Rich countries attain record human development, but half of the poorest have gone backwards

Uneven development progress is leaving the poorest behind, exacerbating inequality, and stoking political polarisation on a global scale. The result is a dangerous gridlock that must be urgently tackled through collective action, according to a new report released today by the United Nations Development Programme (UNDP).

The 2023-24 Human Development Report (HDR), titled 'Breaking the Gridlock: Reimagining cooperation in a polarised world', reveals a troubling trend: the rebound in the global Human Development Index (HDI) – a summary measure reflecting a country’s Gross National Income (GNI) per capita, education, and life expectancy – has been partial, incomplete, and unequal.

The HDI is projected to reach record highs in 2023 after steep declines during 2020 and 2021. But this progress is deeply uneven. Rich countries are experiencing record-high levels of human development while half of the world’s poorest countries remain below their pre-crisis level of progress.

Global inequalities are compounded by substantial economic concentration. As referenced in the report, almost 40 per cent of global trade in goods is concentrated in three or fewer countries; and in 2021 the market capitalisation of each of the three largest tech companies in the world surpassed the Gross Domestic Product (GDP) of more than 90 per cent of countries that year.

“The widening human development gap revealed by the report shows that the two-decade trend of steadily reducing inequalities between wealthy and poor nations is now in reverse," head of the UN Development Programme Achim Steiner said, "Despite our deeply interconnected global societies, we are falling short. We must leverage our interdependence as well as our capacities to address our shared and existential challenges and ensure people’s aspirations are met."

“This gridlock carries a significant human toll, he said, adding that the failure of collective action to advance action on climate change, digitalisation or poverty and inequality not only hinders human development but also worsens polarisation and further erodes trust in people and institutions worldwide.

The report argues that advancing international collective action is hindered by an emerging ‘democracy paradox’: while 9 in 10 people worldwide endorse democracy, over half of global survey respondents express support for leaders that may undermine it by bypassing fundamental rules of the democratic process, as per data analysed in the report. Half of people surveyed worldwide report having no or limited control over their lives, and over two-thirds believe they have little influence on their government’s decisions.

Political polarisation is also a growing concern with global repercussions. Along with a sense of powerlessness, report authors say, it is fuelling inward-turning policy approaches – starkly at odds with the global cooperation needed to address urgent issues like the decarbonisation of our economies, misuse of digital technologies, and conflict. This is particularly alarming in light of 2023's record-breaking temperatures, which emphasise the immediate need for united action to tackle the climate crisis, or in the advent of artificial intelligence as a new and fast-evolving technological frontier with little or no regulatory guard rails.

The report highlights that deglobalisation is neither feasible nor realistic in today’s world and that economic interdependence remains high. It points out that no region is close to self-sufficiency, as all rely on imports from other regions of 25 per cent or more of at least one major type of goods and services.

"In a world marked by increasing polarization and division, neglecting to invest in each other poses a serious threat to our wellbeing and security," Steiner said, adding that protectionist approaches cannot address the complex, interconnected challenges we face, including pandemic prevention, climate change, and digital regulation. "Our problems are intertwined, requiring equally interconnected solutions. By adopting an opportunity-driven agenda that emphasises the benefits of the energy transition and of artificial intelligence for human development, we have a chance to break through the current deadlock and reignite a commitment to a shared future."

The report emphasises how global interdependence is being reconfigured and calls for a new generation of global public goods. It proposes four areas for immediate action:

- planetary public goods, for climate stability, as we confront the unprecedented challenges of the Anthropocene;

- digital global public goods, for greater equity in harnessing new technologies for equitable human development;

- new and expanded financial mechanisms, including a novel track in international cooperation that complements humanitarian assistance and traditional development aid to low-income countries; and

- dialling down political polarisation through new governance approaches focused on enhancing people's voices in deliberation and tackling misinformation.

In this context, multilateralism plays a fundamental role, the report argues, because bilateral engagements are not able to address the irreducibly planetary nature of the provision of global public goods.

Low-income country debt rises to record $860 billion

Governments around the world responded to the Covid-19 pandemic with massive fiscal, monetary, and financial stimulus packages. While these measures were aimed at addressing the health emergency, cushioning the impact of the pandemic on the poor and vulnerable and putting countries on a path to recovery, the resulting debt burden of the world’s low-income countries rose by 12 per cent  to a record $860 billion in 2020, according to a new World Bank report.

Even prior to the pandemic, many low- and middle-income countries were in a vulnerable position, with slowing economic growth and public and external debt at elevated levels. External debt stocks of low- and middle-income countries combined rose by 5.3 per cent in 2020 to $8.7 trillion, according to the new International Debt Statistics 2022 report, which encompasses approach to managing debt is needed to help low- and middle-income countries assess and curtail risks and achieve sustainable debt levels.

"We need a comprehensive approach to the debt problem, including debt reduction, swifter restructuring and improved transparency," World Bank Group president David Malpass said, adding that sustainable debt levels are vital for economic recovery and poverty reduction.

The deterioration in debt indicators was widespread and impacted countries in all regions, it reads, adding that across all low- and middle-income countries, the rise in external indebtedness outpaced Gross National Income (GNI) and export growth. "Low- and middle-income countries’ external debt-to-GNI ratio (excluding China) rose to 42 per cent in 2020 from 37 per cent in 2019 while their debt-to-export ratio increased to 154 per cent in 2020 from 126 per cent in 2019."

In response to the unprecedented challenges posed by the pandemic and at the urging of the World Bank Group and the International Monetary Fund (IMF), in April 2020, the G20 launched the Debt Service Suspension Initiative (DSSI) to provide temporary liquidity support for low-income countries. The G-20 countries agreed to extend the deferral period through the end of 2021. In November 2020, the G20 agreed on a Common Framework for Debt Treatments beyond the DSSI, an initiative to restructure unsustainable debt situations and protracted financing gaps in DSSI-eligible countries.

Overall, in 2020, net inflows from multilateral creditors to low- and middle-income countries rose to $117 billion, the highest level in a decade. Net debt inflows of external public debt to low-income countries rose by 25 per cent to $71 billion, also the highest level in a decade. Multilateral creditors, including the IMF, provided $42 billion in net inflows while bilateral creditors accounted for an additional $10 billion.

