Syndicate content

Financial Sector

Nepal's Paradox: When Good is Not Good Enough

Johannes Zutt's picture

Nepal needs to fix its budget process, remove hurdles to infrastructure development and cut down excess liquidiity.



At first glance Nepal’s economic fundamentals appear sound. Economic growth this year is expected to recover to 4.5%, after a lackluster FY13. On the fiscal and external fronts, indicators are well in the green. This year again, Nepal is likely to be the only country in South Asia to post a budget surplus (0.3% of GDP). Continued growth in revenue mobilization and higher grants will more than make up for the increase in government spending. In FY14, public debt is expected to fall below 30% of GDP, and Nepal’s risk of debt distress may fall from a “moderate” rating to “low”.

Unlike other South Asian countries, Nepal has remained largely unscathed by global monetary tightening, reflecting its limited integration into global financial markets as well as its healthy external balances. Nepali analysts often highlight the growing trade deficit as a cause for concern, but remittances (projected at over 30% of GDP) should push the current account to a comfortable surplus position of 2.4% of GDP.

The only apparent dark spot is inflation, which remains stubbornly high. With inflation close to double digits in January (year-over-year), it appears unlikely that the NRB’s target of 8.5% will be reached.

In short, Nepal appears to be doing well.  Many European countries today can only dream of posting similar growth, fiscal or debt numbers. So what is the problem?

Apr 11, 2014: This Week in #SouthAsiaDev

Liana Pistell's picture
We've rounded up 39 tweets, posts, links, and +1's on South Asia-related development news, innovation, and social good that caught our eye this week. Countries included: Bangladesh, Bhutan, India, NepalPakistan, and Sri Lanka. For regular #SouthAsiaDev updates, follow us on Facebook and Twitter

The Laffer Curve Befriends Bangladesh’s Financial Corporates

Zahid Hussain's picture



Tax revenue growth in Bangladesh this year has been one of the lowest in recent years.  There is now demand for a cut in corporate income tax rate with the forthcoming FY15 budget.[1]  Is this a good idea from a fiscal point of view?
 
Whether or not a tax-cut will increase or lower tax revenues depend on the tax rates and the tax system in place. If tax rates are in the prohibitive range, a tax cut will result in increased tax revenues. Arthur Laffer distinguished between the arithmetic effect and the economic effect of tax cuts. The arithmetic effect means that a lowering of the tax rate will result in lower tax revenues by the amount of the decrease in the rate. The economic effect identifies a positive impact of lower tax rates on work, output and employment which expand the tax base. If tax rates that are currently in the prohibitive range are lowered, the economic effect of a tax cut will outweigh the arithmetic effect and revenue collection will increase with tax cut.[2] 

“Grow Now Clean Up Later” No Longer an Option for India

Muthukumara Mani's picture

India’s stellar economic performance during the past decade has brought immense benefits to the people. Emmployment opportunities have increased, enabling millions to emerge from poverty.

But rapid growth has been clouded by a degrading environment and a growing scarcity of natural resources. Today, India ranks 155th among 178 countries accounting for all measurable environmental indicators, and almost dead last in terms of air pollution. What’s more, more than half of the most polluted cities in the G-20 countries are in India. The deteriorating environment is taking its toll on the people’s health and productivity – and costing the economy a staggering Rs. 3.75 trillion each year (US$80 billion) - or 5.7 percent of GDP. So, does growth – so essential for development – have to come at the price of worsened air quality and other environmental degradation? Fortunately, India does not have to choose between growth and the environment.

This Week in #SouthAsiaDev

Liana Pistell's picture
We've rounded up 15 Tweets, posts, links, and +1's on South Asia-related development news, innovation, and social good that caught our eye this week. Countries included: Bhutan, Bangladesh, India, Nepal, Pakistan, Sri Lanka. For regular #SouthAsiaDev updates, follow us on Facebook and Twitter

Bangladesh: Resilience and Long Term Goals

Lea Gimenez's picture

Bangladesh was born on December 16 1971, following a devastating war that cost the lives of 3,000,000 people. They were victorious in their fight for independence, yet the prospects of the Bangladeshi people living in the 70’s were disheartening, earning it the now rather infamous connotation of a basket case, as Henry Kissinger called it back in 1971. Emerging from the rubbles left by the war, the resilient Bangladeshis began the rebuilding of their newly established nation. Economic growth was slow to take off, and it rebounded to the pre-war level about twenty years later, in the 90’s. Yet, it was after the 90’s that the country began to attain palpable progress and only over the 2000-2010 decade that the country achieved great poverty reduction. The depth-of-poverty MDG target of 8 percent was attained five years ahead of schedule, and Bangladesh was set in the right path for achieving the first MDG goal of halving the poverty headcount to 28.5 percent by 2015.

