Nepal - Country assistance strategy progress report : Chairman's concluding remarks

NEPAL: COUNTRY ASSISTANCE STRATEGY PROGRESS REPORT CHAIRMAN'S CONCLUDING REMARKS Meeting of Executive Directors December 19, 2002 The Executive Directors welcomed the Country Assistance Strategy Progress Report for Nepal and appreciated its assessment of the challenges facing the country. Directors welcomed the progress being made in the implementation of a wide range of reforms, particularly in the areas of governance, banking, and public expenditure management. They appreciated recent Govermnent measures to improve the management of public resources, prioritize development programs, strengthen public service delivery, and enhance accountability. However, Directors also expressed concern about the current security situation, continued political uncertainty, and challenges in the implementation of the development agenda. Directors therefore encouraged the authorities toward early completion of the PRSP paying particular attention to issues of social exclusion and the lack of adequate growth and employment generation. Directors were broadly supportive of the CAS Progress Report and agreed that the objectives of the 1998 CAS remain largely valid. They appreciated IDA's intensive engagement in Nepal and agreed that there is a window of opportunity accompanied by the need to communicate effectively the rationale for the Bank's position, but some Directors expressed concern at the proposed move to a base case lending scenario. Some Directors also stressed that it was premature to consider adjustment and programmatic support to Nepal at this time and noted that the shift to such approaches should be well justified. Directors asked IDA to follow a cautious approach and closely monitor the Government's concrete progress in implementing the reforms. Directors noted the strong focus on governance in the CAS, but remained concerned about this issue, especially with regard to corruption and the inability to provide basic services in rural and remote areas. Directors also stressed the importance of strengthening institutional capacity and expediting progress on decentralization and civil service reform. Directors asked that IDA focus more on financial sector reform, agricultural development, and rural growth. Directors emphasized the need for a stronger momtoring and evaluation framework and urged IDA to develop clear performance indicators and concrete triggers in the next full CAS. Directors welcomed the continued effort to improve coordination with all development partners and urged IDA to improve aid coordination further within the context of a strong country ownership. Finally, Directors urged IDA to carry on extensive consultations, including with the private sector, when preparing the next CAS.