WITH more than 12,000 people killed and 100,000 displaced, Nepal's 10 year Maoist insurgency has not just had a human impact, it has also slowed the poor country's ailing economy, according to the Asian Development Bank (ADB).
"If the conflict is allowed to continue, there will be a lot more social and economic losses. Many more lives will be lost and many more people will be denied the opportunity to improve their livelihood," Sultan Hafeez Rahman, Nepal's ADB country director said.
In the 1990s, Nepal's annual economic growth averaged around a healthy 4.9 per cent but the escalating insurgency saw this drop to an average of 1.9 per cent between 2002 and 2004.
"Given that this conflict is persisting, and that there are chances it might actually deteriorate, Nepal could lose significantly -- more than two percentage points of GDP (gross domestic product) per annum," Rahman said.
With 31 per cent of the population living below the absolute poverty line and with an average income of just less than 300 dollars per year, the troubled Himalayan kingdom cannot afford this loss.
Nepal needs to get economic growth and poverty eradication back on track, and this cannot happen without peace, the ADB official said.
An ADB report focused on the fall in development spending in Nepal as a way of measuring economic decline and concluded that in a "high conflict" situation, Nepal could see a GDP growth loss of 10.3 percentage points over the next five years. If the conflict continues at its current level, the growth loss would total 8.3 percentage points, according to ADB economists.
Remittances from overseas Nepalese workers have been a saving grace for the country but the millions of dollars sent home by Nepal's estimated 1.2 million migrant workers every year cannot match the conflict-related loss.
"Remittances have helped but they cannot nearly offset investment numbers; the orders of magnitude are very different," the ADB country director said.
The solution is simple, according to Rahman. A credible peace dialogue would restore investor confidence and boost markets.
"Once this happens I think that economic activity will tick back. In a very short period of time it can reach growth rates of six per cent or more and if they are serious, over a time horizon of maybe 15 years, they can do as well in per capita terms as any South Asian country."