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Thursday, December 31, 1998 Published at 16:51 GMT

World: South Asia

Nepal: Instability breeds poverty

The World Bank says Nepal could profit more from tourism

By Sushil Sharma in Kathmandu

In its latest report on Nepal, the World Bank says that frequent changes of government have hampered efforts to reduce poverty in the country. The Bank said corruption has become widespread, and that the volume of its future loan assistance to Nepal will depend on the stability of the government and economic reforms.

The report said Nepal has failed to take advantage of the three key assets - agriculture, tourism and water resources.

The Bank said that revenue has become stagnant, while wasteful government expenditure have increased.

New strategy

The World Bank said it is introducing a new strategy which emphasises the productive use of resources. It said it will also work for collective donor action, linking assistance to improved governance.

The report comes in the wake of growing dissatisfaction of donor countries over the recent economic performance of Nepal which depends on foreign aid for more than half of its national budget. The donors said that inconsistent economic policies and frequent changes in the civil service have affected aid projects.

Elections by April

The country has seen five governments since the indecisive elections of 1994. The centre-left coalition government, which came to power last week, has vowed to hold fresh elections by April, seven months ahead of schedule.

Analysts say it is too early to predict whether any party will get a clear majority to form a stable government.

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