chapter  13
Trade policy regimes, growth and poverty
The Nepalese experience
ByBinod K. Karmacharya, Kishor Sharma
Pages 11

The debate over liberalisation, growth and poverty has produced a large number of studies in developing countries, although empirical findings are inconclusive. The evidence from East Asia suggests that rapid growth brought about by openness has substantially reduced poverty and inequality in these countries. However, their experience is less relevant to a least developed country (LDC) like Nepal, which lacks human capital, efficient infrastructure and institutions. There is a widespread perception that liberalisation has in fact increased poverty in LDCs (UNCTAD 2002). For example, measures to achieve the fiscal balance (as a part of market-oriented reforms) have resulted in contraction of infrastructure budget and social expenditure, making the access to basic services difficult for the poor. Also, deregulation of financial markets has resulted in the closure of banks in many rural areas, making the cost of borrowing high for the poor. Furthermore, contraction of public sector and privatisation of public enterprises, in the absence of well-developed private sector, has further aggravated poverty in LDCs.