US embassy cable - 05KATHMANDU1295

C O N F I D E N T I A L KATHMANDU 001295 
 
SIPDIS 
 
E.O. 12958: DECL: 06/14/2015 
TAGS: ECON, EFIN, PGOV, PHUM, NP 
SUBJECT: VICE CHAIRMAN TULSI GIRI AND WIFE ON BANK BLACKLIST 
 
REF: 2004 KATHMANDU 02305 
 
Classified By: Charge Elisabeth Millard. Reasons 1.4 (b/d). 
 
1. (C) After the public revelation that Dr. Tulsi Giri, 
two-time Prime Minister under the Panchayat system and 
current Vice Chairman of the Council of Ministers, and his 
wife Sahara Giri, were on the list of major loan defaulters, 
Nepal's Ministry of Finance put on hold its request that all 
government agencies bar blacklisted willful defaulters from 
public posts.  A World Bank representative confirmed to 
Emboff that the names of Dr. Giri and his wife were among the 
list of 1,751 blacklisted borrowers compiled by the Credit 
Information Bureau (CIB) at the Nepal Rastra (Central) Bank. 
Nepal Bank Limited (NBL) Chief Executive Officer J. Craig 
McAllister also confirmed the inclusion of the King's top 
political appointee on the list.  The revelation has been 
front page news the past several days. 
 
2. (C) According to press reports, the CIB blacklisted the 
Himalaya Plastics Private Limited company and its 
shareholders per the request of NBL for failing to pay a 
total due of USD 248,571 as of mid-January 2005.  Company 
records indicated that Dr. Giri was still Chairman of the 
Board and a shareholder.  Himalaya Plastics obtained the 
loans in 1986 with Dr. Giri as guarantor shortly before he 
left the country to take up residence in Sri Lanka and then 
India; he did not return until he was summoned back by King 
Gyanendra to assume his current post as head of the Council 
of Ministers in February 2005.  Despite repeated attempts by 
NBL to recover the loan amount, the company has remained in 
default for nearly twenty years. 
 
3. (SBU) Giri has conceded that he was Chairman of the Board 
of Himalaya Plastics before he moved abroad.  He claimed, 
however, that he had not taken the loan out under his 
personal guarantee and had no idea he had been blacklisted. 
Speaking at a public program on June 12, Giri stated he would 
not resign from his post simply because he was on a list of 
blacklisted bank defaulters.  Ironically, according to press 
reports, the Council of Ministers that Giri heads on April 14 
accepted a report by the National Planning Commission that 
stated that "blacklisted persons will be barred from assuming 
any responsibilities in public posts."  As of June 14, NBL 
and the Ministry of Finance remained in negotiations 
regarding further actions to be taken against willful 
defaulters. 
 
COMMENT 
------- 
 
4. (C) Pursuing punitive actions against willful defaulters 
remains a politically sensitive issue in Nepal, due largely 
to the high profile of many of those on the CIB's blacklist. 
This latest revelation--that the King's own top political 
appointee and his wife are among the leading defaulters--has 
halted the government's efforts to impose punitive measures. 
It also highlights the continued friction between the 
government's desire to prevent a banking sector crisis 
(according to the IMF, Nepal's two largest commercial banks, 
NBL and Rastriya Banijya Bank, hold portfolios of over 50 
percent non-performing assets, or USD 450 million) (reftel) 
with a hesitation among the top echelons of political and 
social circles to punish their own.  The Embassy will 
continue to work with international financial institutions to 
monitor and apply pressure as required. 
 
5. (C) Nepali press has felt free enough to highlight the 
allegations against the King's top advisor--an indication 
that reports of total press censorship in Nepal should be 
taken with a grain of salt. 
MILLARD