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Taking on Poverty and Inequality in Nepal

Faris hadad-zervos.

An enumerator conducts Living Standards Survey in Nepal

Nepal’s recovery from the COVID-19 pandemic is underway. Domestic demand for investment and consumption has recovered, tourists are beginning to return to Nepal as borders reopen, and the numbers of migrant workers leaving the country for overseas employment have returned to pre-pandemic levels.

With growth averaging 4.5 percent per year over the last decade, Nepal also achieved lower middle-income status in 2020 and is aiming for graduation from Least Development Country status by 2026. Improvements are visible in access to electricity and drinking water, increasing primary and secondary school enrollment, and reducing infant mortality. Also, the advent of federalism has meant that the Nepali people not only saw their lives improved but can also aspire for something greater for their children.

Yet, that’s not the whole story of Nepal’s development over the last decade.

The lack of official data on poverty since 2010 has hindered our collective understanding of whether and how growth has translated into improvements in economic welfare for Nepali households over the last decade.

The economy has also sustained several shocks over this time, including the Gorkha earthquake and fuel crisis in 2015, floods in 2017, landslides, and the COVID-19 pandemic in 2020.

COVID-19 induced substantial jobs and income losses in Nepal, and the recovery has been unequal and is incomplete. By the end of 2021, close to a fifth of job losses had not been recovered, and women and those in agriculture and lower skill occupations, were recovering more slowly.

This recovery is also taking place within a weak domestic labor market that relies overwhelmingly on informal and subsistence jobs, as well as pre-existing spatial inequalities in access to human capital and limited social assistance for the poor.

The Nepali people are well-known for their resilience, and thankfully so. Vulnerability to shocks – both economic and climate – remains an enduring feature of the country’s development story. As risks from climate change and global economic shocks increase, the livelihoods of ordinary Nepali families will continue to be fragile.

So, to sustain development gains, Nepal’s development path must be inclusive of poor and rural households, adapt to a changing climate, and be responsive to shocks. According to the recent Nepal Climate Change Diagnostic Report , about 80 percent of the population is at risk from natural and climate-induced hazards. And vulnerable communities, particularly poorer households and those relying on subsistence agriculture, as well as remote, mountainous municipalities face the highest risks.

To sustain development gains, Nepal’s development path must be inclusive of poor and rural households, adapt to a changing climate, and be responsive to shocks.

An opportunity to capitalize on the promise of federalism How Nepal responds to these dual challenges of vulnerability and inequality will shape its development storyline. This is because these challenges also present opportunities for shifting the nation’s development investments towards green, resilient, and inclusive growth.

These opportunities are further amplified by the move to federalism. The inherent promise of federalism is the potential for more inclusive and pro-poor governance across the country , through more equitable distribution of resources, greater transparency, and accountability.

The development of a federal data ecosystem that can produce the data needed to inform this transition, and the proactive use of this evidence to design the right policies will therefore be critical to deliver on this promise of improved inclusion and resilience in the country.

Charting the Course After a long gap of 12 years, the fourth Nepal Living Standards Survey (NLSS-IV) is currently being rolled out in the field. Over the course of a year, 9,600 Nepali households will be interviewed on a range of topics – health, education, jobs, migration, social protection – to provide the data for a much-needed update of Nepal’s poverty statistics, including poverty estimates at the provincial level for the first time.

Thus, the NLSS-IV will provide an evidence baseline for a policy framework to support the fight against poverty and inequality. The World Bank, with the UK Government’s Evidence for Development Program are proud partners of the Central Bureau of Statistics (CBS) in the implementation of the NLSS IV. Many other development partners are equally engaged and committed to this agenda.

After a long gap of 12 years, the fourth Nepal Living Standards Survey (NLSS-IV) is currently being rolled out in the field to provide the data for a much-needed update of Nepal’s poverty statistics, including poverty estimates at the provincial level.

The 2015 Constitution also put in place a fundamental shift in Nepal’s data governance architecture, placing local governments at the forefront of date collection, analysis, and reporting. This is a big shift that will take time to be realized as federalism rolls out and takes hold. It will need careful prioritization to design a decentralized data architecture, one that allows for the right data to be generated, transmitted, and used across all three levels of government.

Given that the move from a centralized to a federal system of governance was largely meant to address historical inequalities, it will be critical to ensure that local data systems integrate citizens voices from the start . Such an emphasis can improve the quality of the data and promote participation and accountability within Nepal’s emerging governance system.

