Country Report Nepal May 2011

Outlook for 2011-12: Policy trends

There is considerable uncertainty about the economic policy priorities of the new coalition government. The previous administration was unable to persuade the transitional legislature to pass the budget for fiscal year 2010/11 (July 16th-July 15th), and the budget was finally promulgated by executive order four months into the fiscal year. The budget outlines plans to stabilise the external sector, encourage economic growth, reduce inflation and maintain fiscal stability. However, persistent political uncertainty means that the focus of the document is on ensuring the continuity of existing programmes rather than initiating new ones. Moreover, the priority for the government will continue to be to ensure the performance of the basic functions of day-to-day governance, including trying to make sure that the political and security environment is as conducive to economic growth as possible. The government has proposed presenting the 2011/12 budget in early May, but this may also be held hostage to inter-party political tensions.

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