Govt spending falls in first quarter: NRB

Post Report

KATHMANDU, Dec 1- The first quarter of the current fiscal year 2000/01 has been marked with a deceleration in both narrow and broad money. Total government expenditure decelerated mainly due to the deceleration in both regular and development expenditure. In spite of a deceleration in revenue collection, resource mobilization remained satisfactory because of a significant growth in the receipt of foreign cash grants, states a press communique received here today.

However, because of higher government expenditure compared to the resource mobilization, budgetary deficit was observed during the review period. The rate of inflation on point to point basis has been recorded at two per cent mainly because of the decline in the prices of food and beverages group. In the external front, because of a higher growth rate of exports than that of imports trade deficit has decreased compared to that of last year. The foreign exchange holdings of the banking system rose substantially due to a surplus in the balance of payment emanating from the growth in net transfer income and miscellaneous capital inflows as well as a decline in the trade deficit. The resulting foreign exchange reserve was sufficient to cover merchandise imports of more than eleven months. In the share market, share transaction declined compared to the previous month.

Monetary

During the first quarter of the fiscal year 2000/01, broad money registered a decelerating growth of 2.2 per cent (Rs 4164.3 million) to Rs 190285.2 million compared to a growth of 3.1 per cent (Rs 4669.2 million) during the same period last year. A deceleration in the growth of net domestic assets despite a marginal increment in net foreign assets compared to last year are attributed for such a deceleration in broad money. As a consequence of downward revision in interest rates on deposits, and expansion in resource mobilization activities of non-bank financial institutions, growth of time deposits decelerated from 2.7 per cent (Rs 2781.3 million) last year to 1.8 per cent (Rs 2301.3 million) during the review period. Narrow money also decelerated to 3.1 per cent (Rs 1863.0 million) during the review period compared to a growth of 3.7 per cent (Rs 1887.9 million) in the previous year.

As a result of a decline in the credit flow to government enterprises and deceleration in claims on the government as well as the private sector, total domestic credit of the banking system decelerated from 4.4 per cent (Rs 5979.0) in the previous year to 2.8 per cent (Rs 4462.6 million) during the review period. The flow of bank credit to the private sector decelerated to 3.7 per cent (Rs 4051.7 million) during the review period compared to a growth of 5.8 (Rs 5279.1 million) in the preceding year mainly due to low in credit demand for imports, the communique states.

Fiscal

On the fiscal front, government expenditure decelerated from 38.1 per cent last year to 10.5 per cent amounting to Rs 11533.9 million during the review period. Of the total expenditure, regular expenditure and development expenditure increased by 12.9 per cent and 12.6 per cent respectively, while freeze expenditure declined by 9.2 per cent. Resource mobilization marked a growth of 18.0 per cent during the review period compared to a growth of 12.7 per cent during the same period last year. Revenue collection, the major source of resource mobilization, increased from Rs 8010.2 million last year to Rs 8829.2 million during the review period marking a growth of 10.2 per cent compared to 14.9 per cent growth last year. An increase in the receipts from foreign cash grants has resulted in such a growth in resource mobilization. However, because of the higher government expenditure, budget deficit of Rs 2222.0 million was observed during the review period. The government received foreign cash loan amounting to Rs 1034.0 million while the remaining amount of Rs 1188.0 million was overdrawn from Nepal Rastra Bank to meet the resources gap during the review period states the communique.

Consumer price index

The National Urban Consumer Price Index, on point to point basis, recorded a rise of 2.1 per cent during the review period compared to a rise of 4.2 per cent last year. A fall in the price of food and beverages group helped the rate of inflation to remain at a lower single digit. Of the overall price index, price index of food and beverages group declined by 4.6 per cent compared to 3.9 per cent increase in the preceding year.

There was an increase in the price of spices, sugar and sugar products, milk and milk products, restaurant meals as well as meat, fish and eggs. However, the declining prices of oil and ghee, cereal products, pulses and beverages contributed for such a decline in the price index of food and beverages group. Price index of non-food and services group increased from 4.7 per cent in the previous year to 10.8 per cent during the review period. This was mainly due to the rise in prices of housing, transport and communications, medicine and personal care, tobacco, education and recreation, shoes as well as cloth, clothing and sewing services. Regionwise, price index of Hills, Kathmandu and Tarai increased by 3.9 per cent, 2.8 per cent and 1.1 per cent respectively, says the communique.

