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WB warns middle class people may fall back into poverty

By Our Reporter
The World Bank has warned the government that the families which were graduated from poverty and entered the middle class might fall back into poverty in case of income shocks.
“Although many households have exited poverty in Nepal, welfare gains have not been large enough to move them into the middle class, and they remain vulnerable to falling back into poverty should an income shock occur,” the WB in its recent Systematic Country Diagnostic (SCD) report of Nepal.
The WB has suggested that a substantial change in the structure of the economy was needed to reduce the vulnerability.
The World Bank said high level exposure to natural disasters, which will increase with climate change, and the continued dependence on rain-fed agriculture will push many people into into poverty.
It also warned that the opportunities for faster growth and poverty reduction are being missed, and sources of fragility remain because of power imbalances and inequality of opportunity.
The WB said that at current rates of growth, per capita income would reach only US $958 in 2030, and the country needs faster rates of growth at 7 to 8.
It recommends encouraging investment in infrastructure, strengthen regulations and reduce government involvement in markets, increasing openness by reducing tariffs and increasing Foreign Direct Investment (FDI), and increasing access to credit for women, rural entrepreneurs and small and medium enterprises.
The report says that the current transition to federalism is a potential game changer if it is accompanied by a meaningful change in the balance of power.
Similarly, addressing constraints to private investment is essential for individuals to become more productive employees and entrepreneurs.

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