"Economies across the globe face a daunting challenge posed by high and rapidly rising debt levels,” senior vice president and chief economist of the World Bank Group Carmen Reinhart said, adding that policymakers need to prepare for the possibility of debt distress when financial market conditions turn less benign, particularly in emerging market and developing economies.

Greater debt transparency is critical in addressing the risks posed by rising debt in many developing countries. To facilitate transparency, International Debt Statistics 2022 was expanded to provide more detailed and disaggregated data on external debt than ever before. The data now gives the breakdown of a borrowing country’s external debt stock to show the amount owed to each official and private creditor, the currency composition of this debt, and the terms on which loans were extended, according to the World Bank. "For DSSI-eligible countries the dataset was expanded to include the debt service deferred in 2020 by each bilateral creditor and the projected month-by-month debt-service payments owed to them through 2021."

International Debt Statistics (IDS) is a longstanding annual publication of the World Bank featuring external debt statistics and analysis for the 123 low- and middle-income countries that report to the World Bank Debt Reporting System (DRS).

Since the start of the Covid-19 pandemic, the World Bank Group has deployed over $157 billion to fight the health, economic, and social impacts of the pandemic, the fastest and largest crisis response in its history. The financing is helping more than 100 countries strengthen pandemic preparedness, protect the poor and jobs, and jump start a climate-friendly recovery. The bank is also supporting over 50 low- and middle-income countries, more than half of which are in Africa, with the purchase and deployment of Covid-19 vaccines, and is making available $20 billion in financing for this purpose until the end of 2022.

Nepal to graduate in 2026 to developing country

The United Nations Committee for Development Policy (CDP) has recommended for Nepal’s graduation from the Least Developed Country (LDC) category with preparatory period of five years. "This means that the graduation of Nepal would be effective in 2026," according to a press note issued by the Permanent Mission of Nepal in New York. 

The CDP – in its triennial review held from February 22 to 26 – made the recommendation as Nepal had met the criteria for graduation for three consecutive reviews. Out of three indices which the CDP considers while deciding on the question of graduation – GNI per capita, Human Assets Index (HAI), and Economic and Environmental Vulnerability Index (EVI) – Nepal met the thresholds for the latter two, thus being eligible for graduation.

Though Nepal had met the graduation criteria for the first time in 2015, the CDP in its 2018 triennial review recommended to defer the graduation on the request of the government considering the setback on Nepal’s economy by the 2015 earthquake and other disasters in the following years.

Nepal  – seeking a sustainable growth and graduation  – had requested the UN to delay the graduation till 2021. The then vice chair of the National Planning Commission (NPC) Dr Swarnim Wagle recommended the government to delay the graduation as Nepal has long way to go to meet the GNI per capita requirement, which is considered the milestone for a sustainable graduation. The government – led by prime minister Sher Bahadur Deuba  – wrote letter to the UN seeking postponement.

This time too, due to the extraordinary challenges posed by the Covid-19 pandemic and based on the request of the government, the normal preparatory period of three years has been extended to five. In addition to Nepal, Bangladesh and Lao People’s Democratic Republic have also been recommended for graduation by the CDP.

The CDP’s recommendation is an important milestone in Nepal’s development trajectory towards the national ambition of ‘Prosperous Nepal, Happy Nepali’ and the nation’s development aspirations as reflected in the fifteenth Periodic Plan, claims the press note. 

The recommendation needs to be endorsed by the United Nations Economic and Social Council (ECOSOC) which shall then be ‘noted’ by the UN General Assembly later this year. Nepal will continue to have access to all LDC-specific support measures until 2026. The preparatory period of five years is given to provide adequate time for a smooth transition during which Nepal would be enabling itself to offset the loss of support measures exclusive to the LDCs. But a section of Nepal's business fraternity is still reluctant as they think that without improving the capacity and trade logistic cost, the loss of LDC-specific support measures will hit the country's economy. 

"Nepal scored 72.1 in the HAI but the threshold being above 66, and 25.5 in the EVI, the threshold being below 32, whereas Nepal has $1027 Gross National Income, while the threshold is $1230. "The government is planning to announce $1400 as the gross national income on the basis of revised indices," according to National Planning Commission. 

The private sector is however not comfortable with graduation. Though graduation will increase Nepal's reliability and credibility in the international arena for keeping its words, the country will lose the benefits it is getting due to least developed country (LDC).

Nepal currently enjoys duty free and quota free access to the Canada and US markets due to its LDC status. With graduation -- in five years -- Nepali will lose competitiveness in the international market as it has to compete with the goods produced by the great manufacturing giants.

Likewise, Nepal also has to face a gamut of challenges to make the recommendation irreversible during the review. With the current unstable politics and economy, Nepal must chart out a national level strategy to make Nepali produce more competitive. The planning commission, however, claimed that it is charting out the five-year strategy to bring the policy shift. But the government needs to be serious in dcreasing the cost of trade and private sector be serious on market competition. The resource crunch country will find it difficulty to even prepare the budget, as it is going to lose large chunck of aid from development partners apart from dutyfree quotafree market access.  

Nepal should start negotiations with the EU, India, China, Japan and other countries so that the trade will not be hampered. But with the right strategy and planning during these five years, Nepal could mitigate the challenges. According to the National Planning Commission, Nepal also needs to conduct a fresh review of the scheduled graduation plan considering the impact Covid-19 pandemic and must prepare a transition strategy in cooperation with trade and development partners to avoid adverse impacts from the country’s graduation as it risks losing preferential treatment and as the Covid pandemic has had a profound impact on global economy, with new risks of rising trade and export costs impacting external markets, and the need for more concessional aid, including debt relief, to overcome multiple crises.

