Identifier
Created
Classification
Origin
09KATHMANDU473
2009-06-08 00:44:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Kathmandu
Cable title:  

NEPAL: ECONOMIC HIGHLIGHTS FOR THE MONTH OF MAY

Tags:  ECON ELAB ENRG ETRD PGOV NP 
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P 080044Z JUN 09
FM AMEMBASSY KATHMANDU
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INFO RUEHBJ/AMEMBASSY BEIJING 6980
RUEHKA/AMEMBASSY DHAKA 2625
RUEHIL/AMEMBASSY ISLAMABAD 5347
RUEHNE/AMEMBASSY NEW DELHI 3061
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RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAIIA/CIA WASHDC
RHHJJPI/PACOM IDHS HONOLULU HI
UNCLAS SECTION 01 OF 02 KATHMANDU 000473 

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON ELAB ENRG ETRD PGOV NP
SUBJECT: NEPAL: ECONOMIC HIGHLIGHTS FOR THE MONTH OF MAY
2009

UNCLAS SECTION 01 OF 02 KATHMANDU 000473

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON ELAB ENRG ETRD PGOV NP
SUBJECT: NEPAL: ECONOMIC HIGHLIGHTS FOR THE MONTH OF MAY
2009


1. (U) Below is a compilation of economic highlights from
Embassy Kathmandu for the month of May 2009, including the
following:
-- Food Crisis Leaves Millions Hungry
-- Electricity Supply Improves, But Not for All
-- Bank Lending Growth Rate Slows
-- Declining Number of Workers Going Overseas
-- Tourist Arrivals by Air Fall

Food Crisis Leaves Millions Hungry
--------------


2. (U) A severe winter drought has left about 3.4 million
people with an inadequate food supply, according to a report
issued by the Ministry of Agriculture and Co-operatives
(MoAC) in mid-May. The food crisis has affected people living
in hill and mountain districts throughout the country, except
in eastern Nepal. The Far-Western Region and Mid-Western
Region have been particularly hard hit. The MoAC estimates
that two-thirds of the population in the mountains of the Far
West have been affected by the food crisis, which is expected
to last for another seven months. In the Midwest, where the
crisis is expected to persist for at least six months, about
53 percent of the people do not have enough food.


3. (U) The food crisis was sparked by one of the worst
droughts in the history of Nepal. Some districts in Mid- and
Far-Western Nepal reported receiving less than 50 percent of
the average precipitation between November 2008 and February

2009. Nationwide, yields for wheat and barley, two principal
winter crops, fell by 14 and 17 percent respectively, while
yields in the Mid- and Far-West plummeted by more than half.
The crisis was exacerbated by a two-week bandha in the Terai,
which ended on May 4. The strike crippled transportation in
the region, which is Nepal's agricultural belt.


4. (U) In late May, the UN Food and Agricultural
Organization (FAO) and World Food Program (WFP) announced
that they were increasing their assistance to those affected
by the food crisis. WFP officials said they planned to
provided subsidized food to another 700,000 people in the
worst-hit areas, while FAO officials said they are expanding
food-for-jobs and food-for-training programs in these areas.

Electricity Supply Improves, But Not For All

--------------


5. (U) On May 31, the Nepal Electrical Authority (NEA)
announced that it would cut the ongoing eight-hour daily
load-shedding in half, beginning the next day. NEA officials
said they were able to make the cut because a rise in water
levels has increased power generation at several major
hydropower plants. At the Kulekhani Hydropower Project near
Hetauda in Mahawanpur Dsitrict south of Kathmandu, power
production increased by 38 percent, or 52MW, following
continuous rainfall in the surrounding area.


6. (U) However, not all of the country benefited from the
announced reduction. The NEA said it will not cut
load-shedding in the Morang-Sunsari region in the eastern
Terai, a important industrial center. Load-shedding will
remain at eight hours daily in this region because it is
dependent on power imported from Kataiya, India, and only one
of the two import circuits damaged by the Koshi floods in
August 2008 has been repaired. The repaired circuit has a
45MW capacity, while the one still under repair carries 30 MW.