The government at all levels is taking concrete steps to integrate climate strategies and actions into development policies, programs, and budgets. The recent World Bank Group’s Country Climate and Development Report for Nepal further supports the government’s GRID approach. The end game is to strengthen household and community resilience. Making this happen requires better governance for climate change and disaster risk management.

While federal institutions need to create the right enabling environment and policy frameworks for a green, resilient, and inclusive Nepal, provincial and local governments will be at the forefront taking action – to protect the vulnerable and excluded, to identify and address emerging risks, and to respond in near time to shocks.

And while federal institutions need to create the right enabling environment and policy frameworks for a green, resilient, and inclusive Nepal, provincial and local governments will be at the forefront taking action – to protect the vulnerable and excluded, to identify and address emerging risks, and to respond in near time to shocks.

A concerted effort to strengthen their capacity to use data and evidence to respond to the dual challenges of vulnerability and exclusion could not come at a better time. It also allows the country to engage in regional and global analysis and comparisons of the impacts of climate change and other shocks, an important precursor to taking collective action with other countries. The World Bank is here to support this historic transition.

Inequality and Shared Prosperity
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World Bank Country Director for Maldives, Nepal and Sri Lanka

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Nepal multidimensional poverty index 2021: report, analysis towards action.

This image shows a man's hands counting money

Nepal has made substantive progress in reducing the Multidimensional Poverty Index (MPI) from 30.1 percent (NMICS 2014) to 17.4 (2019 NMICS) percent over the timeframe of five years. This latest MPI Report reaffirms that Nepal is heading in the right direction in its commitment to Agenda 2030 and in attaining its aspiration of ‘Prosperous Nepal - Happy Nepali’. In 2019, 17.4 percent of Nepalis are multidimensionally poor – just under five million persons, and the MPI is 0.074. Across indicators, the highest number of people are deprived in housing materials, clean cooking fuel, years of schooling, assets, and nutrition. Considering the indicator weights, years of schooling and nutritional deprivations contribute most to ongoing multidimensional poverty in Nepal.

In a global comparison, Nepal’s 2019 MPI value of 0.074 is below Bangladesh’s 2019 MPI of 0.104, which is also computed from a NMICS survey, and is lower than the MPI values for all South Asian countries except the Maldives. Nepal’s MPI matches the MPI of Botswana (2015-16), which is among the least poor countries in Sub-Saharan Africa, is similar to that of Nicaragua (2011-12) in Latin America, and just a little less poor than Kiribati (2018-19 NMICS) in East Asia and Pacific region.

The MPI Report 2021 is jointly developed by Oxford Poverty and Human Development Initiative (OPHI) and Central Bureau of Statistics (CBS), Nepal with the financial contribution from UNICEF and UNDP Nepal. The report is based on the Nepal Multiple Indicator Cluster Survey Report (NMICS) 2019 and covers a subset of priorities articulated in the current 15th Plan, Sustainable Development Goals: Status and Roadmap 2016-2030 Report and Constitution of Nepal 2015.

This image shows the cover of the MPI report

Files available for download

Fighting inequality in Nepal: the road to prosperity

Today, more than 8.1 million Nepalis live in poverty. Women and girls are more likely to be poor, despite the significant contribution they make to the economy, especially through unpaid care and household work. More than one-third of Nepal’s children under 5 years are stunted, and 10% suffer wasting due to acute malnutrition. Without a concerted effort to tackle inequality and pursue policies that benefit the many rather than the richest few, the poorest and most marginalized Nepalis will continue to be excluded from progress.

This report seeks to take stock of the context and drivers of inequality in Nepal, and offer evidence-based recommendations that can support the government’s commitment to tackling inequality. To build a more equal country that leaves nobody behind, Nepal must act now to put the right policies in place, and enable citizens and social movements to advocate for progressive change and hold decision makers to account.

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Taking on poverty and inequality in Nepal

Faris hadad-zervos.

Encourage green, resilient and inclusive growth

KATHMANDU, NOVEMBER 23

Nepal's recovery from the COVID-19 pandemic is underway. Domestic demand for investment and consumption has recovered, tourists are beginning to return to Nepal, and the number of migrant workers leaving the country for overseas employment has returned to pre-pandemic levels. With growth averaging 4.5 per cent per year over the last decade, Nepal also achieved lower middle-income status in 2020 and is aiming for graduation from Least Developed Country status by 2026.

Supply issues counter increasing demand for precious yellow metal, djokovic says federer set tone for excellence and led with poise.

