ECONOMIC OUTLOOK

Saving Grace

The sustained increase in the inflow of remittances has helped increase the purchasing power of the people

By A CORRESPONDENT

Overseas workers : aiding economy

The increasing remittances have helped to increase the disposable income of the people. According to a new instrument called Gross National Disposable Income (GNDI) prepared by the Nepal Rastra Bank (NRB), the GNDI is increasing at the rate of 9.1 percent.

In the current fiscal year, this rate is expected to increase up to 12.3 percent. Likewise, the remittance amount is expected to increase by 45.3 percent in the current fiscal year. Last year, remittance amount of Rs 65.54 billion entered into the country. This is the amount of remittance that has entered the country through official channels. If those coming through unofficial channels are also included, then the amount is certain to rise considerably.

The remittance has helped positively in the deposit collection, balance of payment and foreign exchange reserve.

Last week, while informing about the latest economic outlook, NRB governor Bijaya Nath Bhattarai said that the government’s expenditure has increased by 13.3 percent in the first nine months of the current fiscal year compared to the corresponding period a year ago. However, the growth of revenue collection stood at mere 0.1 percent. The government had, in fact, aimed to achieve revenue growth of 14 percent this year.

He said that currently the government’s budgetary situation is in deficit of Rs 6 billion excluding local authorities’ deposits with banks.

During this period, total exports increased by 10.4 percent. Exports to India rose by 16.2 percent in 2005/06 compared to a growth of 20 percent in the same period last year. Exports to other countries declined by 0.3 percent in the review period compared to a decline of 14.1 percent last year.

Total imports increased by 22.2 percent compared to 6.4 percent in the corresponding period of the previous year. Imports from India increased by 29 percent while imports from third countries increased by 12.6 percent. Among the imports from India , imports of goods like petroleum products, rice, yarn, medicine registered the increase.

Total trade deficit has registered a growth by 30.2 percent compared to an increase of 7.1 percent in the last year during same period. During this period, the National Wholesale Price Index increased by 7.9 percent.

At present, the total foreign exchange reserve at the NRB stands at Rs 150.94 billion. This reserve increased by 16.2 percent during the review period. Recently, the Central Bureau of Statistics had estimated that the GDP would grow by merely 2.3 percent this fiscal year.

Meanwhile, speaking at a public program in the capital, Finance Minister Dr. Ram Sharan Mahat said that achieving seven percent growth of GDP is possible if the country can improve business confidence and investment climate. He added that 30 percent of the total GDP should be utilized for investment to revive the sluggish economy for the purpose.

NATO’s Suggestions

In view of the forthcoming budget, Basant Raj Mishra, President of Nepal Association of Tour Operators (NATO), submitted an 18-point recommendation Finance Minister Dr. Ram Saran Mahat. “NATO feels that the points included in the letter will assist in bailing out the tourism industry from the current situation and achieve its potential capacity,” states a press release by the association.

The NATO’s suggestions include regaining lost confidence through effective tourism marketing; enhancing competitive strength of local tour operators; declaring tourism as a national industry; and refraining from changing the existing tax structures. “No new taxes or fees should be introduced in the upcoming budget,” the release adds. Likewise, the association has urged the minister to encourage international flights/ charters for high inflow of tourists and develop tourism infrastructures.

The association has called for strengthening the national carrier and providing incentives to sick industries. Furthermore, the association has also advised the government to take stringent action against willful defaulters. “Crisis in the banking sector of a country would mean a crisis in the entire economy. It is thus, those who disobey to repay their loans to banks, despite having the capability to pay, should be penalized,” the release states. The association has also advised the government to form a “participatory high-level independent body for tourism promotion and grievance handling.”