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Written by: Staff

KATHMANDU, Apr 19 (Reuters) Nepal's economy can hold out for months even if it is isolated by donors and allies angered by King Gyanendra's crackdown on a pro-democracy campaign, the World Bank representative to the country said on Wednesday.

Although the economy was suffering a lot of strain from a two-week strike in the campaign by a seven-party alliance for the restoration of democracy, it had foreign exchange reserves of about $1.5 billion, equivalent to the full annual budget, said Ken-ichi Ohashi, the bank's Nepal Country Director.

''How long has Burma (Myanmar) survived?'' he said in an interview with Reuters. ''I think evidence is pretty clear that if a country decides to endure some hardship, the economy just doesn't collapse very easily.

''And especially the Nepali economy, it's so well integrated into the Indian economy that it's not going to collapse.'' India, the giant neighbour to the south of the landlocked kingdom, has an open border with Nepal. But it can bring pressure to bear by closing off trade and transit points, on which Nepal depends for imports of fuel and other essentials.

India slapped a partial trade blockade on Nepal in the late 1980s following political differences, but it had only a limited impact even though it lasted for several months.

''If India plays hardball, India can put pressure,'' Ohashi said. ''But the pressure is only through essentially making everybody's life miserable.'' Nepal is one of the poorest countries in the world, with per capita annual income of just above $250. But up to to 80 percent of its 26 million people depend on agriculture. Nepal also exports textiles, handicrafts, vegetable oil and carpets.

Remittances from overseas Nepalis bring in about $1.3 billion annually.

Tourism and aid are two other principal sources of foreign exchange, but some donors have slowed lending because of the king's crackdown on the democracy campaign. Tourist arrivals are also falling because of the unrest.

The two-week strike has choked supplies to the capital Kathmandu and fuel and food are falling short. Revenue collection has dwindled as economic activity has dropped.

''But they have generally kept up with current expenditure requirements and the government can access the line of credit with the central bank,'' Ohashi said. ''I don't see a situation where the government can't pay government employees.'' ''It seems pretty obvious to me that the biggest pressure comes from whether people come out in large numbers.

''If a million people came out, I think the king would have certainly have to take notice. Donors threatening to cut aid I don't think is going to do it.'' REUTERS CS HS1209

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