Because of lack of job opportunities in the rural areas and prolonged conflict, Nepal experienced rapid urbanization from internal migration. Rapid urbanization resulted in inadequate urban infrastructure and services, including intermittent drinking water supply, poor water quality, and poor sanitation.
During project appraisal in 2008, only 33% Nepal’s households were being served with grid electricity, and the country could not generate adequate power to totally meet demand. Nepal’s hydropower generation potential alone is estimated at 43,000 megawatt (MW) but the total installed generation capacity was only 615 MW in 2008.
During project appraisal in 2010, poor transport connectivity was identified as a major development constraint for Nepal. Road transport, the predominant mode that accounted for more than 90% of passenger and freight transport, was supported by a strategic road network that provided links to major economic centers and neighboring countries.
Nepal’s transition to democracy, following the end of a decade-long civil conflict in April 2006, had been complex and sometimes halting because of the deep ideological, social, and economic divisions that propelled the conflict.