Abstract
The armed conflict between the Unified Communist Party of Nepal (Maoist)
and the Government of Nepal increased the expenditure of the state on
security almost doubled from 1.6 percent of the GDP to 3 percent between
2001 and 2004. The defense budget increased from Rs. 4 billion to Rs. 12
billion a year which was largely because the number of Nepalese Army
increased from 46,000 to 96,000. There are numerous studies conducted on
Nepal’s’ socio- economic and political aspects during the civil
conflict. Much research has focused on the impact on trade and commerce,
but little attention has been paid to the increasing security
expenditure during the conflict. To fully recognize this dimension of
expenditure of the state we must therefore understand the increasing
security cost during the conflict, not just the impact of conflict on
trade and commerce. Examining various data and information on economic
analysis of civil conflict, this paper studies the effects of increased
expenditure on defense required during the Maoist insurgency in Nepal.
What was the opportunity costs of increases in security expenditure by
Nepalese government to invest its war against the Maoist rebellion? How
sudden increase in security spending by the government reduced
development expenditure and investment of Nepal? How conflict has
impacted significantly in the development of education, employment
opportunities, health services, and public and private investment?