Nepal graduates to ‘lower-middle-income’ country: World Bank

Nepal has officially graduated to a ‘lower-middle-income’ country from a ‘low-income’ country, according to the World Bank.
The multilateral development partner – in its latest country classifications by income level report published yesterday – also claimed that the report has, however, taken account of the income classifications through the use of GNI of 2019, which does not reflect the impact of Covid-19.
The World Bank updates the classifications – annually on July 1 – on the basis of gross national income (GNI) per capita. Nepal witnessed GNI per capita rise to $1,090 in 2019, from $960 in 2018, surpassing the $1,036 threshold for lower-middle-income countries in 2020.
According to the World Bank, countries with GNI per capita from $1,036 to $12,535 fall in the category of middle income category, which has further been sub-categorised as lower-middle income ($1,036 to $4,045) and upper-middle income ($4,046 to $12,535) countries. Likewise, countries with GNI per capita of over $12,535 are considered high income, according to the World Bank, which assigns the global economies to three income groups; low, middle, and high-income countries. The countries with GNI per capita of below $1,036 are considered low income.
According to the World Bank, the economies are categorised on the basis of economic growth, inflation, exchange rates, and population growth influence GNI per capita. GNI is the total amount of money earned by the country. GNI is also used to measure the country’s wealth. The income includes the country’s gross domestic product (GDP) and the earnings it received from overseas sources including remittance.
Since the classification is based on GNI of 2019, the GNI per capita may reduce in 2020 and Nepal might again fall into the lower income country status, due to coronavirus that has halted the economic activities hurting also the remittance, apart from gross domestic product (GDP).
Nepal has, however, aimed at graduating to the middle-income country status by 2022.

Human development in Nepal stagnates

Nepal’s HDI value for 2018 is 0.579 – which put the country in the medium human development category – positioning it at 147 out of 189 countries and territories – one rank up from last year’s 148 position, revealing that the country's status in human development almost remained stagnant. The rank is shared with Kenya. The report also reveals that Nepal has just maintained its position in the medium human development with the threshold of 0.55-0.69 points.
Nepal’s 2018 HDI of 0.579 is below the average of 0.634 for countries in the medium human development group and below the average of 0.642 for countries in South Asia. From South Asia, countries which are close to Nepal in 2018 HDI rank and to some extent in population size are Afghanistan and Sri Lanka, which have HDIs ranked 170 and 71 respectively .
Between 1990 and 2018, Nepal’s HDI value increased from 0.380 to 0.579, an increase of 52.6 per cent. Between 1990 and 2018, Nepal’s life expectancy at birth increased by 16.1 years, mean years of schooling increased by 2.8 years and expected years of schooling increased by 4.7 years. Likewise, Nepal’s GNI per capita increased by about 130.5 per cent between 1990 and 2018, according to the report that was launched simultaneously from Kathmandu and seven provinces in Nepal today.
Despite global progress in tackling poverty, hunger and disease, a ‘new generation of inequalities’ indicates that many societies are not working as they should and Nepal is not an exception, according to a new human development report. “The old inequalities were based on access to health services and education whereas the new generation of inequalities is based on technology, education and the climate, according to the United Nations Development Programme’s (UNDP) report.
“Previously, we talked about wealth as a major driver for inequality but now, countries like Nepal are in another inequality trap and that concerns technology and education,” finance minister Dr Yuba Raj Khatiwada said launching the report.
While South Asia was the fastest-growing region, with 46 per cent growth, in the 1990-2018 period, Nepal’s human development index (HDI) rose from 0.380 to 0.579, an increase of 52.6 per cent, the report reads, adding that people are living longer, on average, are more educated and have greater incomes. “For example, between 1990 and 2018, Nepal’s life expectancy at birth increased by 16.1 years to 70.5 years, mean years of schooling increased by 2.8 years and expected years of schooling increased by 4.7 years.”
Likewise, Nepal’s Gross National Income (GNI) per capita also increased by about 130.5 per cent between 1990 ($1,192) and 2018 ($2,748). Nepal, however, is still below the average value of 0.634 for countries in the medium human development group and below the average of 0.642 for countries in South Asia. “Nepal lags behind most South Asian countries, ranking above Pakistan (152) and Afghanistan (170). But the report, which ranks countries on their average achievement in key dimensions of human development, like life expectancy, education and per capita income, reveals that Nepal trails behind Sri Lanka (71), the Maldives (104), India (129), Bhutan (134) and Bangladesh (135).
Despite progress in most human development indicators, the report also shows that Nepal has a poor Gender Inequality Index (GII) with a value of 0.476 – a huge gap between the HDI for men and women in the country – ranking it 115 out of 162 countries. The HDI for men is 0.612 while that for women is 0.549.
“The gender equality gap is so huge that if we started working to reducing the gap now, it will take us 202 years,” resident representative of the UNDP Ayshanie Medagangoda-Labe, said at the report launch. “There are also questions about whether the artificial intelligence era will further increase inequality,” she said, adding, “Yes, but the choice is in our hands.”
The report has also pointed out that prevailing inequality is threatening human development.
Likewise, some 33.5 per cent of parliamentary seats – in Nepal – are held by women, but just 29 per cent of adult women have reached at least a secondary level of education, compared to 44.2 per cent of males, according to the report. “For every 100,000 live births, 258 women die from pregnancy-related causes.”
But female participation in the labour market is 81.7 per cent, compared to 84.4 per cent for men.
Nepal’s HDI at 0.579 is a modest improvement but when the value is discounted for inequality, the index falls to 0.430, a loss of 25.8 per cent due to inequality in the distribution of the HDI dimension indices, the UNDP flagship report reads.
Likewise, in Nepal, some 34 per cent of the population – 9.96 million people – is multidimensionally poor while an additional 22.3 per cent is classified as vulnerable to multidimensional poverty (6.54 million people). Multidimensional poverty takes into account the various deprivations experienced by poor people in their daily lives like poor health and living standards, lack of education and living in areas that are environmentally hazardous.
The breadth of deprivation in Nepal – which is the average deprivation score experienced by people in multidimensional poverty – is 43.6 per cent. The Multidimensional Poverty Index, which is the share of the population that is multidimensionally poor, adjusted by the intensity of the deprivations, is 0.148, the report reads, adding that the multidimensional poverty with income poverty is measured by the percentage of the population living below $1.90 per day.
Norway, with HDI of 0.990, stands at first position, while Sri Lanka is ranked 71st among 189 countries.

