Economy
GDP (2003 est.): $5.85 billion.
Annual growth rate: 2.25%.
Per capita income: $242.
Avg. inflation rate (FY 2002-03 for first 9 months): 8.1%.
Natural resources: Water, hydropower, scenic beauty, limited but fertile agricultural land, timber.
Agriculture (38% of GDP): Products--rice, wheat, maize, sugarcane, oilseed, jute, millet, potatoes. Land--25% cultivated.
Industry (20% of GDP): Types--carpets, pashmina, garments, cement, cigarettes, bricks, sugar, soap, matches, jute, hydroelectric power.
Trade (2002-03 available for the first 9 months est.): Exports--$493.11 million: carpets, pashmina, garments. Major markets--Germany, U.S. Imports--$1.2 billion: manufactured goods. Major supplier--India.
Central government budget (FY 2002-03): $1.22 billion, defense/police allocation $188.2 million.
Official exchange rate (June 2003): 75.9 Nepalese rupees=U.S.$1.
Fiscal Year: July 16-July 15.

Economy of Nepal
Nepal ranks among the world's poorest countries with a per capita income of just over $250. Based on national calorie/GNP criteria, an estimated 38% of the population is below the poverty line. An isolated, agrarian society until the mid-20th century, Nepal entered the modern era in 1951 without schools, hospitals, roads, telecommunications, electric power, industry, or civil service. The country has, however, made progress toward sustainable economic growth since the 1950s and is committed to a program of economic liberalization.

Nepal launched its 10th economic development plan in 2002; its currency has been made convertible, and 16 state enterprises have been privatized, 2 liquidated, and 2 dissolved. Foreign aid accounts for more than half of the development budget. The Government of Nepal has shown increasing commitment to fiscal transparency, good governance, and accountability. Also in 2002 the government began to prioritize development projects and eliminate wasteful spending. In consultation with civil society and donors, the government cut 160 development projects that were driven by political patronage.

Agriculture remains Nepal's principal economic activity, employing 81% of the population and providing 38% of GDP. Only about 25% of the total area is cultivable; another 33% is forested, and most of the rest is mountainous. Rice and wheat are the main food crops. The lowland Terai region produces an agricultural surplus, part of which supplies the food-deficient hill areas. Because of Nepal’s dependence on agriculture, the annual monsoon rain, or lack of it, strongly influences economic growth.

Nepal’s total exports increased by about 3.6%, primarily due to improved figures for readymade garments and jewelry, while imports grew by about 17% in FY 2002-03. Thus the trade deficit for the first 9 months of FY 2002-03 increased 27% from the previous year to $705 million. Real GDP growth during 1996-2002 averaged less than 5%. Real growth experienced a one-time jump in 1999, rising to 6% before slipping back to below 5%. In FY 2001-2002, real GDP growth declined by -0.5 %, its lowest point in 20 years. The economy recovered in the following year, however, with GDP growth estimated at 2.4%.

Despite the growing trade deficit, Nepal's balance of payments has increased due to money sent home from Nepalis working abroad. In addition, Nepal receives substantial amounts of external assistance from India, the United Kingdom, the United States, Japan, Germany, and the Scandinavian countries. Several multilateral organizations, such as the World Bank, the Asian Development Bank, and the UN Development Program, also provide assistance. In September 2003 Nepal acceded to the World Trade Organization.

With eight of the world's 10 highest mountain peaks--including Mt. Everest at 8,848 m (29,000 ft.)--Nepal is a tourist destination for hikers and mountain climbers. Yet with a worsening internal security situation and a global economic slowdown, tourism declined 34% in FY 2002. Swift rivers flowing south through the Himalayas have massive hydroelectric potential to service domestic needs and growing demand from India. Several hydroelectric projects, at Kulekhani and Marsyangdi, were completed in the mid- to late 1980s. In the early nineties, one large public sector project and a number of private projects were planned; some have been completed. The most significant privately financed hydroelectric projects currently in operation are the Khimti Khola (60 MW) and the Bhote Koshi (36 MW).

The environmental impact of Nepal's hydroelectric projects has been limited by the fact that most are "run-of-river," with only one storage project undertaken to date. The largest under active consideration is the private sector West Seti (750 MW) storage project that is dedicated to electricity exports. An Australian company is promoting the project for implementation along build-own-transfer lines and is presently negotiating a power purchase agreement with the Indian Power Trading Corporation. Private investment in the hydropower sector over the past 8 years has exceeded $360 million. Currently domestic demand for electricity is increasing at 8%-10% a year.

Population pressure on natural resources is increasing. Over-population is already straining the "carrying capacity" of the middle hill areas, particularly the Kathmandu Valley, resulting in the depletion of forest cover for crops, fuel, and fodder and contributing to erosion and flooding. Although steep mountain terrain makes exploitation difficult, mineral surveys have found small deposits of limestone, magnesite, zinc, copper, iron, mica, lead, and cobalt.

Progress has been achieved in education, health, and infrastructure. A countrywide primary education system is under development, and Tribhuvan University has several campuses. Although eradication efforts continue, malaria has been controlled in the fertile but previously uninhabitable Terai region in the south. Kathmandu is linked to India and nearby hill regions by an expanding highway network.
source: http://www.state.gov