An analytical study of Poverty Reduction Strategy of Nepal to

achieve the Millennium Development Goals

A Semester Paper on

Eco 603: Advanced Studies on Development Economics

Submitted to Central Department of Economics (CEDECON) for the

Internal Assessment of Partial Fulfillment of Master of Philosophy

(M. Phil 2010) in Economics

Submitted by

Bigyan Shrestha
Roll No. 21
March, 2010
 Table of Contents

1. Introduction 1
2. Objectives 2
3. Nepal’s Poverty Reduction Strategies 2
3.1 Poverty Reduction Strategy Paper 3
3.2 Poverty Alleviation Fund 3
3.3 Micro Enterprise Development Program 4
3.4 Three Years Interim Plan 4
4. Achievements 5
5. Conclusion 7

References 8
1. Introduction
In September 2000, 147 Heads of State and Government – and 189 nations in total –
adopted the Millennium Declaration and agreed to work together to secure peace and
security and to combat poverty. The Declaration combines a set of interconnected and
mutually reinforcing development goals into a global agenda. These so-called Millennium
Development Goals (hereafter MDGs) set the goals and targets for human development.
They are centered around eight major goals:

1) Eradicate Poverty and Hunger

2) Achieve Universal Primary Education
3) Promote Gender Equality and empower women
4) Reduce child mortality
5) Improve maternal health
6) Combat HIV/ AIDS, malaria and other diseases
7) Ensure Environmental sustainability
8) Develop a global partnership for development

Quantitative targets have been set for most goals, which are to be achieved over a 25-year
period – between 1990 and 2015. Appropriate indicators have been selected to monitor
progress on each of the targets. A common list of 18 targets and 48 indicators
corresponding to these goals has been prepared collaboratively by the UN, the World Bank,
IMF, OECD and WTO to ensure a common assessment and understanding of the status of
MDGs at global, regional and national levels.

The detailed target and indicators fixed for achievement of 1st Millennium Development
Goal are:

Goal 1: Eradicate Extreme Poverty and Hunger

Target 1: Halve, between 1990 and 2015, the proportion of people whose income is less
than one dollar a day
Target 2: Halve, between 1990 and 2015, the proportion of people who suffer from
hunger
Indicator 4: Prevalence of underweight children under five years of age
Indicator 5: Proportion of population below minimum level of dietary energy consumption
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 Nepal has been committed to achieving the MDGs since it endorsed the Millennium
Declaration. A number of steps have been taken since then to align the MDGs with the
national planning process. For example, The country’s Tenth Plan/ Poverty Reduction
Strategy Paper (PRSP) (2002/03 – 2006/07) has incorporated the MDGs into its strategic
framework. Similarly, it has implemented three-year rolling Medium Term Expenditure
Framework (MTEF) to help link programs and projects more closely with PRSP priorities.
Currently Nepal is running in Three years interim Plan (2007/08-2009/10). The poverty
reduction has been main focus of the plan since tenth plan (2002-2007). For Nepal Target
fixed for the first Millennium Development Goal is:

Goal 1a: Eradicate Extreme Poverty

Target: Halve between 1990 and 2015, the proportion of people whose income is less
than one dollar per day.

2015 (Target)

Population living below US$1 a day (PPP value) (%) 17

Population living below national poverty line (%) 21

2. Objectives
The objective of the paper is to study the policies and strategies of the Nepal government to
combat poverty and hunger (1st goal of MDG) and analyze the achievement till date.