Nepal ranks third in South Asian SDG index

Nepal has secured third position – among South Asian nations – in the Sustainable Development Goals (SDG) Index, indicating that the country is better-off in achieving the United Nations-backed targets within 2030 than many others in the neighbourhood, according to the SDG Index and Dashboards Report 2017 titled ‘Global Responsibilities: International Spillovers in Achieving the Goals’ released today.
Nepal trails Sri Lanka and Bhutan in the index, but has performed better than India, Bangladesh, Pakistan and Afghanistan, whereas the index has not covered the Maldives.
Although Nepal’s performance in the South Asia remains strong, it lags behind in the global index – which covers some 157 of the 193 UN member states – securing 105th position with an overall score of 61.6, according to the report. "The score indicates the country, on average, has travelled 61.6 per cent of the way towards attaining all the SDGs."
Although the latest report has placed Nepal in a better position than many other South Asian nations in terms of proximity to the global goals, the country still needs to make lots of efforts to meet targets related to ending hunger (Goal 2), promoting good health and well being (Goal 3), ensuring access to affordable and clean energy (Goal 7), and promoting decent work and economic growth (Goal 8), says the report jointly prepared by the Bertelsmann Stiftung, a German social responsibility foundation, and the Sustainable Development Solutions Network, a group that works with the UN to promote the SDGs.
Nepal also needs to put in lots of effort to build resilient industry, promote sustainable industrialisation and foster innovation (Goal 9), create sustainable cities and communities (Goal 11), and promote peace, justice and strong institutions (Goal 16).
The report acknowledges that poorer countries, like Nepal, tend to be closer to the bottom of the rankings, as they lack adequate infrastructure, and the mechanisms needed to manage key environmental issues that are the focus of other SDGs.
Also, rich countries tend to generate adverse 'spillovers' that hinder the ability of poorer countries to achieve the SDGs. "We assume that all high-income countries should aim for the internationally agreed threshold of providing 0.7 per cent of gross national income (GNI) in official development assistance,” it adds.
SDGs – a follow-up on Millennium Development Goals (MDGs), which expired at the end of 2015 – are a set of 17 goals and 169 targets covering a broad range of sustainable development issues. These goals have to be achieved by all UN member states by 2030.
One of the primary objectives of SDGs is to end poverty and hunger from the world. The SDGs also aim at promoting well-being of all the people, sustainable industrialisation, inclusive and sustainable economic growth, and employment and decent work for all.
Likewise, reducing inequality, making cities inclusive, safe and resilient, ensuring sustainable consumption and production patterns and taking urgent actions to combat climate change and its impacts are other goals.
The SDGs also aim at bridging all forms of inequality, raise access to basic public services, ensure access to justice and promote sustainable economic development. “For example, the high consumption levels, banking secrecy and tax havens, and weapons exports, by the rich countries may severely inhibit sustainable development in poorer and more vulnerable countries,” reads the report.
It calls for considerable global assistance to supplement national leadership, says the report. The assistance, according to the report, should come in many forms: foreign direct investment, global tax reform to enable the poor countries to fight tax evasion by international investors, technology sharing, capacity development, and more official development assistance.

Nepal to graduate from LDC by 2025: UN

Nepal is among the 16 countries that will graduate to the developing country status from the current Least Developed Country (LDC) category by 2025, according to a report by the UN agency.
The United Nations Conference on Trade and Development (UNCTAD) report states that Nepal is projected to graduate only in two criterion – human asset index (HAI) and economic vulnerability index (EVI) – of the three criterion. "If this is the case, this will be the first time that the income criterion has not been met at the time of graduation," says the report.
A LDC must have gross national income (GNI) per capita of $1,242 for graduation. Nepal needs to double from its current GNI that stands at $752,
"Nepal also has to boost economic growth to spur the income, one of the three criterion to graduate, though meeting the two criterion is enough to graduate," the Least Developed Countries Report 2016 'The Path to Graduation and Beyond: Making the most of the Process' noted.
The report also said that most of the countries, whose graduation is expected by 2024, have included graduation as an explicit goal in their development plans and programmes.
"Five of these countries – Nepal, Bangladesh, Bhutan, Laos and Myanmar – have set explicit timetables," it said. "Also of the 16 countries projected to graduate by 2025, only four – Afghanistan, Bhutan, the Lao People's Democratic Republic and Nepal, all in Asia – are landlocked."
According to senior economist at the UNDP Nepal Basudeb Guha-Khasnobis, the situation in Nepal has been improving in recent months. "If things move as according to the plan, Nepal could also meet the income criteria by 2022,” he added.
Nepal became eligible to graduate from LDC category as it met two criteria – HAI and EVI -- in 2015. Once a country is eligible, it is evaluated every three years to check the sustainability of the graduation. Guha is of the view that Nepal will sustain coming two triennal reviews by the Committee for Development Policy (CDP) slated for 2018 and 2021.
The National Planning Commission (NPC) had, in its 13th Plan, included a target of graduation by 2022, bringing forward from 2030 in the 12th Plan. The commission's approach paper on graduation by 2022 includes 'strategic directions and action' for each of the three criteria as well as for monitoring and evaluation.
A country is graduated from the LDC category not only on the basis of meeting three criteria – GNI per capita, HAI and EVI once, it also has to sustain thresholds for at least two criteria or reach double the GNI per capita threshold – income-only graduation – in two consecutive triennial reviews.
Graduation process is only the first milestone in a marathon of development, not the winning post of a race to escape the LDC category, Guha said, adding that it marks the end of a political and administrative process, not the completion of an economic or developmental process.
Guha said that economically how a country graduates is more important than when.
But some economists are of the view that the graduation will cut foreign development resources and preferential treatment that a country gets as LDC as it would reduce development finance, which becomes less concessional, and also access to climate finance may be reduced. Likewise, after graduation a country will also lose potential preferential market access that is estimated at $4.2 billion per year across LDCs as a whole.
However, Guha claims that the effect of losing preferential market access depends on coverage and structure of LDC – specific preferential schemes, product composition of exports, and distribution across markets and also fallback tariffs after graduation.
But a graduating country benefits from a grace period – normally three years – before graduation effectively takes place. This period, during which the country remains an LDC, is designed to enable the graduating state and its development and trading partners to agree on a 'smooth-transition' strategy, so that the planned loss of LDC status does not disrupt the socioeconomic progress of the country. A smooth-transition measure generally implies extending to the graduated country, for a number of years after graduation, a concession the country had been entitled to by virtue of LDC status.
However, Guha suggested Nepal to form national policy agenda to address macroeconomic policy frameworks combining stability with investment dynamism and employment generation, scaling up public investment – including projects that strategically address bottlenecks in the productive sector – increased fiscal space: improved tax systems, diversification of revenue sources and addressing illicit financial flows, improved access to credit and financial services, notably for farmers and SMEs, coupled with accelerated transformation of rural economies: upgrading agriculture, promoting non-farm activities for effective and sustainable graduation.
The UN has currently designated 48 countries as LDCs. The list of LDCs is reviewed every three years by the CDP – a group of independent experts reporting to the United Nations Economic and Social Council (ECOSOC). The CDP, in its report to ECOSOC, may recommend countries for addition to, or graduation from, the list of LDCs.
The UN report also notes that while the 48 LDCs comprise around 880 million people – accounting for 12 per cent of world population – they face such serious structural barriers to growth that they account for less than 2 per cent of world GDP and around 1 per cent of world trade.

