After registering the weakest growth in14 years during FY2016, economic activity is recovering inNepal. Agriculture and construction are expected to improveon the account of a good monsoon as well as increaseddisbursements of housing reconstruction grants. Coupled within-creased government spending, this is expected to pushFY2017 growth to 5 percent and to remain in line withpotential thereafter. This edition of the Nepal DevelopmentUpdate examines the key economic developments in Nepal overthe preceding months, placing them in a longer term andglobal perspective. In the Special Focus section, theauthors take a closer look at what it would take for theelectricity sector to power Nepal’s recovery. Over the pastdecade, power outages in Nepal have increased substantially.Availability of reliable and affordable electricity hasbecome a major constraint for Nepal’s development as ithampers the ability to improve living standards, raiseagricultural productivity and income, and help youthtransition from farming to non-farm employment throughcreation of new industries at home. Given Nepal’s naturalendowments, it is not difficult to envision an electricitysector that can support green growth, poverty reduction, andshared prosperity. Such an electricity sector would not onlymeet domestic demand reliably, affordably, and cleanly, butwould earn revenue from export of surplus hydropower throughenhanced regional electricity markets to neighboringcountries by integrating the wider South Asia power market.Wholesale structural reforms of the electricity sector areneeded to achieve this.
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