After the installation of multiparty democracy, the structural programmes initiated in the past few years were carried forward under the enhanced structural adjustment facility (ESAF) of the IMF with the objectives of a 5 per cent annual increase in the GDP growth.
The Eighth five year plan (1992-97) formulated by the first democratic government led by Nepali Congress set the target of bringing the level of poverty (defined as a level of income enough to consume 2124 calories of food and other minimum non-food items.) from 49 per cent to 42 percent.
The plan drew a long-term perspective plan for agricultural development, sustainable development, reduction in regional imbalances and resource conservation.
During this plan period, far reaching market oriented economic reforms were introduced. The government enacted the Privatization Act and accompanying regulations and guidelines with the objectives of reducing the burden on the government and releasing resources to other sectors.
Wide ranging financial reforms were introduced to strengthen the liberalization process. Nepali currency was made fully convertible in all current account transactions. Monetary policy was improved to increase domestic resource mobilization, enhance efficiency of capital and provide credit to the priority and productive sectors. The trade policy in the changed context had the objective of reducing the trade imbalance through improved import management, export promotion and diversification.
As a result of these policy initiatives, cottage and small-scale industries, an important source of employment, grew at an annual rate of 11 percent.
Tourism, which is the backbone of the Nepalese economy, grew at an average annual rate of six and half per cent during the period. Despite the failure of the agricultural sector, the country registered an overall economic growth of 4.65 per cent per annum.
The Ninth plan (1998-2002) carried forward the structural changes initiated during the previous plan. An ambitious long-term development plan was also drawn to make Nepal into a competitive, competent and technologically oriented society.
However, political instability and the violence unleashed by the Maoist insurgency movement during this period have adversely affected the development in all sectors. The GDP recorded a negative growth rate or remained stagnant at less than five percent; tourism suffered a setback, industrial productivity declined as a result of labour and political unrest.
Nepal’s export earnings from readymade garments, pashmina products, and woollen carpets suffered due to slow-down in demand from abroad. Despite the growing trade deficit, Nepal’s balance of payments has increased due to money sent home from Nepalese working abroad.