Economic growth plunges to 13-year low at 0.77 per cent

The economic growth for the current fiscal year has squeezed to almost zero, according to the Central Bureau of Statistics (CBS).
Releasing the gross domestic product (GDP) estimate for the current fiscal year today, the CBS said that the economy will grow by a mere 0.77 per cent – which is a 13-year low – in the current fiscal year. In the fiscal year 2001-02, the country – under the King Gyanendra's rule – had recorded economic growth of 0.16 per cent. Likewise, the CBS has also revised last fiscal year's economic growth downward to 2.32 per cent from earlier estimation of 3.04 per cent.
The subpar monsoon that resulted in weak agricultural output, almost five months of economic blockade, and stalled reconstruction work in the aftermath of the last year's devastating earthquakes have pulled the economic growth down to a 13-year low, according to CBS director general Suman Raj Aryal.
The economy did not plunge into negative zone also due to better performance by the service sector including health and education sectors, he added.
The largest contributor to the economy, agriculture, is estimated to grow by only 1.14 percent, though its contribution to the economy is 31.19 per cent, whereas the lowest contributor – fisheries' sector – has just 0.5 per cent share in the economy.
The report also revealed that the total size of the economy is going to grow to Rs 2.25 trillion in the current fiscal year, from Rs 2.12 trillion in the last fiscal year.
Likewise, the largest contributors to the economy are agriculture (31.19 per cent); followed by wholesale and retail trade (14.23 per cent); real estate (9.16 per cent); transportation, communication and storage (8.42 per cent); construction (6.88 per cent); education (6.76 percent); and production (5.53 per cent) sectors, according to the CBS.
However, of the 15 sectors that are used to calculate the GDP growth, some six sectors are going to record negative growth in the current fiscal year.
Various national and international institutions have projected the Nepali economy to grow between -0.9 per cent and 2.2 per cent, whereas the government has in its white paper projected the growth at around 2 per cent, during the current fiscal year. The central bank had projected a negative growth for the economy whereas UNESCAP yesterday projected that the economy will grow by 2.2 per cent.
According to Aryal, various institutions are involved in making projetctions about GDP growth, but the CBS' projection is the authentic and most dependable one. "The CBS has projected the economic growth on the basis of nine months' data of the current fiscal year," he said, adding that the remaining 3 months could see some increment in economic activities, which could lead to improved economic growth.

Has gross national income increased?
Despite low economic growth, the CBS has projected an increment in per capita gross national income (GNI) to Rs 80,921 in the current fiscal year from last year's Rs 77,079. The increment of Rs 3,842 is 4.98 per cent compared to the last fiscal year, the CBS said. However, the increment in GNI per capita covers only half the inflation rate for the year, which is around 10 per cent, according to the central bank.

Savings lowest in last 22 years
Likewise, gross domestic savings as percentage of gross domestic product (GDP) is the lowest in the last 22 years, according to the CBS. The gross domestic savings as percentage of gross domestic product (GDP) is likely to stand at 5.26 per cent in the current fiscal year, as the country has failed to enhance its productive capacity. The figure is the lowest since fiscal year 1994-95.

Sectoral growth (compared to last fiscal year)
1. Agriculture and Forestry – 1.14 per cent
2. Fisheries – 11.76 per cent
3. Mining and quarrying – 6.54 per cent (negative growth)
4. Manufacturing – 9.86 per cent (negative growth)
5. Electricity, gas and water – 1.66 per cent (negative growth)
6. Construction – 3.98 per cent (negative growth)
7. Wholesale and retail trade – 1.13 per cent (negative growth)
8. Hotels and restaurants – 4.85 per cent (negative growth)
9. Transport, storage and communications – 2.55 per cent
10. Financial intermedeation – 3.30 per cent
11. Real estate, renting and business activities – 3.72 per cent
12. Public administration and defence – 5.78 per cent
13. Education – 6.69 per cent
14. Health and social work – 8.85 per cent
15. Other community, social and personal service activities – 5.60 per cent

