Nepal was one of the poorest nations in the world. With a per capita income ranging from US$158 to US$180 per year, about 40 percent of the population living in conditions of absolute poverty, and virtually no marketable national resources, the country's fiscal resources for maintaining a standing army were woefully inadequate (see The Five-Year Plans , ch. 3). To compound matters, the country had virtually no capacity to provision its military beyond the most basic items such as food, clothing, and small-arms ammunition. Almost all of the army's equipment needs, such as airdefense guns and aircraft of all kinds, and its requirements for overhauling major equipment items were purchased abroad through scarce foreign exchange reserves or concessional terms. By any standard, the Royal Nepal Army faced severe resource constraints, even in comparison with other less- developed countries.

Nevertheless, resources earmarked for the military represented a modest defense burden. According to 1989 estimates, approximately US$33 million, or 1.2 percent of the gross national product (GNP-- see Glossary), was budgeted for defense. The defense outlay represented approximately 6.2 percent of the central government expenditures budget. Health, education, and economic development clearly took priority over defense (see Regular and Development Budget , ch. 3). Defense budget figures must be used with caution, however. Most observers suspected that actual outlays for the military were buried in other budget categories or else handled discreetly under accounts controlled by the royal family. Much of the defense budget, however, paid for routine recurring costs, particularly salaries and pensions. The defense budget traditionally was not subjected to close public scrutiny, and all but the most generalized statistics were a closely guarded secret. As of mid-1991, it was unclear whether this pattern would hold true. The Parliament, now genuinely representative, was constitutionally responsible for passing the annual budget and overseeing national defense requirements, but had not yet had a chance to prove itself in practice.

Data as of September 1991