Low-income mid income 1948 1973 Eutimate LateoS Pee Asia & Poe LIlOR FORCEZ ..... Total Labor Forco (thou) 1144.6 1071.9 7521.9 Female (%) 40.1 39.2 9.3 34-.2 34.0 Agriculture ( 94.1 93.6 93.0 a 60.6 13.3 InduOtry (% 1. 1.0 0.68 15.6 16,6 Participation rate (%): Total 49.7 40.2 46.7 41.0 30.o male 59,4 17.0 56.4 53.1 10.7 Fema le 40.0 30.3 36.9 29.4 26.0 Age pdepamonCy ratio 0.0 0.8 0.9 0.7 0.7 HOUSING Average S61a ot hOu26holO: Total .. 8.5 Urban 6.4 .. Rural . .. PercentaeO of dwellings With electricity: Total .. 3.0 Urban 30.2 .. .. Rural .. .. EDUCATION Emroll ment rates: Primary: total 20.0 26.0 73.0 04.0 109.1 Male 36.0 44.0 100.0 104.2 111., Female 4.0 0.0 43.0 78.7 107.3 ecaOnaa)'y: Yotal 1.0 10.0 22.0 33.0 47.8 male 9.0 16.0 34.0 40.5 50.2 Female 2.0 3.0 10.0 24.7 44.7 Pupil-Teacher ratio: Primary 2.8 . 20.0 45.7 38.2 29.6 Secondary 17.6 37.3 26.3 10.2 21.0 Pupils reaching grade (X) .. .. .. 56.2 74.6 INCOIE, CONSUMPTION. AM POVERTY Energy consumption per cap. (kg Of oil eQUivalent) 9.7 9.4 19.5 310.5 510.2 Percentage of private income recoiveo by: Highest 10% of households .. 46.5 Itignest 20% .. 59.2 Lowost 20% .. 4.6 Lowest 40% .. 12.6 get. absolute poverty income level (US$ per Capita): Urban .. .. 95.0 .. 181.0 Rural 45.0 t. 135.6 Est. pop. below absoluto poverty Income level (%) Uron .. .. 55.0 b .. 27.0 Rural .. .. 61.0 a .. 43.0 PasseOger carS/thou pop. 0.3 .. .. 0.9 5.7 Nowspaper circulation (per thousand population) 2.7 3.2 6.8 28.4 62.7 EPO .July 1916 noet age ~"*Os e oom.i.oe w.'ptw CoUattc etw*0 Soeg an date ve4,I00it and to *nt unIlorm UnIoa gtosg *o. 10m M g to Setwosl 20 d ea . lg73 ggwsea t070 Ott ISM ga4 Kmot reciteat ovaio 40lvag 108 *ad l a. 1050 6. 1$70  f. I, , Ih I a9w > 82 830 840 * ~~~~~~~~Tnis map has been prepared by The Workl 8ank s slagi excluswvely, for fhi ~~~Nh ~~~~~the ieadeti6 andis e~, Iusnrey ofo the internal use of The World BartA antd, fnaW' e Carpvatan the denoninnlons used and te boundares shown 00~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~P on4 the part of The World flank and the hnternatonal Finance Corpom on the ivg3l status of any letenor or any endorsement or acceptance of Vandeldhuro",T RA soiow ,' lp 'X5 o {t ~~~~~~ N~~~~~~~ ODandAura ~ Noolan _~~ . _ v I I T E P A ~' Bhoirowo 0 o 20 40 60 80 100 120 140 160 KILOMETERS 0 20 40 60 80 100 MILES 810 820 3 848  I___________________________I_________________________ IBRD 10154F NEPAL866* ( APRIL 191 N E P A L P ITN' jC H I N A me Wernatomi A.-/~~~~~~IEA.7 On NO dol ot G E OPGEOPHYSICAL 300E PAt -ais anylildgient30 ct ch boundanes ELEVATION IN METERS: .BANGIIA Above 4,000 INDIA 1,000 -4,000 Below 1,000 Arabian / Bay of , . . Sea \ 1 Bengal I A Mountain peaks i;'-~ ~Major rivers Internotionol boundaries I LANKA 87