Nepal's per capita to reach $2,500

Nepal has projected a more than three-fold increase in gross national income (GNI) in the next one-and-a-half-decade.
Nepal, under its Sustainable Development Goals (SDGs), has projected a per capita GNI of $2,500 by 2030 from the current $772, according to the national preliminary report on Sustainable Development Goals 2016-2030, drafted by the National Planning Commission (NPC).
GNI measures income received by a country both domestically and from overseas, including the remittance earnings that migrant workers – living and working abroad – send back home. For many countries like Nepal, money coming in from remittances is an important source of national income, adding to their GNI.
The projection is also based on Nepal's plan to graduate to developing countries status by 2022 from the current least developed country (LDC) status, and middle income country status by 2030.
However, the government needs to invest – in the country – double of what it is investing currently and help grow the economy by 8 per cent every year, if it is to achieve the target of achieving almost four-fold income growth.
Raising the income level and eliminating absolute poverty is one of the key SDG targets, according to vice chairman of the National Planning Commission (NPC) Dr Yuba Raj Khatiwada. Though eliminating poverty is almost impossible, Nepal targets eliminating the under $1.5-per day absolute poverty, he said, adding that the population below the national poverty line could be brought down to 5 per cent in the next 15 years.
Ending absolute poverty in Nepal by 2030 is an ambitious target, particularly given the reversals caused by the recent devastating earthquakes. "In the next six months, the planning commission will calculate the cost and financing needs to achieve the SDGs goals, including poverty elimination and income growth," he said.
Currently, a quarter of the population – or some 24.8 per cent – in Nepal is under the absolute poverty line, according to NPC. The government will also start formulating budgets from the next fiscal year 2016-17, keeping in mind the need to meet the above targets.
"Resource generation from domestic and international sources, the implementation capacity and distribution mechanism have to be made robust," he added. "Rise in income and distribution along with social security are key to the SDGs."
The SDGs, a follow-up on MDGs that started from January 2016, is the blueprint of long-term development strategy with the socio-economic and environmental focus on 17 targets. "It also targets on increasing access, utility and quality of services," according to director general of the Central Bureau of Statistics (CBS) Suman Aryal.
The NPC has come up with long-term governance and rights-based visions to achieve the targets including ending all types of poverty, food security and sustainable agriculture development, quality education to all, gender equality, and women empowerment.
Among other priority areas are enhancing access to energy supply, change in consumption and production modality, fighting climate change and setting up effective, inclusive and accountable institutions for incorporating all in social upliftment.
The NPC has also developed indicators based on the country’s needs rather than adopting global indices. The Millennium Development Goals (MDGs) – 2000-2015 – had set targets at low levels, and as a result, maximum targets had been met. Although the country has witnessed a remarkable change in the people’s living standards under MDGs, qualitative growth is still a far cry. Stating the maternal mortality rate was reduced to almost half to 415 per 100,000 live births during the MDG period, the SDG plans to ensure proper health service to all.
The SGDs will focus on generating employment opportunities, justifiable distribution of social security schemes, education system up to secondary level, agricultural productivity and health services in particular. Some other goals include reducing inequality within and among countries, making cities inclusive, safe, resilient and sustainable, ensuring sustainable consumption and production patterns, and taking urgent action to combat climate change and its impacts.
These goals, which have to be achieved by 2030, have potential to change the face of the country as they focus on bridging inequality of all forms, raising access to basic public services, ensuring access to justice and sustainable economic development.
The SGDs have considered infrastructure development as a fundamental factor for sustainable development and have targeted increasing hydropower generation capacity to 10,000-MW by 2030 from 818-MW in 2014. It has also envisaged increasing the industry’s share in the GDP to 25 per cent from 15 per cent in 2014.
Meanwhile, Nepal has also started advocating for easier access to technology through Technology Bank. Lately, developed countries have reduced aid for LDCs, while copyright and patent issues have made it utterly difficult for countries like Nepal to gain access to technologies available in the developed nations. "It calls for better coordination and cooperation between LDcs and developed countries, so that all the SDGs can be met within the deadline," he added.

What is GNI
According to the World Bank, GNI is the sum of value added by all resident producers plus any product taxes – minus subsidies – not included in the valuation of output, plus the net receipts of primary income – compensation of employees and property income – from abroad.

NPC mulling seven-year 14th plan

National Planning Commission (NPC) is mulling to make 14th 'five-year' plan seven year long.
During discussions on the Approach Paper for the 14th periodic plan today, some planning commission members proposed that the plan – that creates a structure, picks priority areas and sets targets for the country's economic development – be made a seven-year-long one for this time, according to planning commission vice chair Dr Govind Raj Pokharel.
"We have started discussions on the approach paper for the 14th plan from today," he said, adding that different members had put forward varied opinions.
The 14th periodic plan will start from the next fiscal year 2016-17.
Since, Nepal will have seven years to graduate to developing country from current Least Developed Country (LDC) status, some members proposed that we take this into account and align the periodic plan accordingly, Pokharel added.
Nepal is planning to graduate from its current LDC status to a developing country status by 2022.
Earlier, the planning commission had prepared Three-Year Interim Plans thrice due to prolonged political transition. The planning commission had brought three-year interim plans to align with constitution making process from the Constituent Assembly (CA). But historically, planning commission has been bringing five-year plan since almost six decades. But the planning commission has brought three year interim plans thrice since the second political movement of 2008.
The third Three-Year Interim plan (2013-14 to 2015-16) – also the 13th plan – aimed at preparing groundwork for Nepal to graduate to developing country status in the next 10 years from 2013 to 2022.
Though Nepal will technically graduate to developing country before 2022 – as it has already met two of the three criterion set for graduation – its sustainability has been under question, especially after the devastating earthquake of April 25, May 12  and series of aftershocks.
The earthquake floored many buildings – including world heritage sites, public buildings, schools, police posts and important infrastructure in addition to private buildings – pushing as many as a million people into poverty, according to the Post Disaster Needs Assessment (PDNA) report.
Out of the three criterion set by the United Nations Committee for Development Policy, Nepal has already met two – Economic Vulnerability Index (EVI) and Human Assets Index (HAI) – graduate to developing country. But it cannot meet per capita GNI threshold.

Nepal to graduate to developing country from LDC before deadline

Nepal is going to graduate 'technically' to developing country status from the current Least Developed Country (LDC) status before the deadline of 2022.
Nepal has met two – out of the three – criterion to graduate to the developing country, informed National Planning Commission member Swarnim Wagle.
Of the three, a LDC has to meet atleast two criterion – Economic Vulnerability Index (EVI) and Human Assets Index (HAI) – or one criteria that is per capita gross national income (GNI) – to graduate to the developing country, according to the  UN Committee for Development Policy. But for that a country’s per capita GNI should be twice the UN threshold that is $1,242. But, UN data revealed that Nepal’s per capita gross national income stands at $659, which is way below the UN threshold.
Nepal has met Economic Vulnerability Index (EVI) and Human Assets Index (HAI) to graduate to developing country, concluded the meeting of UN Committee for Development Policy – a body under the UN Department of Economic and Social Affairs – held in New York on March 23-27.
However, Nepal has failed to meet the first criteria that is per capita gross national income (GNI), which should be $1,242 or more, which is fixed by the UN for 2015, though it has met the two other criterion.
Human Assets Index (HAI) – that is the level of the human capital present in a country that includes indicators on gross secondary enrollment ratio, and under-nourishment, under-five mortality and literacy rates – needs to be 66 or above to be eligible for graduation. Nepal scored 68.7, which is 2.7 points more than the UN threshold.
Likewise, Economic Vulnerability Index (EVI) – that measures a country’s vulnerability to external economic and environmental shocks using the eight indicators – should be 32 or less for graduation. Nepal scored 26.8, which is below the UN threshold of 32.
"Since Nepal has met the two non-income criteria, it can graduate on technical grounds,” Wagle said, adding that Nepal is now under review. "Nepal will have to sustain these achievements till 2018, when the UN will conduct another review. If it is able to sustain the current achievement, the UN Economic and Social Council will forward the proposal on Nepal’s graduation to the UN General Assembly in 2018."
The country will then formally graduate to developing countries after three years by 2021, after formal decision by the UN General Assembly. However, graduation to developing country will make Nepal unfit to get benefit that it is receiving as a LDC. Thus Nepal needs to increase its competitive capacity and increase domestic production by investing more on physical infrastructure and industries.
The planning commission has reset the deadline to 2022 – bringing it down by eight years from 2030 – last year during the third three-year interim plan.
Nepal now needs to propel economic growth to sustain the achievements and elevate it to middle income country by 2030 from the current low income country, Wagle added.

