Nepal
- Total external debt: $3.285 billion (World Bank, 2007)
- Total external debt payments: $117 million (World Bank, 2007).
- Population: 27.1 million (World Bank, 2007)
- Percentage of adults who can read and write: 48.6% (HDR 2005)
- Average life expectancy: 62.6 years (HDR 2005)
- HIV prevalence: 0.5% (HDR 05)
- Total health spending: 1.5% of GDP (HDR 04)
- Total spending on debt service payments: 1.58% of GDP
- Annual GDP: $7.4 billion (HDR 2005)
DROP THE DEBT FAST
Nepal is the focus of the Drop the Debt Fast on Sunday 13 April, when it is also Nepali New Year.
Background information
With the world's highest mountain, Everest, and beautiful scenery and wildlife, Nepal has great potential as a tourist destination. But it faces environmental, social and political challenges as well as high levels of poverty. Nepal has a distinctive Hindu and Buddhist culture; most of the population depend on agriculture, and around 40% of Nepalis are estimated to live in poverty.
Political history
Nepal has spent the majority of its history under an hereditary monarchy. Protests led to the establishment of democracy in 1991, which having been suspended twice, was restored in 2006. A Maoist insurgency has caused turmoil and unrest throughout the past decade, but since negotiations in 2006 there has been a cessation of hostilities. The country is now striving to overcome the legacy of this period, and to rebuild its economy and democracy.
Where has the debt come from?
Nepal is one of the poorest countries in the world, with a per capita income of just $290. The social and political unrest of recent times has hampered economic growth, and also caused large-scale migration, as people have fled to neighbouring countries to avoid the violence and abject poverty. Nepal has been heavily dependent on aid, and has external debt is $3.3 billion, the vast majority of which is to multilateral lenders, including $1.4 billion to the World Bank, who started lending to Nepal in 1969. This lending has been linked to macro-level, as well as sector-level, reforms, which are now tied together in Nepal’s Poverty Reduction Strategy, including the usual open-market liberalising agenda of the Bank. Although the Bank does lend for essential services such as water, health and education, the two sectors that the Bank currently lends most money to Nepal for are the financial sector, and energy and mining.
Debt cancellation status
Nepal is officially classed as a low-income country by the World Bank. It is potentially eligible for the Heavily Indebted Poor Countries initiative and the Multilateral Debt Relief Initiative but it has not yet met the qualification criteria, which involves adherence to World Bank and IMF policy reforms and programmes. It is also deciding whether it wants to go through the conditions and lack of country ownership required. Nepal has qualified for additional debt assistance from the UK, which cancels the UK’s share of Nepal’s debts to the World Bank.
The New Economics Foundation calculates that Nepal requires 100% debt cancellation in order for the government to meet the basic needs of its citizens, such as health, education and infrastructure, without taxing those living below an ethical poverty line of $3 a day.
Sources:
World Bank country information, IMF country information, New Internationalist country profile,
BBC country profile.
Last updated: April 2008
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