3. Nepal’s Poverty Reduction Strategies

Nepal prepared its first progress report on the MDGs in 2002. A number of steps have been
taken since then to align the MDGs with the national planning process. Some of the poverty
reduction measures implemented by Government of Nepal are given below:

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3.1 Poverty Reduction Strategy Paper
In 10th Plan, Nepal came up with Poverty Reduction Strategy Paper for reduction of poverty.
The Tenth Plan/ PRSP (2002-2007) has devised a four pronged strategy to attain its
objectives and goals. These are:

• High, Sustainable and Broad Based Growth

• Social Sector and Infrastructure Developmnet
• Social Inclusion and Targeted programs and
• Good Governance
To achieve high and broad based economic growth, the Poverty Reduction Strategy argues
for greater productivity in agricultural and non agricultural sectors, along with recovery in
manufacturing, tourism and exports. The Poverty Reduction Strategy (PRS) adopts
agriculture growth strategies as stipulated in the Agriculture Perspective Plan (APP) and for
the non-agricultural sector it emphasizes the need to reduce the role of the state in
economic activities and create an environment more conductive to private sector
development.

3.2 Poverty Alleviation Fund

Poverty Alleviation Fund was established in 2060 B.S. (2003) with the objective of
supporting the demand driven Poverty Alleviation activities based on demand and
participation of beneficiaries at the community level. This Fund is in operation as an
autonomous entity under the Poverty Alleviation Fund Act, 2063 (2006) established with
the objective of supporting the program targeted to the people in the lowest rung among
the ultra poor targeted for inclusive development, and as outlined in PRSP and the ongoing
Three-year Interim Plan. This independent organization has been carrying out its programs
in 55 districts.

The Fund is being guided by five Principles

• Social inclusiveness,
• Transparency
• Demand-driven Program
• Direct fund flow to the Community and

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 • Carrying out the poverty-focused program in participation of the ultra poor and
backward class of the people.

3.3 Micro Enterprise Development Program

The Government of Nepal with poverty reduction initiatives within the broader framework
of the millennium development goals commenced Micro Enterprise Development
Programme with technical and financial assistance from United Nations Development
Programme (UNDP) in July 1998 to create off farm employment and income generating
opportunities for the rural communities in 10 districts. Based on the success of the first
phase, MEDEP has been expanded to second and third phases with coverage of 36 districts
in the country.

Considering the effectiveness of MEDEP modality the government has made the policy of
replicating this model in all 75 districts.

3.4 Three years Interim Plan (2007/08 to 2009/10)

Upon the request of the Government of Nepal (GoN) the UN System helped finalize the
Three Year Interim Plan (2007/08 to 2009/10) and make it MDG-based.
Under this initiative, the Millennium Development Goals Initiative (MDGI) team together
with the UNCT in Nepal and UN Regional Offices, worked closely with the Government to
assist in aligning the Three-year Interim Plan and subsequent National Development Plans
with the MDGs.

The present 3-year Interim Plan aims at making people realize actual change by minimizing
the current situation of unemployment, poverty and inequality, and assist in stabilizing
sustainable peace in the country.

Focussing on the main target, this present Plan, which has been formulated differently from
the previous plans with more participatory processes, has given top priority to
reconstruction, rehabilitation and social reintegration.

In order to achieve these goals, this plan has envisioned 6 strategies, and they are:

(1) Special Emphasis on Relief, Reconstruction and Reintegration

(2) Employment and Poverty–oriented Broader Economic Growth

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 (3) Promotion of Good-governance and Effective Service Delivery
(4) Increased Investment on Physical Infrastructure Development
(5) Emphasis on Social Development, and
(6) Implementation of Targeted Programs and Inclusiveness.

4. Achievements
The changing pattern of the incidence of poverty is shown below in the table:

Poverty is still the major problem of Nepal. There is deep rooted poverty in rural areas. The
achievement in reduction of poverty in rural area is low as compared to achievement in
urban area. 95% of the people live in rural areas. The poverty gap ratio declined from 11.8
to 7.6 which meant that on average poor people have moved closer to the poverty line.

Progresses on Key Indicators of first goal are given below:

Goal 1a: Eradicate Extreme Poverty

Target: Halve between 1990 and 2015, the proportion of people whose income is less than one dollar
per day.

