Last Updated: Tuesday, 02 September 2014, 13:52 GMT

Nepal: Political impasse deepens economic uncertainty

Publisher Integrated Regional Information Networks (IRIN)
Publication Date 30 May 2012
Cite as Integrated Regional Information Networks (IRIN), Nepal: Political impasse deepens economic uncertainty, 30 May 2012, available at: http://www.refworld.org/docid/4fc8ab2b2.html [accessed 3 September 2014]
DisclaimerThis is not a UNHCR publication. UNHCR is not responsible for, nor does it necessarily endorse, its content. Any views expressed are solely those of the author or publisher and do not necessarily reflect those of UNHCR, the United Nations or its Member States.

Most Nepalese face an uncertain economic future and the possibility of political unrest after Nepal's Constituent Assembly (CA) failed to agree on a new constitution on 27 May.

"I'm really worried about the rise in prices, which is already too much for us. I was hoping for the first time that things would improve here," Laxmi Chettri, who works in a hotel and is the sole support of her bed-ridden husband and two children, told IRIN.

"Where can I go for help now? Who do we turn to?," asked Shanta Tamang, 30, who migrated to the capital, Kathmandu, to find work but can barely feed her three children on the less than US$30 per month she earns as a cleaner.

Nepal plunged deeper into political crisis when the 601-member CA, tasked with drafting the next constitution, failed to reach an agreement on the contentious issue of federalism in the Himalayan nation's future, and missed the fourth deadline since the CA was established in 2008.

There has been no effective government for more than five years since a decade-long civil war between Maoist and government forces, which left over 13,000 people dead, ended in 2006.

In response, Prime Minister Baburam Bhattarai, a member of the dominant Maoist party, called for fresh elections to be held in November 2012, a move that was strongly opposed and led to calls for his resignation.

"We are seriously concerned about the prime minister's unilateral decision to call for elections," said Jhalnath Khanal, chairman of the Unified Marxist Leninist (UML) party.

Poor most affected

The impact of the stepped-up political instability on millions of Nepalese, many of whom are already living below the poverty line, is worrying. The Central Bureau of Statistics notes that 25 percent of the country's 30 million inhabitants live below the poverty line, surviving on less than $1 per day.
 
"Prices will naturally increase and make the lives of the poor more difficult. The government has taken a back seat, and the current crisis will have a negative impact on our economy," economist Pranab Budathoki, who also heads the Nepal office of the non-profit Local Interventions Group, told IRIN.
 
The UN World Food Programme (WFP) considers three and a half million Nepalese moderately to severely food insecure, and counts the country among the poorest in South Asia.
 
In 2011 the biggest price increases were in vegetables, which went up by 47 percent, while cereal and grains rose by 10 percent. In 2012 the price of mansuli, the most common type of rice and a staple component of the Nepalese diet, is $0.62 per kg, compared to $0.34 per kg in 2008.
 
Political unrest and strikes are expected to occur in the coming months, bringing temporary price spikes that are likely to exacerbate the country's 10 percent inflation rate, setting up a spiral of economic uncertainty and the fear of a return to conflict.
 
The Far West, the country's poorest region, experienced almost 30 days of strikes between April and May, organized by various politically affiliated ethnic groups, and resulted in major price increases in the price of basic foodstuffs, cooking fuel and other commodities.
 
More than 46 percent of the Far West population live below the poverty line, according to the government's 2011 Nepal Living Standards Survey.
 
"The prices increased because there was shortage of supply and the transport became very expensive," said Ravindra Shrestha, a local food trader in Bardiya District, nearly 700km southwest of the capital. Much of the landlocked nation's imports come from or via neighbouring India.
 
"We experienced more than 30 percent price hikes in rice, lentils, sugar and oil," said Dipendra Pandey, a food trader from Dadeldhura, a remote hill district in the Far West region.
 
The World Bank noted in 2011 that Nepal's economy - with only 3.5 percent real GDP - continued to suffer from political uncertainty, but hoped an accelerated political transition would reduce this.
 
For ordinary Nepalese struggling to get by, the prospects of that happening any time soon look bleaker. "There is nothing I can hope for now," said 20-year old Urmila Chaudhary.
 
UN reaction
 
On 29 May, UN Secretary-General Ban Ki-moon voiced his disappointment that Nepal's Constituent Assembly had expired without the adoption of a long-awaited constitution, and called on all parties to work together in the national interest to ensure that the achievements of recent years would not be lost.
 
Nepal had entered an "uncertain constitutional and political period", a statement by his spokesperson noted, and the government and political leaders, as well as leaders of various communities, need to demonstrate the courage and wisdom to come together to address the challenges the nation faces.
 
Ban's spokesperson pointed out that "As an immediate priority, a political consensus on the way forward is essential to ensure stability and continuity."
 

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