Export/Import

On the external front, exports and imports both registered respective growths of 24.9 per cent to Rs 13521.3 million and 7.5 per cent to Rs 25538.3 million during the review period. Although there was a significant increase in the exports to India, exports to third countries decelerated during the review period. In spite of a decrease in the exports of readymade garments, woolen carpet, and jewelry to third countries, exports of tanned skin and pulses increased compared to that of last year. During the review period, Rs 3.03 billion worth of Pashmina was exported state communique.

The export-import ratio, which was 45.6 per cent in the previous year, improved to 52.89 per cent during the review period. The increase in imports was attributed mainly to higher imports of vehicles and parts, textile, thread, chemicals, chemical fertilizer, agricultural tools and machinery from India and petroleum products, beetle nuts, crude oil, plastic granules, copper wire and sheet, thread, textile, transportation goods and spare parts, computer parts, aeroplanes parts, medical equipment and palm oil from third countries. The growth rate of exports was high while that of imports remained low compared to last year. As a result, trade deficit during the review period declined by 7.0 per cent amounting to Rs 12017.0 million compared to a growth of 32.1 per cent in the previous year, states the communique.

Balance of payment

Based on the monetary statistics for the first quarter of the fiscal year 2000/01, the overall balance of payment recorded a surplus of Rs 1605.5 million. Foreign exchange holdings of the banking system increased by 28.4 per cent to Rs 99391.2 million as at mid-October 2000. Of the total reserves 83.3 per cent accounted for convertible currency and 16.7 per cent for non-convertible currency, says communique.

In the share market, market capitalization of those companies listed in the Stock Exchange increase to Rs 53.09 billion in the review month (Aswin) from Rs 50.35 billion in the previous months. Likewise, NEPSE index increased from 421.2 to 433.9 during the same period, the communique concludes.

Nepal’s export potential not fully realized

Post Report

KATHMANDU, Dec 1 Chairman of Nepal-German Chamber of Commerce and Industry (NGCCI), BK Shrestha, pointed out the need to diversify and expand export base of Nepali products. Despite having big possibilities to attract direct foreign invest (FDI) and technology from Germany, we have not been able to take full advantage it, he said.

NGCCI will now focus its activities to expand on these areas, he added. He also said, if German products are manufactured in Nepal, it could easily be absorbed in the huge market in India and China. As Nepal has favourable trade agreements with both the nations, has abundance of cheap manpower and conducive environment, I request German investors to invest in Nepal, Shrestha said.

Although our politicians and statesmen are never tired of harping about the private sector’s lead role in economic field, but their commitments are far from the reality, Shrestha said.

Speaking at the 9th annual general meeting (AGM) of the NGCCI, German Ambassador to Nepal Rudiger Lemp said cooperation between the NGCCI and German embassy has been very close, cordial and beneficial for both sides. He said that, Nepal exported goods to Germany worth 187 million DM and imported goods from Germany worth 30 million DM in 1999.

Our role as Nepal’s second largest export market is making positive contribution towards development in the kingdom. In spite of general budget cut-backs, Nepal will receive an increased cooperation fund in 2000/2001, he assured.

Jim Tomecko, Team Leader, GTZ-PSPP said, though business has moved from stability to uncertainty with globalization, there are many possible avenues for joint activities between Nepal and Germany.

If regional and international strategies are not adopted, Nepal may lag behind in joining the World Trade Organization (WTO) and South Asian Free Trade Area (SAFTA). However, their application will lower the tariffs, which will encourage investment if there is better partnership, he further said.

Suggesting Nepal to make reassessment and market survey, Tom said Public Private Partnership Program offers technical support, training and other measures for the promotion of Nepalese firms.

Diwakar Golchha, Second Vice president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said that formation of NGCCI has improved Nepal-German relations as bilateral chambers are important to promote economic activities of respective countries.

In his inaugural speech, Prithvi Raj Ligal, Vice president of National Planning Commission (NPC) said that NGCCI has significantly promoted Nepalese trade and Germany is a major trading partner with which Nepal has a trade surplus.

Nepal has favourable environment for foreign investment. Therefore, Germany can invest in knowledge-based industry. He also suggested NGCCI to come up with strategies and plans to attract foreign investment.

Ligal also gave away best export award for best traditional export to Paramount Carpet Industry, best export award for best non-traditional merchandise to Das Multiple Exports, NGCCI Recognition Award to Binayak Shah and Special Achievement Award to Ameer Shakya on the occasion.