Kruse, AurélienBajracharya, Roshan DarshanMahato, Deb Narayan2014-01-282014-01-282013-10https://hdl.handle.net/10986/16633Nepal's political developments continue to overshadow and impede its economic development. Over the short term, whether the scheduled elections are held and, if so, whether they achieve a modicum of consensus will be a major test. Political instability clouded the outlook in FY2013 and remains the principal source of vulnerability going forward. While Nepal's macroeconomic fundamentals remain stable, sources of vulnerability have not disappeared. Although the financial sector has rebuilt strength, it remains an important source of weakness. Important initiatives to improve the governance environment have been taken, but these initiatives can be amplified further. For FY2014, the baseline scenario is a gradual return to trend, with higher growth and sustainable fiscal expansion. While important psychologically and for some sectors of the economy, the recent depreciation of the Nepal rupee is not expected to hold back growth or to threaten macroeconomic stability. While a revision of the peg with India may eventually be warranted, the report agrees with Nepali policy makers that this is not the time when markets are unstable to move impulsively. Instead, such a major policy shift should be based on clear policy objectives and in-depth analysis of likely economic outcomes, including the long-term impact on Nepal's trade competitiveness. The report is structured as follows: chapter one gives summary; chapter two gives recent economic developments; chapter three gives policies and short- to medium-term development challenges; chapter four presents short and medium-term economic projections; chapter five focuses on bank support and activities; and chapter six presents special focus.en-USCC BY 3.0 IGOACCOUNTINGAGGREGATE DEMANDAMORTIZATIONARBITRAGEARREARSASSETASSET QUALITYBALANCE OF PAYMENTBALANCE SHEETSBANK LENDINGBANKING INDUSTRYBANKING SECTORBILLBROAD MONEYBUDGETBUDGET DEFICITBUFFERBUFFERSCAPITAL ADEQUACYCAPITAL FLOWCAPITAL FLOWSCAPITAL FORMATIONCAPITAL MARKETSCAPITAL OUTFLOWSCAPITAL OUTLAYSCDCOMMERCIAL BANKINGCOMMERCIAL BANKSCONSOLIDATIONCONSUMER GOODSCONSUMPTIONCONSUMPTION BASKETCREDIT EXPOSURECREDIT GROWTHCREDIT GUARANTEECURRENCIESCURRENCYCURRENCY DEPRECIATIONCURRENCY PEGCURRENCY PEGSCURRENCY RISKCURRENCY VALUECURRENT ACCOUNTCURRENT ACCOUNT BALANCECURRENT ACCOUNT BALANCESCURRENT ACCOUNT DEFICITSCURRENT ACCOUNT POSITIONCURRENT ACCOUNT SURPLUSDEBT LEVELSDEBT SERVICEDEBT SERVICE PAYMENTSDEBT SERVICESDEBT SUSTAINABILITYDEPOSITDEPOSITORDEPOSITSDEPRECIATIONDEPRESSED INVESTMENTDIRECTION OF TRADEDOLLAR VALUEDOMESTIC BORROWINGDOMESTIC CONSUMPTIONDOMESTIC CURRENCYDOMESTIC DEMANDDOMESTIC GOODSDOMESTIC PRICEDOMESTIC PRICESECONOMIC DEVELOPMENTECONOMIC DEVELOPMENTSECONOMIC GROWTHECONOMYELASTICITY OF DEMANDEMERGING MARKET ECONOMIESEQUILIBRIUMEQUILIBRIUM LEVELSEQUITYEXCHANGE RATE FLUCTUATIONSEXCHANGE RATE MISALIGNMENTEXCHANGE RATE PEGEXCHANGE RATE POLICYEXCHANGE RATESEXPORT GROWTHEXPORTEREXPORTERSEXPOSUREEXTERNAL COMPETITIVENESSEXTERNAL DEBTFINANCEFINANCIAL HEALTHFINANCIAL INSTITUTIONSFINANCIAL INTERMEDIATIONFINANCIAL MANAGEMENTFISCAL BALANCESFISCAL DEFICITFISCAL POLICIESFISCAL POLICYFISCAL POSITIONFIXED CAPITALFOOD PRICESFOREIGN ASSETSFOREIGN CURRENCIESFOREIGN CURRENCYFOREIGN CURRENCY RESERVESFOREIGN DEBTFOREIGN EXCHANGEFOREIGN EXCHANGE EARNINGSFOREIGN EXCHANGE RESERVESFUTUREGOLDGOODGOVERNMENT SPENDINGGROWTH RATEHARD CURRENCYIMBALANCEIMBALANCESIMPORTIMPORT CONTENTIMPORT COSTSIMPORT DEMANDIMPORT GROWTHIMPORT PRICESIMPORTSINCOME TAXINDEBTEDNESSINDEPENDENT MONETARY POLICYINFLATIONINFLATION EXPECTATIONSINFLATIONARY PRESSUREINFLATIONARY PRESSURESINTERESTINTEREST INCOMEINTEREST RATESINVENTORIESINVESTMENT CLIMATEINVESTORLIABILITIESLIABILITYLIQUIDITYLIQUIDITY CONSTRAINTSLIQUIDITY MANAGEMENTLIQUIDITY POSITIONLOANLOAN PORTFOLIOLOAN RECOVERYLOCAL CURRENCYMACROECONOMIC STABILITYMAJOR CURRENCIESMARKETMARKET SHAREMISALIGNMENTMONETARY AGGREGATESMONETARY AUTHORITIESMONETARY POLICYMONETARY UNIONSMONEYNOMINAL DEPRECIATIONNOMINAL EXCHANGE RATENON PERFORMING LOANNON-PERFORMING LOANSNPLOIL PRICESOTHER CURRENCIESOUTSTANDING DEBTOVERVALUATIONPEGPENSIONPERSONAL INCOMEPOLITICAL INSTABILITYPOLITICAL STABILITYPOLITICAL UNCERTAINTYPOLITICAL VOLATILITYPOVERTYPOVERTY REDUCTIONPRICE INCREASESPRICE MOVEMENTSPRICE STABILITYPRIVATE INVESTMENTPRIVATE INVESTMENTSPRIVATE SECTOR BANKPROFITPROFITSPUBLIC DEBTPUBLIC EXPENDITUREPUBLIC EXPENDITURESPUBLIC INVESTMENTPUBLIC SPENDINGPURCHASING POWERPURCHASING POWER PARITYREAL APPRECIATIONREAL DEPRECIATIONREAL EXCHANGE RATERECURRENT EXPENDITURESREGISTRATION FEERELATIVE PRICESREMITTANCEREMITTANCESRESERVERETAIL PRICERETAIL PRICESRETURNREVENUERISKRISKSSAFETY NETSSECTOR REFORMSECTOR REFORMSSHORT-TERM TRADESHORTFALLSSLOWDOWNSTABLE EXCHANGE RATESTOCKSTRUCTURAL PROBLEMSSTRUCTURAL REFORMSSUPPLIESSUPPLYSUPPLY-SIDESURPLUST-BILLSTAXTAXESTOTAL CREDITTOTAL DEBTTOTAL EXPORTSTOTAL IMPORTTOTAL IMPORTSTRADABLE GOODSTRADE BALANCETRADE DEFICITTRADE STATISTICSTRANSPORTATION COSTSTREASURYUNCERTAINTIESUNCERTAINTYUNDERLYING ASSETUPWARD PRESSUREWEIGHTWORLD PRICESNepal Development Update, October 2013World Bank10.1596/16633