Country plans to graduate from LDC by 2022

The National Planning Commission (NPC) has revised its targetted time frame of the country's planned graduation to a developed country from the current status of Least Developed Country (LDC) by eight years to 2022.
"Though the current Three Year Interim Plan (2010-13) has envisioned to graduate Nepal to a developed country in the next two decades, we could graduate by 2022," according to the chairman of the Election Council Khil Raj Regmi, who is also the chair of the planning commission.
A country falls under a Least Developed Country (LDC), if it has less than $905 three-year average GNI per capita (poverty) — as a country will graduate, if it exceeds $1,086 — lowest indicators of socioeconomic indicators including nutrition, health, education and adult literacy along with the lowest Human Development Index ratings, and economic vulnerability based on instability of agricultural production, exports of goods and services, economic importance of non-traditional activities, merchandise export concentration and handicap of economic smallness, according to the Committee for Development Policy of the UN Economic and Social Council that reviews the LDC criteria every three years.
According to Central Bureau of Statistics, the GNI per capital is projected at $721 — some $ 365 less to graduate — for the current fiscal year, whereas Nepal has also been improving in some of the human development indicators under the Millennium Development Goals (MDGs) in recent years.
Since the LDC category was started, only three countries have graduated to developing country status. The first country to graduate from LDC status was Botswana in 1994 followed by Cape Verde in 2007. Maldives became the third country to graduate to developing country status on January 1, 2011.
Currently, there are 14 countries from Asia and Pacific, apart from 34 from Africa, under the LDC group that Nepal is leading in the UN.
Apart from Nepal, Afghanistan, Bhutan and Bangladesh are other LDCs in SAARC.
As the planning commission is vacant currently, only the officiating members — finance minister, chief secretary, finance secretary and the secretary of NPC including chairman — were present in today's meeting that also decided to complete the homework for the third Three Year Interim Plan (2013-16) that will come into effect after mid-July as the current second Three Year Interim Plan will come to an end by mid-July.
The planning commission has remained vacant since April 22, after vice chair Deependra Bahadur Kshetry and three members resigned following the High Level Political Committee's decision to call back the appointees of the then Dr Baburam Bhattarai-led government.
In the absence of the vice chair and other members, it will be a Herculean task for NPC to prepare the strategy let alone finalise the draft of the third Three Year Interim Plan (2013-16), though the meeting also decided to work on it.
The planning commission has to call the meeting of Nepal Development Council to finalise the draft, which, if not finalised by the end of this month, could lead to a plan holiday.
Development partners have been waiting for the final draft of the third Three Year Interim Plan to align their programmes, according to the government's advice, as without the alignment, the donors' assistance — that have helped imporve human development indicators — will be derailed. However, the government itself is delaying the appointment pushing the country towards a plan holiday.
Earlier, finance minister Shankar Koirala had — after pressure from development partners — promised to appoint vice chair and members in the commission soon to expedite the preparation of strategies and finalise the draft to avoid a plan holiday.

Export-led, private-sector open economic model a must

Economists have asked the government to devise an export-led, private sector open and competitive economic model with due social security and welfare of the people for the economic growth of the country.
"It should be based on 'Savings-Investment Interaction Model' ensuring a high growth trajectory with substantial poverty reduction strategy to attract foreign direct investment on a greater quantum and more investment in infrastructure," said chairman of Mega Bank Prof Dr Madan Kumar Dahal during a seminar organised by Nepal Nagarik Manch here in the capital.
The government must ensure it will not nationalise private property comprising factories, industries, and banks including education and health organisations, he said, adding that improving industrial relations and middle level manpower aspiring for foreign employment should be emphasised on.
Since the tax burden is relatively higher in Nepal as compared to other South Asian nations employing GNI per capita criterion, it must be simplified, and made transparent to make the country competitive for foreign direct investment as well as indigenous investments, he added.
Dahal also called for induction of 'red pill economics' to ensure a great leap forward due to the growing danger of 'fiscal cliff' in a developing economy like Nepal.
The government must effectively utilise the nation's wealth including subterranean resources, by declaring Plan Holiday, formulating emergency annual plan-cum-budget, reordering priorities, improving government capacity to spend capital expenditure, and initiating stern action against corrupt practices as a road map for economic growth, he said.
Dahal added that with medium and long term goals the government must work to weed out the constraints — rampant corruption, high cost economy, subsistence agriculture, alarmingly increasing dependency, poor investment on priority sectors, limited exportable items, lack of employment opportunity, extremely inadequate infrastructure coupled with weak economic diplomacy — of growth, he added.
"Investment in agriculture, the biggest and also a priority sector, has been minimal and was confined to 3.2 per cent of the total resources allocation in fiscal year 2011-12, and the share of manufacturing has also dropped to below six per cent of the GDP."
The country is passing through a critical phase of low equilibrium trap with downsizing phase circumscribed by poverty and stagnation, the economist said, adding that macroeconomic indicators reflect that Nepal suffers from a sluggish economic growth rate.
The economy has a structural problem, which needs to be addressed to propel growth, said, Prof Dr Bishwambher Pyakuryal.
Economists also called for policy and political stability for growth as the country has been witnessing a prolonged political transition with no clear economic vision.