Bank Lending Growth Rate Slows
--------------


7. (U) The Nepal Rastra Bank (NRB) reported that the growth
in commercial bank lending slowed during the first nine
months of the current fiscal year, which began in July 2008,
as compared to the same period last year. Overall credit to
the private sector expanded by 17.9 percent during this
period. During the same period last year, it grew by 19.9
percent.


8. (U) Declines in the growth of loans to the construction
and real estate sectors may indicate that the overheated
housing market is being to cool. According to the NRB,
construction loans grew by 27.2 percent, while in the same

KATHMANDU 00000473 002 OF 002


period the previous year they grew by nearly 44 percent. The
central bank noted that credit growth in the real estate
sector "also declined," but it did not provide figures.


9. (U) One of the few areas in which the growth accelerated
is consumer loans. During the review period, consumer loans,
such as those for gold and silver and credit cards, grew by
31.6 percent, as compared to 0.1 percent last year, according
to the bank. Observers said this dramatic growth suggests
that remittances are now being used more for consumption than
for productive investments.

Declining Number of Workers Going Overseas
--------------


10. (U) The number of Nepali workers leaving for overseas
jobs fell by 20.5 percent during the first 10 months of the
current fiscal year, as compared to the same period last
year, according to the Department of Foreign Employment
(DoFE),Ministry of Labor and Transport Management. The DoFE
reported that 147,545 workers left the country during this
period, while, during the same period the previous year,
185,817 workers left. (Note: These figures do not include
workers who left for jobs in India. End note.)


11. (U) Between mid-April and mid-May, there were dramatic
declines in the number of jobseekers leaving for work in
three of the most popular labor destinations: Malaysia, the
U.A.E. and Saudi Arabia. According to the DoFE, only 824
workers left for Malaysia during this period, as compared to
4,181 last year. The number of workers leaving for the U.A.E.
was 1,701 this year, down from 4,336 last year. Saudi
Arabia, the most popular destination for Nepali workers,
absorbed 2,861 jobseekers, about 2,000 fewer than last year.

Tourist Arrivals by Air Fall
--------------


12. (U) The Nepal Tourism Board (NTB) reported that tourist
arrivals at Tribhuvan International Airport, the country's
sole international airport, fell by 5 percent in May,
compared to the same month last year. According to the NTB,
25,129 visitors arrived by air in May, 1,331 fewer than the
previous year. Air arrivals have fallen ins all but one of
the first five months of 2009, as compared fort the same
months last year. (Note: In recent years, air arrivals have
accounted for about 70 percent of all tourist arrivals. End
note.)


13. (U) The largest declines were in the numbers of tourists
arriving from other South Asian countries. Visitors arriving
from India, which is, by far, the largest source of tourists,
fell by 13.6 percent in May, as compared to last year. The
only country in the region to register growth was Sri Lanka,
with visitors from that country increasing by nearly 20
percent. Arrivals from the United States and Canada also
grew, as did those from the European market.

Inflation Moderates Somewhat
--------------


14. (U) Consumer price inflation rose to 11.9 percent during
the first nine months of the current fiscal year, as compared
to 8.9 percent during the same period the previous year,
according to the NRB. The current year-on-year inflation
rate is 1.2 percent less than the rate the central bank
reported for the first eight months of the fiscal year.


15. (U) Inflation during this period was driven mainly by
the rise in the price of food and beverages, which overall
increased by 14.8 percent, as compared to 12.6 percent last
year. Within this group, the price of sugar and sugar
products increased the most, rising by 50.5 percent. During
the same period last year, the price of these products fell
3.8 percent. The price of meat, fish and eggs and the
vegetable and fruits sub-groups were also up sharply,
increasing by 28.2 percent and 21.3 percent, respectively.


POWELL