1995 2000 2005 2015 (Target)

Population living below US$1 a 34 NA 24 17

day (PPP value) (%)
Population living below 42 38 31 21
national poverty line (%)

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Above table shows that both the population living below $1 per day and living below
national poverty line has decreased over the period of 10 years from 1995 to 2005. If the
same level of poverty reduction can be achieved till 2015, this seems that targeted goal can
be achieved in the context of Nepal.

The MDG Progress Report for Nepal 2005, prepared in partnership between the
Government of Nepal and the UN Country Team, suggested that Nepal, despite the decade-
long conflict, was likely or potentially able to meet all except two goals, the ones on
universal primary education and HIV and AIDS. In 2008, the UN's informal assessment is
largely similar. Nepal still has the potential to reach almost all of the Goals if the
Government and the development community make serious and coordinated efforts to
improve the implementation of programmes across the country.

The Millennium Development Goals Needs Assessment Report for Nepal 2006 shows that
the Government must make a public investment of US$ 12.6 billion over the next decade if
the Goals are to be reached. More than half that money must be channelled to reducing
hunger, improving education and, critically, developing infrastructure. A poor transport
network, lack of market access and limited electricity is hindering growth, especially in rural
areas where most Nepalese live. The Report shows that donors must double their funding
for development in Nepal over the next ten years.

The Basic Capabilities Index (BCI) 2009 released by the Social Watch, an international
organization showed South Asian nations including Nepal will not be able to eradicate
poverty and ensure minimum education for all by 2015. Nepal has secured only 58 points in
the 2009 index compared to 55.1 in the 2008 index.

The ranking is considered extremely critical. The index says that the current trend does not
allow Nepal to meet the internationally agreed poverty reduction goals, unless substantial
changes occur. The BCI also challenged the MDG Progress Report for Nepal 2005, prepared
together by the Government of Nepal and UN Country Team, which suggested that Nepal
was likely or potentially able to meet all except two goals, the ones on universal primary
education and HIV and AIDS. According to the report, the current trend will not make a
success to define the well being of the citizens based on children getting education at the

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 primary level as well as the child mortality rate and the percentage of births attended by
skilled workers. The BCI, however does not use income as an indicator.

5. Conclusions
Nepal is also committed in attaining millennium development goals. Nepal is among one of
the least developed countries in world. Nepal is focusing on poverty reduction strategy
since inception of the plan. In Ninth five year plan (2002-2007), poverty reduction strategy
paper was introduced and became the main goal of the plan. Poverty Alleviation Fund,
Micro Enterprise Development Program were focused on poverty reduction. In running
three year plan also, poverty reduction became the main priority of the plan.

The incidence of poverty has reduced to 31% in 2005 from 42% in 1995. About 90% of the
poor live in rural areas. Though poverty gap has decreased, inequality has increased from
1995 to 2005.

The MDG Progress Report for Nepal 2005, prepared in partnership between the
Government of Nepal and the UN Country Team, suggested that Nepal, despite the decade-
long conflict, was likely or potentially able to meet all except two goals, the ones on
universal primary education and HIV and AIDS.

The Millennium Development Goals Needs Assessment Report for Nepal 2006 shows that
the Government must make a public investment of US$ 12.6 billion over the next decade if
the Goals are to be reached.

The Basic Capabilities Index (BCI) 2009 released by the Social Watch, an international
organization showed South Asian nations including Nepal will not be able to eradicate
poverty and ensure minimum education for all by 2015. Nepal has secured only 58 points in
the 2009 index compared to 55.1 in the 2008 index.

it seems that there is great challenge in achieving Millenium Development Goal for Nepal in
terms of first goal “Eradicate extreme poverty and hunger”. Channeling of the resources to
the desired sector, inclusive development, good governance, political stability etc may help
in achieving the desired goal by 2015.

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 REFERENCES
United Nations and Government of Nepal, Nepal Millennium Development Goals: Progress
Report 2005 (Kathmandu, 2005).

Ministry of Finance, Economic Surveys

National Planning Commission. Three Year interim Plan (2064/65 to 2066/67)

National Planning Commission, Poverty Reduction Strategy Paper

http://socialwatch.org

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