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VOL. 27, NO. 17, January 04, 2007 (Paush 20 2064 B.S.)
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Disturbing Signals
The latest Nepal Rastra Bank (NRB) report paints a gloomy picture of the economic state of affairs
By A CORRESPONDENT
As the political leaders continue to be preoccupied with 'big issues' like peace process, constitution amendment and election, the national economy is in a shabby condition.
Due to apparent lack of political guidance and focus, the economy is slowly drifting towards disaster.
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Marketplace: Sword of inflation is dangling |
At least, this was what was apparent in the recent report by the central bank.
Reports quoting NRB statement said that the budget deficit reached Rs.7.41 billion in the first four months of the current fiscal year. Just a year ago, during the same period, a surplus of Rs.1.97 billion had been recorded.
The government expenditures, in this period, grew by 34.5 percent to Rs.34.54 billion, pushed up mainly by rising recurrent expenditures. Government expenditures had increased by 9.9 percent in the corresponding period of the previous year. Increased expenditure on relief-related activities, salary increment of civil servants, and preparation for the constituent assembly elections resulted in a higher than projected growth in recurrent spending, said the central bank in a statement.
The NRB has also suggested that the government be prudent on non-budgetary expenses. On debt servicing, expenditure on principal repayments increased by 83.0 percent to Rs 4.39 billion as compared to a rise of 35.2 percent in the corresponding period of the previous year. Of the payment, Rs 2 billion went for repaying domestic debt and Rs.2.39 billion for the external debt.
Worryingly, revenue mobilization also slowed down. The total revenue mobilization rose by 13.2 percent to Rs.24.35 billion, while it had grown by 20.3 percent in the same period last year. NRB blamed the low revenue collection on adverse impact of frequent bandhs, strikes in tarai on business and industries, and problems in revenue mobilization in bordering customs offices.
Situation was not encouraging on the foreign grants front either. The government received foreign cash grants of Rs 2.26 billion, as against receipt of Rs 3.31 billion in the same period last year.
Both exports and imports performed badly. The total volume of exports fell by 6.3 percent due to decline in the exports of vegetable ghee, toothpaste, textiles, chemicals and pulses to India and woolen carpet, pashmina, readymade garments to other countries. Likewise, imports rose by one percent.
The overall balance of payments (BoP) recorded a deficit of Rs. 3.61 billion, while it had registered a surplus of Rs 180.8 million in the period last year.
Foreign currency reserves decreased by 1.2 percent in the first four months of this year to settle at Rs 163.12 billion. To meet the rising demand of Indian currency, the NRB purchased Indian currency equivalent to Rs 20.63 billion by selling US$ 321.4 million.
Inflation slightly eased down. The inflation based on consumer price index grew to 6.3 percent by mid-November, as compared to 7.1 percent a year ago. However, since the petroleum prices have been further increased twice in recent months, the inflation, too, could spiral upwards, say economists.
Perhaps to offset this situation, the government is said to be planning austerity measures to cut costs.
"Official trips abroad will be cut and new land and vehicles will not be purchased," Budget Division chief at the ministry, Krishna Hari Baskota told The Himalayan Times. "This way we could save up to Rs 3 billion without compromising on any development activity."
