By Sushil Sharma BBC reporter in Kathmandu

The Asian Development Bank (ADB) has called for an early resolution to Nepal's long-running Maoist insurgency to revive the country's battered economy.

Its representative in Kathmandu blamed the poor security situation for the country's present economic crisis.

The country's political problems need to be addressed and an urgent solution found to the conflict Richard Vokes ADB official

The move follows news of Nepal's worst economic performance in 20 years.

The ADB is one of Nepal's major donors, and has provided $2bn over the past 30 years.

Its representative, Richard Vokes, told reporters on Tuesday that the insurgency posed the biggest challenge to efforts to revive the economy.

Recovery 'possible'

Recent official figures show that Nepal's economy has shrunk for the first time in two decades.

Modest agricultural growth, a poor harvest, a fall in key exports, declining industrial production and a slump in the crucial tourism sector were blamed for the fall in economic growth.

The government has been aiming for over 4% growth next year.

Mr Vokes said because of political instability and the poor security situation, the target was not achievable.

However, there was scope for recovery, he said, which would depend mainly on tackling the seven-year conflict.

A number of aid projects have come under rebel attack since the rebels launched an armed struggle to replace the monarchy with a communist republic.

Continuing aid

The rebels recently renewed their long-standing offer to hold peace talks, and announced that attacks on the kingdom's civilian infrastructure would be stopped.

The government has also said that the "doors of dialogue" are open.

Mr Vokes said this was an encouraging sign, although there has been no visible progress on initiating the peace talks yet.

He pledged continued assistance to Nepal to help improve its economic situation.

The ADB is expected to provide a loan of $119m next year.