How can regional integration improve access to finance in South Asia?

Sarmad Shaikh's picture

South Asia is the least integrated region in the world. Intra-regional trade in South Asia is less than 2% of GDP compared to over 20% in East Asia. Labor mobility and regional travel is minimal, with few exceptions. Even remote communication is low – only 7% of international telephone calls in South Asia are to countries within the region, compared to 71% for East Asia. The case for closer integration has remained strong for a while now, and it is refreshing to see that some movement, albeit watchful, in addressing some of the region's deep rooted political economy issues, particularly between India and Pakistan.

The discussions around closer integration have centered on energy, trade, connectivity and stability. All of these offer strong potential to enhance growth in the region. However, financial sector integration overall, and access to finance in particular, hardly ever make it to the agenda of regional integration forums and deliberations. This is unfortunate, because the region has a long way to go in providing adequate access to financial services and insurance products, especially to the vulnerable segments of the population. Given that South Asia is home to more than half a billion of the world’s poor, this becomes a poverty reduction goal as much as a financial inclusion goal.

Creating an Ecosystem for Sustainable Financial Inclusion through Community Institutions

Parmesh Shah's picture

Bihar, a state in Eastern India has more than 100 million inhabitants and is India’s second poorest state. Ninety percent of the population lives in rural areas and the state has lagged behind in increasing access to finance in these areas. The credit-to deposit ratio of Bihar at 37% (an indicator of availability of credit in peri-urban and rural areas) is one of the lowest in India.

Jeevika, a program jointly supported by the World Bank and Government of Bihar, has demonstrated that investments in community institutions can deliver significant results. Investments in community institutions have helped them mature and become an institutional platform for the poor enabling them to demand better services from the public sector, improve access to finance from commercial banks and enhance their existing livelihoods.

Rising Tides Raise Some Boats More Than Others

Mabruk Kabir's picture

Like a Bollywood dance sequence, South Asia’s growth numbers tend to dazzle. It is the second-fastest-growing region in the world after East Asia. But behind the glamour lies a paradox. Despite robust economic growth, the total number of people living in poverty in South Asia has not fallen fast enough. Today, there are more poor people living under $1.25 a day in South Asia than in Sub-Saharan Africa.

Social indicators are lagging as well. South Asia has the highest rates of malnutrition in the world, with 250 million children undernourished. More than 30 million children still do not go to school. Gender discrimination remains a scar. Women’s labor-force participation in the region is among the world’s lowest, boys outnumber girls in school enrollment, and legal and judicial systems still do not address systemic gender violence.

Voices of Youth: What Does India Need to Get Back to a High Growth Trajectory?

Amrita Chowdhury's picture

India today is the fourth largest economy in the world. But for the country to sustain a growth rate of close to 6%, it remains vulnerable to the vicissitudes of global investors. It’s time to ponder: why it is not the other way round? How can India reach a position where we not only follow the rise and fall of global economic forces but also lead the way in sustaining the global economy? This is my dream.

Improving Ongoing Flagship Programs:
-The monitoring of all flagship projects should be improved right from the Gram Panchayat level to the state and central level.
-Models need to be developed for every flagship program, success factors studied, and implementation aligned with the specific needs of each state.
-All program implementation officers should be trained by those who have worked in successful programs. Pay should be linked with performance.
-Resource reallocation should depend on progress and work load.
-All unsuccessful programs should be analyzed to understand the main causes for failure and alternatives planned.
-Benchmark studies should be conducted to identify critical indicators for development in education, health and infrastructure and year on year progress checked.

Pages