Donors, recipients need to revisit strategy

The experts suggested both the donors and aid recipient countries to walk the talk and revisit their strategy to help develop trade in making the recipient countries independent in the long run.
"Both donors and the government have been unable to fully meet their commitments in both financing and governing the needed development initiatives," said central bank governor Dr Yubraj Khatiwada addressing a validation workshop on 'Nepal Case Study For European Report on Development', organised by South Asia Watch on Trade, Economics and Environment (SAWTEE) and Center for the Study of Labour and Migration (CESLM) here today.
"Donors need to focus on hardware aspects as well because 'in the absence of infrastructure', mobilising development support in software areas like rights issues, will not be fruitful," he said, adding that there is a need to create enabling environment for economic growth so that domestic revenue mobilisation could finance social protection and human security related development activities. Khatiwada also stressed on the need to refocus development efforts and social progress agenda so that they don’t undermine economic growth.
The study is a part of the European Report on Development (ERD), an annual report commissioned by the European Commission since 2009 that looks at the course of development cooperation in several socio-economic areas. The focus of the 2012-2013 report — the fourth in the series — is 'Development in a Changing World: Elements for a Post-2015 Global Agenda'.
“Post 2015, meeting some of the Millennium Development Goals (MDGs) targets will still remain a challenge, which will require development parents to reorient their development interventions keeping in mind the changing actors and new challenges like climate change and the impact of financial crisis,” said executive chairman of SAWTEE Dr Posh Raj Pandey.
Similarly, highlighting the objective of the study, senior adviser EU Development Policy and lead author of European Report on Development 2013 Dr James Mackie said that the report aims at evaluating progress made so far in meeting MDG targets, learn from the experiences and use it to frame post 2015 development agenda.
"The goal is to think beyond MDGs and aid in order to suggest a framework for the future, and in Nepal’s case the relationship between Nepal the EU development cooperation," he said, adding that the three main themes are aid and finance, trade and investment and migration.
The report is aimed at policy oriented study to bridge the gap between research and policymaking related to development initiatives.
"The deadline for 2015 is close and not all MDG targets will be met," head of Operation at the Delegation of the EU to Nepal Lluis Navarro said. "It is good time for the report to think about post 2015 framework for development initiatives and support mobilisation," he said, adding that the post 2015 development framework needs to look at framing support of both traditional as well as new donors in relation to the needs of recipient country.
The Nepal case study assesses the progress made since 1990s, the key drives and obstacles for it, and the role of external actors and impact of MDGs, apart from looking at the main constraints and opportunities faced by the economy and the possibilities for external actors to better support national development strategies.
MDG targets are helping to galvanise global support and mobilising resources accordingly, said co-presenter of the report chief executive director of SWTEE Dr Ratnakar Adhikari.
He stressed on the need to scale up absorptive capacity and need assessment, stop frequent transfer of staff in bureaucracy and increase ownership of development projects. "In the international level," he said "development partnership should provide enabling environment, not intrude on policy space. Other aid and finance related interventions include continuing ODA numerical target of 0.7 per cent of GNI, additional funding for Aid for Trade and climate finance and targeting foreign aid in productive sectors."
Similarly, at the domestic level the emphasis should be on to address supply-side constraints to increase trade and investment, whereas at the international level, the emphasis should be on promoting regional investment agreement, resolving definitional complexity related to Aid for Trade, promoting trade and investment nexus, and sourcing one per cent of developed country imports from LDCs, among others. "On the technology front, the emphasis should be on increasing expenditure on research and development to one per cent of GDP and at the international level the focus should be on easing technology transfer and adoption."
Similarly, on the occasion, another presenter research director at Center for the Study of Labour and Mobility Dr Bandita Sijapati focused on migration and argued that at the domestic level if migration is unavoidable then migrant’s rights and welfare have to be protected.
"At the international level, she emphasised on promoting initiatives that would help channel remittances into productive sectors and strengthen regional initiatives to secure rights and welfare of migrants."

Income inequality on rise, rich are getting richer and the poor are getting poorer

The rich are getting richer and poor poorer as Nepal's income inequality has been rising in the last ten years widening the rich-poor gap, according to a report.
In the past ten years the Gini-coefficient increased from 34 to 47.3 indicating that the gap between the rich and the poor grew further, according to the Human Development Report 2011 released by the UNDP here today.
The Gini-coefficient measures the income inequality among the entire population of the country. The higher the number, the more income is being taken in by a small group. Likewise if most of the money is being made by the majority of the population, the lower the Gini-coefficient will be. It is the measure of the deviation of the distribution of income — or consumption — among individuals or households within a country from a perfectly equal distribution. A value of zero represents absolute equality, a value of 100 absolute inequality.
Almost 41 per cent of income or consumption is held by the highest 10 per cent of the populace and only 2.6 per cent of the income is shared by lowest 10 per cent of the populace as income distribution can vary greatly from wealth distribution in a country.
Nepal not only has the highest Gini-coefficient in Asia but also in the South Asian region meaning Nepal has the highest income inequality in the region, the annual report of the UNDP said.
The gap between the rich and poor has been increasing in a country that has 25.2 per cent of the populace, who does not even earn Rs 54 a day, new national poverty line, according to Nepal Life Standard Survey III published by the Central Bureau of Statics (CBS) recently.
However, Nepal has improved in the Human Development Index (HDI) that stands at 0.458, though inequality adjusted GHDI stands at 0.301. The HDI stood 0.455 in 2010.
The Human Development Report introduced a new way of measuring development by combining indicators of life expectancy, educational attainment and income into a composite human development index (HDI). The breakthrough for the HDI was the creation of a single statistic which was to serve as a frame of reference for both social and economic development. It sets a minimum and a maximum for each dimension, called goalposts, and then shows where each country stands in relation to these goalposts, expressed as a value between 0 and 1.
The composite HDI has three dimensions — health, education and living standard — and four indicators — life expectancy at birth, mean years of schooling and expected years of schooling, and gross national income per capita. The decent standard of living component is measured by GNI per capita (PPP$) instead of GDP per capita (PPP$). The HDI uses the logarithm of income, to reflect the diminishing importance of income with increasing GNI. The scores for the three HDI dimension indices are then aggregated into a composite index using geometric mean.