Growth has slumped in Nepal and a violent insurgency is strangling resources, but the country is still on track to halve the number of people in absolute poverty by the UN deadline of 2015, experts say.
More than one-third of the country's 25 million citizens live below the absolute poverty line, earning less than a dollar a day.
"In the past five years, poverty is down from 42 percent to 31 percent ... If that trend continues, Nepal would achieve another 20 percent in poverty reduction," Ghulam Isaczai, deputy resident representative at the UN Development Program, said late on Friday.
"Nepal is more or less on track with the others. But if the situation changes and the conflict intensifies, all those gains would be reversed," he said in an interview. "It's a struggle getting work done in a conflict environment."
Reducing poverty by half in developing countries around the world by 2015 is one of the "Millennium Development Goals" laid down by the UN.
But even if the number of Nepal's poorest comes down by half, it would still leave millions in squalor. Nepal is one of the poorest counties in the world, with more than 86 percent people earning under US$2 a day, according to the UN.
Poverty is regarded as one of the key reasons behind the start of the Maoist insurgency in 1996, when hundreds of fighters armed with World War II-era guns began terrorizing officials, attacking the police, burning land records and enforcing `quick justice' for villagers.
The rebels now have their influence in some three-fourths of the country, and apart from government teachers and health workers, there is little official presence beyond town centers.
More than 13,000 people have died.
Too scared of Maoist reprisals, officials have not ventured into the villages for years.
So international aid groups, whose aid largely runs the country, are reaching out directly to people in remote areas to support development projects. The UNDP, for example, has a program that has created more than 30,000 small community organizations that save money and use its grants to make electricity for homes and build stretches of roads and culverts.
In the Maoist strongholds, the rebels themselves are known to have built some roads and bridges.
The insurgency that began in 1996 has sapped government funds, forcing it to deploy the army in anti-militant operations across the country and divert resources.
"There has been a decline in the government's resource base. There is a difficulty in generating local resources," Isaczai said.
Another UN agency, the Economic and Social Survey of Asia and the Pacific, this week said economic growth declined in Nepal from 3.7 percent in 2004 to 2.6 percent last year.
That was largely due to the failure of rains and the poor performance of the predominant agriculture sector. The economy was also affected by the Maoist insurgency and the phasing out of textile quotas last year under a WTO agreement, a move that reduced Nepali textile exports.
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