Fighting batters Nepal's economy

Many visitors come to see the world's highest peak

By Sushil Sharma BBC correspondent in Kathmandu

Nepal's economy has been badly hit by the long-running Maoist insurgency, officials say.

Once far-off insurgency is now felt in Kathmandu

Growth has slowed and much of the kingdom's infrastructure has been destroyed since the uprising began six years ago.

Economic growth last year was at its lowest for several years, according to the authorities.

A member of the country's National Planning Commission said the total loss was $0.5bn - or 10% of gross domestic product, the most commonly used indicator of national income.

Widespread damage

The escalation in fighting in the civil war has frightened off tourists, Nepal's main hard currency earner.

Civil war is hitting rural areas hard

There has also been a lull in industrial production and exports have fallen, officials said.

As a result, government revenues have registered a sharp decline.

According to one estimate, damage to the country's infrastructure has cost tens of millions of dollars.

Many power stations, telecommunication centres and bridges have been destroyed in rebel attacks.

International donors have pledged more economic aid in an effort to revive Nepal's economy, said Shankar Sharma, a member of the country's National Planning Commission.

But he said the immediate challenge before Nepal was to tackle insurgency and restore peace and stability.

Bloody conflict

Experts say the economy can pick up only if the security situation improves.

Nepal has been under a state of emergency since November last year when peace talks between the government and the rebels broke down.

The Nepalese army has led a military campaign since then aimed at crushing the Maoists.

There are indications that the government forces have strengthened their positions in recent months but it is not clear how long it might take to restore the situation to normal.

The Maoists want to replace the kingdom's constitutional monarchy and multi-party democracy with a communist republic.

More than 4,000 people are thought to have been killed in six years of violence.