Print Edition - 2018-12-23  |  Free the Words


  • Inequality and poverty go hand-in-hand

Dec 23, 2018-

During the 1980s, Bangladesh and Ethiopia were  continually ranked as the poorest countries in Asia and Africa. At the time, they were  portrayed as countries of famine and hunger, while Nepal was economically performing  better  in comparison. Fast forward to the 2000s, and the situation is completely reversed. Both Bangladesh and Ethiopia developed their fast growing economies, catching up to countries representing middle-level economies. Nepal remained where it was as a least developed country. 

This is not to say we haven’t inched. Within the past 25 years, Nepal has reduced poverty. In 1991, 49 percent was living below poverty line, while in 2016 the figure plummeted to 21 percent. However, despite poverty reduction, Nepal still remains poorest countries in the world. 

At the heart of Nepal’s inability to address rampant poverty is growing inequality. Poverty and inequality, which almost always go part-in-parcel, are severely striking Nepal. In a fitting quote that captures the nature of inequality in Nepal, Meiko Nishimizu, the World Bank Vice President for South Asia at the time, referred to Kathmandu in a 2003 speech as ‘an island of prosperity in a sea of poverty that is Nepal’.  

Discussions on poverty need to to continually factor the growing inequality in Nepal and development interventions need to target not just the outcomes of poverty but also of inequality. 

In Nepal, around nine million people are living in extreme poverty and around 5 million are undernourished. The same people who have historically suffered from poverty -persons with disabilities, dalit communities, abandoned children and displaced persons, landless persons or those with very few assets, bonded laborourers, illiterate and unemployed populations, among others--have continually been lacking adequate support and services and have been compelled to live in substandard conditions.  

Income inequality, which is apparent in both urban and rural contexts, affects and is affected by many other forms of inequality, such as inequalities of wealth, political power, and social status. Income is a major determinant of quality of life, affecting the health and well-being of individuals and families, and varies by social factors such as sex, age, and race or ethnicity. In Nepal, where corruption is rampant, income inequality is apparent in both the private and public sectors. 

On a global level, income inequality has become extreme by any measure. According to Credit Suisse’s study 2014 study on global inequality levels,  the richest one percent of people in the world own more than 48 percent of global weatlth. The report warned that growing inequality could trigger a recession-but four years later, little has been done to tackle it. 

But the difficulties to address the growing issue lies in one major difference between extreme poverty and inequality: it is possible to eradicate extreme poverty within a period of decades, the challenge of inequality, on the other hand, is often perennial. The economic gap between developed districts like Kathmandu, Biratnagar and Birgunj measured against the undeveloped districts like Mugu, Bajura and Saptari are as stark as the inequality between Europe and Africa.

According to governmental sources, about 65 percent of farmers own just 15 percent of land and only 5 percent of total farmers have access to institutional credit facilities. More than 36 percent of the households’ face food deficits in a year. Karnali province and province 2 continually rank as the poorest among the seven  provinces of Nepal, which are no better than the less developed remote regions of Sub-Saharan Africa. More than 2.5 million people are multidimensionally poor in Province 2, representing 35 percent of all poor Nepalis. While some positive steps have been taken, many solutions have not led to lasting effects. 

Remittance has played a pivotal role in reducing poverty. One out of two families in Nepal are receiving any kind of remittance from abroad. The decline in the share of income of the poorest 40 per cent is due to the decline in agricultural growth. 

The government has failed to take fiscal measures to reduce income inequality. Income distribution is affected indirectly by patterns of taxation and ownership. Overall economic inequality is affected by policies that provide public goods, such as health care and education, leaving a larger proportion of individuals’ incomes to be spent on other goods.

Inequality is rising rather than falling, leaving us in a classic conundrum in which international assistance is required to support ‘pockets of poverty’. Rather than approaching development efforts with the aim of reducing poverty, development programmes should also focus on tackling inequality. 

The current government of two third majority  has the responsibly to accelerate the engine of economic growth. After the end of political transition, now is a golden opportunity to transform Nepal into an economically stable and prosperous nation; an economic system that generates opportunities for all-- particularly the less well off--is vital to fulfill Nepal’s hopes of becoming a better nation with a brighter future. 


Shrestha is a former under-secretary of the Ministry of Finance and has served at the United Nations Development Programme in South Sudan and Sierra Leone.

Published: 23-12-2018 06:46

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