Nepal: Strengthening Capacity for Macroeconomic Analysis

Public sector management / Economic affairs management

Institutional capacity for economic policy analysis in Nepal is weak and as a result, public policy formulation is often not based on a sound analytical foundation. The need for sound economic policy analysis has become even more critical over the years in view of the stagnating economic growth and for better understanding the evolving structure of Nepal?s economy, its increasing complexity and the interactions between different economic sectors. Economic policy analysis has also been constrained by Nepal?s weak national statistical system, particularly the lack of quality and timely macroeconomic data.

Given the importance of reliable and timely macroeconomic data for policy analysis, ADB has also been assisting the Government in strengthening Nepal?s weak statistical system. Recent assistance in this respect includes: (i) TA 3451-NEP (completed in 2004): Strengthening the National Statistical System, which helped in developing a consolidated national statistical plan (CNSP), and improving compilation of the NA, agriculture statistics development and poverty monitoring, and (ii) TA 4460-NEP: Strengthening the National Accounts System (near completion), which supported migration of the national accounts to the System of National Accounts (SNA) 1993, benchmarking and rebasing the national accounts estimates, and development of a system of compiling quarterly national accounts. Also, a diagnostic study was conducted on Nepal?s statistical system under RETA 6333: Statistical Capacity Building in the Asia Pacific Region, which recommended adoption of the CNSP without further delay and identified a broad range of long-term statistical capacity building (SCB) needs of the Central Bureau of Statistics (CBS, the main statistical agency) and other Government agencies.

Economic policies based on an improved statistical system (national accounts) and sound quantitative

macroeconomic analysis.

Component A:

(i) A more conducive legal and institutional environment for improving the national statistical

system.

(ii) A system of QNAcompilation established.

Component B: Macroeconomic tools developed for short- to medium-term macroeconomic forecasting and policy analysis.

While the legal and institutional reforms are still underway, the system of compiling QNA data has been streamlined.

NMEM is institutionalized and the DSGE model finalized.

Component A: Enactment of the new Statistical Act, more autonomous CBS, and more functional

National Statistical Council (NSC)

Component A: Quarterly GDP estimates for FY2007 FY2010

Component B: Upgrade of the Nepal Macroeconomic Model (NMEM)

Compoent B: A Dynamic Stochastic General Equilibrium (DSGE)-type model developed for Nepal

Component B: User manual to undertake the quantitative macroeconomic analysis and forecasting

- Draft Statiscal Act being submitted to the Cabinet.

- Quarterly GDP estimates for all sectors completed.

- User manual to undertake the quantitative macroeconomic analysis and forecasting prepared.

- DSGE model finalized and submitted to NRB.

- Upgradation of the NMEM completed.

Individual Consultants will be recruited under the TA.

Component A: Developing a System of Quarterly National Accounts

National Accounts Expert (International, 4 person-months)

National Accounts Expert (National, 5 person-months)

Agriculture Statistician (National, 4 person-months)

Component B: Macroeconomic Modeling

Macroeconomic Modeling Specialist (International, 6 person-months)

Macroeconomic Modeling Specialist (National, 5 person-months)

Econometrician (National, 5 person-months)

Information Technology Specialist (Nationial, 2 person-months)