Yet, that's not the whole story of Nepal's development over the last decade. The lack of official data on poverty since 2010 has hindered our collective understanding of whether and how growth has translated into improvements in economic welfare for Nepali households over the last decade. The economy has also sustained several shocks over this time, including the Gorkha earthquake and fuel crisis in 2015, floods in 2017, landslides, and the COVID-19 pandemic in 2020. By the end of 2021, close to a fifth of job losses due to COV- ID-19 had not been recovered, and women and those in agriculture and lower skill occupations, were recovering more slowly. This recovery is also taking place within a weak domestic labour market that relies overwhelmingly on informal and subsistence jobs, as well as pre-existing spatial inequalities in access to human capital and limited social assistance for the poor.

The Nepali people are well-known for their resilience, and thankfully so. Vulnerability to shocks – both economic and climate–remains an enduring feature of the country's development story. As risks from climate change and global economic shocks increase, the livelihoods of ordinary Nepali families will continue to be fragile.

So, to sustain development gains, Nepal's development path must be inclusive of poor and rural households, adapt to a changing climate, and be responsive to shocks. According to the recent Nepal Climate Change Diagnostic Report, about 80 percent of the population is at risk from natural and climate-induced hazards. And vulnerable communities, particularly poorer households and those relying on subsistence agriculture, as well as remote, mountainous municipalities face the highest risks.

How Nepal responds to these dual challenges of vulnerability and inequality will shape its development storyline. This is because these challenges also present opportunities for shifting the nation's development investments towards green, resilient and inclusive growth. These opportunities are further amplified by the move to federalism.

The inherent promise of federalism is the potential for more inclusive and pro-poor governance across the country, through more equitable distribution of resources, greater transparency, and accountability. The development of a federal data ecosystem that can produce the data needed to inform this transition, and the proactive use of this evidence to design the right policies will therefore be critical to deliver on this promise of improved inclusion and resilience in the country.

After a long gap of 12 years, the fourth Nepal Living Standards Survey (NLSS-IV) is currently being rolled out in the field. Over the course of a year, 9,600 Nepali households will be interviewed on a range of topics – health, education, jobs, migration, social protection – to provide the data for a much-needed update of Nepal's poverty statistics, including poverty estimates at the provincial level for the first time. Thus, the NLSS-IV will provide an evidence baseline for a policy framework to support the fight against poverty and inequality. The World Bank, with the UK Government's Evidence for Development Programme, are proud partners of the Central Bureau of Statistics (CBS) in the implementation of the NLSS IV.

The 2015 Constitution also put in place a fundamental shift in Nepal's data governance architecture, placing local governments at the forefront of data collection, analysis and reporting.

This is a big shift that will take time to be realised as federalism rolls out and takes hold. It will need careful prioritisation to design a decentralised data architecture, one that allows for the right data to be generated, transmitted, and used across all three levels of government. Given that the move from a centralised to a federal system of governance was largely meant to address historical inequalities, it will be critical to ensure that local data systems integrate citizens' voices from the start. Such an emphasis can improve the quality of the data and promote participation and accountability within Nepal's emerging governance system.

Nepal has demonstrated its commitment to address the challenges to inclusive development, including those posed by climate risks. The government and its development partners adopted the Green, Resilient and Inclusive Development (GRID) approach in 2021. The government at all levels is taking concrete steps to integrate climate strategies and actions into development policies, programmes and budgets. The recent World Bank Group's Country Climate and Development Report for Nepal further supports the government's GRID approach. The end game is to strengthen household and community resilience. Making this happen requires better governance for climate change and disaster risk management.

And while federal institutions need to create the right enabling environment and policy frameworks for a green, resilient and inclusive Nepal, provincial and local governments will be at the forefront taking action – to protect the vulnerable and excluded, to identify and address emerging risks, and to respond in near time to shocks. A concerted effort to strengthen their capacity to use data and evidence to respond to the dual challenges of vulnerability and exclusion could not come at a better time. It also allows the country to engage in regional and global analysis and comparisons of the impacts of climate change and other shocks, an important precursor to taking collective action with other countries. The World Bank is here to support this historic transition.

To sustain development gains, Nepal's development path must be inclusive of poor and rural households, adapt to a changing climate. According to the Nepal Climate Change Diagnostic Report, about 80 percent of the population is at risk from natural hazards.

Hadad-Zervos is the World Bank Country Director for Maldives, Nepal and Sri Lanka

VAT refund system in Nepal Design and implementation

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Balancing Indigenous rights and nature conservation in Nepal

One-horned rhino at Chitwan National Park in Nepal. Photo By Biswash Chepang, used with permission.

