Why Nepal Wants to Stay Poor

The UN would want to declare Nepal as the latest member nation to join the list of Developing Economies in 2018, but Nepal wants to remain in the Least Developed Country (LDC) category for a few more years.

Nepal has officially requested the UN to not put it on the list of Developing Economies just before a meeting in March to review the status of each LDC and forward recommendations to the UN General Assembly.

Nepal fears that it may lose foreign aid if it graduates from LDC status, and argues its economy is still vulnerable to various threats including natural disasters. Nepal recently sent a high-level delegation to New York to lobby with the UN-OHRLLS to not graduate it from the LDC category.

A country has to meet three criteria to graduate from LDC status: at least $1,242 Gross National Income (GNI) per capita, above 66 score in Human Assets Index (HAI) and below 32 score in Economic Vulnerability Index (EVI).

When the UN had last reviewed the status of LDC countries in 2015, Nepal had achieved more than enough HAI (68.7) and EVI (26.8) scores. If Nepal is found to have maintained its HAI and EVI rankings when the UN-OHRLLS meets next month, it will graduate from its LDC category – even if it fails to meet GNI per capita.

Nepal has increased its literacy and Net Enrolment Rates (NER) sufficiently to maintain its HAI growth, and its EVI ranking has also improved over the last three years because of connectivity and export conditions.

But Nepal argues that its GNI per capita was just $862 in 2017, and it will be unable to sustain HAI and EVI growth unless its national income grows. Nepal has also questioned the modality of determining EVI ranking, arguing its score should be less than was has been determined.

The UN-OHRLLS looks into 12 indicators to determine whether a country’s economy is vulnerable, but it does not consider threats that Nepal’s economy has faced: earthquake, Blockade, flood and landslide. Nepal argues that its economy can be described as safe only after factoring in these threats.

Economist Swarnim Wagle, who resigned as Vice Chair of National Planning Commission (NPC) this week, says: “The UN indicators to determine a country’s economic vulnerability were based on African countries in the 70s, which cannot be applicable to Nepal. The UN must reconsider its own indicators before declaring Nepal a developing country.”

As an LDC, Nepal enjoys concessional loans, have export privileges, get technical support to expand its market and money for climate change adaptation. At a time when Nepal is hoping for more foreign aid to support new federal structure, it does not want to lose potential funding by being identified as a developing nation.