The World Bank's 100 million US dollars Poverty Reduction Strategy Credit (PRSC)--II loan hangs in the air as the Nepali government has failed to fulfill "four critical" commitments on economic reform.

The government had promised to meet the conditionalities by the end of November, 2005.

Rajib Upadhya, senior external affairs specialist at the World Bank Nepal Office, said here on Sunday that the bank will not release the PRSC loan till the government fulfills its promise.

He also expressed frustration over the government's non- compliance. "Of course, this is frustrating but again, this is also not the first time a promise has remained hanging for want of visible action," he said.

In a letter sent to the bank in October, Nepali Finance Minister Madhukar SJB Rana had committed the government to seizing the passports of top willful defaulters and suspending ownership transfer of fixed assets if they fail to reach amicable settlements with their lending banks within November.

Besides, the government had also pledged to enforce the much- delayed Governance Act and Labor Act and adjust prices of petroleum products at par with international prices through an automatic pricing mechanism.

The bank tabled the four conditionalities during a high level meeting with the government held in Washington DC last September.

The bank had then warned it will drastically downgrade its lending posture from "base case" to "low case."

If Nepal is demoted to low case, future assistance levels will be reduced to no more than 50 million dollars a year, as against the current "base case," which allows assistance of 120- 200 million dollars a year.

Source: Xinhua