Countries and Regions

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p. 3 of 20 BACK | NEXT I. Country Performance Assessment A. Economic Performance Assessment B. Poverty Assessment C. Assessment of Socio-Environmental Performance D. Governance: Sound Development Management E. Implementation Assessment II. Country Operational Strategy III. Sector Strategies IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Nepal : I. Country Performance Assessment

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B. Poverty Assessment

12. In Nepal, about 42 percent of the population lives below the national poverty line of NRs4,400 ($77) per capita per annum, which is based on minimum caloric intake, housing, and other nonfood standards. However, this figure varies widely across the country. While only 23 percent of the urban population do not have sufficient incomes to meet basic consumption needs, 44 percent of the rural population fall below the standard. Geographically, the incidence of poverty in the Midwestern and Far Western development regions greatly exceeds the national average, as does the rate in the mountain districts³. It would take about NRs530 per person per year to completely lift all of the poor out of poverty in the country, but about NRs815 per person for those living in the mountain districts⁴.

13. Income distribution in Nepal is becoming increasingly unequal over time. The Gini coefficient has increased from 0.26 in 1985 to 0.43 in 1996 in urban areas, while in rural areas it has increased from 0.23 to 0.31 during the same period. There are also wide variations in average household income by geographical areas, and the urban/rural disparity is also large. In rural areas, the western part of the country has lower incomes than the eastern and central parts. Per capita incomes are lower in the terai than in the hills (income distribution is worst in the terai with a Gini coefficient of 0.66); however, in the eastern and central areas, incomes are higher in the terai than in the hills. Region-wise, the worst income distribution is found in the central region (Gini coefficient of 0.66)⁵.

14. Due to a lack of comparable data, it is difficult to assess the trends in the poverty rate over time, but there does not appear to have been any reduction in poverty in the last 20 years, despite increases in life expectancy. In fact, because of the rising population, there are indications that the absolute number of the poor has almost doubled during this period⁶. Many factors have constrained reduction of poverty and income inequality, including (i) inequitable land distribution, (ii) caste and gender bias, and (iii) erratic and low economic growth (leading to low employment generation) along with high population growth. Initiatives to reduce poverty and income inequality need to address these closely interrelated factors.

15. Taking a broader view of human deprivation than the simple income measure, Nepal ranked 144th out of 174 countries in the United Nations Development Programme's (UNDP's) 2000 Human Development Report. The people in the poorest regions of the country also have the lowest access to education and basic health services, highest rates of infant mortality, and highest rates of child malnutrition. Poverty undermines efforts at promoting human development, since it prevents many parents from sending their children to school. The current literacy rate among individuals age 6 and above is 38 percent (52 percent for men and 24 percent for women). However, only 20 percent of the poor are literate compared to 60 percent of those in the higher-income groups. Poverty also heightens gender differences. While 32 percent of poor men are literate, the literacy rate of poor women is much lower at 9 percent. Poverty induces malnutrition and frequent illnesses forcing households to waste their precious resources on medical care. In turn, illiteracy, malnutrition, and disease reduce development and employment opportunities, worsening poverty. The major challenge facing Nepal is to overcome this vicious cycle of poverty and low human development.

16. The Government's Ninth Five-year Plan, FY1998-FY2002 (Ninth Plan), has an overarching goal of poverty reduction, with a target of reducing the poverty rate by 10 percentage points by the end of the plan period. To achieve this goal, the Ninth Plan incorporates interventions to promote broad-based growth of the economy with targeted programs for poverty reduction. Implementation of the Ninth Plan has been slow during its first two years such that it is now important to set investment priorities for the remainder of the planning period. Monitoring is another important area that needs to be developed further, particularly in the case of targeted programs, to help maximize the poverty reduction impact of Government investments.

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