The enactment of Nepal's policy on “Construction of Physical Infrastructure Inside Protected Areas” has ignited a lot of controversy, with stakeholders, especially Indigenous Peoples’ organizations, expressing strong opposition. This amendment, initiated by Nepal’s Department of National Parks and Wildlife Conservation (DNPWC) and published in the national gazette of Nepal on January 4, has drawn sharp criticism for its potential to displace Indigenous communities from their ancestral lands. The policy prioritizes profit over environmental conservation and Indigenous rights by allowing businesses to initiate large-scale projects such as hydropower plants and tourist resorts within national parks and protected areas.

The debate surrounding this policy amendment underscores the delicate balance between economic development and environmental concerns and calls for a rights-based approach to conservation in Nepal.

In September 2023, over two dozen conservationists submitted feedback to the draft amendment to the Ministry of Forest and Environment advocating for the inclusion of Indigenous Peoples’ issues through a common position paper . However, these recommendations were not significantly accommodated in the final document.

Wildlife conservation legislation for whom?

As per Ajay Karki, the deputy director-general of DNPWC, the amendment consolidates 12 regulations from the 1974 National Parks and Wildlife Conservation Act in Nepal into a single “umbrella regulation.” This regulation allows the construction of large-scale hydropower plants, dams, hotels, and tourist resorts within national parks and protected areas.

Several hydro projects are already under construction within the Langtang National Park area in north central Nepal and this amendment will open the floodgates to initiating more hydropower projects in protected areas.

Kaligandaki Hydro power plant located in Syangja District of Nepal. Image via Wikipedia by Milan GC. CC BY-SA 3.0

Kaligandaki hydropower plant in the Syangja District of Nepal. Image via Wikipedia by Milan GC. ( CC BY-SA 3.0 DEED ).

Another significant impact of the new amendment is the reopening of national parks to tourism activities, including establishing hotels, which raises environmental concerns. From 2009 to 2012, seven hotels in Chitwan National Park were closed down by the authorities due to alleged poaching and ecological concerns.

Nepal can boast 12 national parks, one wildlife reserve, a hunting reserve, six conservation areas, and 13 buffer zones. Indigenous communities living in or around these protected areas already face numerous threats, including deforestation, pollution, climate change, and unsustainable resource extraction .

The rights of Indigenous peoples

In Nepal, Indigenous knowledge, beliefs and traditional practices have profoundly influenced land-use practices, sustainable resource management, and biodiversity conservation. For instance, the Chepang people revere plants, animals, rivers, and mountains as home to holy spirits , guiding them to extract resources sustainably, in accordance with strict traditions.

Chepang Community People grazing their livestocks in Rapti Municipality-1, Photo By Biswash Chepang

People tending to livestock grazing in Rapti Municipality-1, Photo By Biswash Chepang, used with permission.

It is imperative to rethink, redefine, and redesign Nepal's existing conservation model to prioritize rights-based conservation. The governments must ensure that eviction processes do not render anyone homeless or vulnerable to human rights violations. Indigenous peoples and local communities should be able to protect and sustainably manage lands, territories, and natural resources based on their ancestral knowledge and livelihood practices.

One example of creating an enabling environment for safeguarding Indigenous Peoples’ legal rights in Nepal is the recognition of the Shagya Acts in Tsum Nubri Rural Municipality. These customary Indigenous practices regulate activities such as hunting, harvesting, and trading to preserve biodiversity. Local legislation should be enacted to enforce these acts, benefiting communities that safeguard language, tradition, and culture, and maintain a harmonious relationship with nature.

Various academic studies underscore the significance of expanding the legal recognition of Indigenous peoples and local communities’ territories as an effective means to protect biodiversity and prevent historical human rights violations associated with traditional conservation strategies. A rights-based approach is important in achieving positive conservation outcomes , affirming the correlation between robust Indigenous peoples’ and local communities’ land rights and biodiversity conservation.

Target 21 of the Global Biodiversity Framework (GBF) advocates for equitable participation in biodiversity decision-making by Indigenous peoples and local communities, alongside respect for their rights over lands, territories, and resources, including women, girls, and youth. Upholding Indigenous peoples’ right to free, prior, and informed consent is essential for any project impacting their traditional lands or livelihoods.

It is imperative to prioritize Indigenous peoples’ rights, including self-determination and the strengthening of their traditional knowledge and governance systems. Conservation institutions must ensure that conservation efforts do not result in rights violations , abuse, or marginalization of the people.

The Bridge features personal essays, commentary, and creative non-fiction that illuminate differences in perception between local and international coverage of news events, from the unique perspective of members of the Global Voices community. Views expressed do not necessarily represent the opinion of the community as a whole. All Posts

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