Dr Biswombher Pyakuryal is professor of economics at Tribhuvan University and also heads Business Information Services, a private company that performs credit rating of Nepali enterprises upon request. Pyakuryal has been monitoring the country's economic health from close quarters and spoke to us on the prospects for economic growth post-ceasefire.

Nepali Times: Some say now that we have hit the bottom, there is nowhere to go but up. What are the chances of the economy rebounding?
Dr Pyakuryal: Our economy is very sensitive to various factors. After the royal palace massacre two years ago, our currency depreciated vis-?-vis the US dollar. The inflow of Indian tourists declined by 40 percent in the aftermath of the hijacking of the Indian Airlines in 1999. During the 1989 impasse with India, our total production and employment declined dramatically. About 90 percent of the industries were dependent on India and had to close shop. The ceasefire will have a positive effect: people will have a sense of security, which will help the economy pick up.

How badly did the Maoist insurgency affect the economy?
We have to look at the period after 2001 to assess the impact of the insurgency. It will be difficult to explain the tendencies prior to that on the basis of the insurgency alone. The government could not implement nearly two-thirds of the projects identified under the priority sector in 2001. A study commissioned by the United Nations Commission for Trade and Development showed a majority of joint venture industries operating in Nepal want to expand their businesses despite the security situation. The negative indicators of the economy over the last one year are mainly due to the poor performance of the government rather than effects of the insurgency.

But there has been a real cost in the destruction of infrastructure. Haven't we been pushed back decades?
The government is talking about a Poverty Development Fund, a Power Development Fund etc. Foreign aid is pouring in to support the military. There is no question of not having enough support to repair destroyed infrastructure. We have policies, a regulatory and legal framework that meets global requirements. If the government decides to set up a separate fund for this purpose, it won't be difficult to do.

Officials say a good policy environment is now in place. Will that help economic activity?
There are some positive developments in this area. The government has integrated the scheme of poverty reduction in the tenth Five Year Plan. The Medium Term Expenditure Framework (MTEF) has made projections of total resource and expenditure for the next three years. Industrial policy and the Industrial Perspective Plan have also made the economic environment more conducive for foreign direct investment. Now that the government has built an economic infrastructure, and if it works on a political resolution to the ceasefire, it will certainly help the economy.

How long could it take the economy to bounce back?
Looking at the trend of government investment, it could easily take another year for the economy to be on the upswing. The very backbone of the economy, whether it is investment, revenue or overall GDP growth, has been badly bruised. By evaluating the demand in the domestic market, our competitive edge and earnings from exports, we can conclude that it will take anywhere between two to five years for the economy to recover-provided peace is restored. A planned period of five years will be needed to revive the economy. This projection can be made on the experiences of other Least Developed Countries and from our past.

Do you see the need for special packages?
We need to keep in mind the "economics of emergency". It will take a couple of years to offset the negative trends in economic indicators. At the same time, we must redefine the concept of public-private sector partnerships. With our entry into liberalisation, the government wants private sector involvement so it can be a facilitator to ensure consumer advantage. In today's context the private sector will be defined on the basis of the government's preparations of a social safety net for the public. The country's economic development is possible only through a strong and stable joint partnership between the government and private sectors.