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Kathmandu Wednesday September 06, 2000 Bhadra 21, 2057.
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Trade deficit widens, inflation low
By a Post Reporter
KATHMANDU, Sept 5 - This fiscal year 1999/00 has been marked
with an acceleration in economic growth and a sharp deceleration in inflation rate
irrespective of continued high monetary growth. Government expenditure accelerated mainly
due to a rise in development expenditure. Higher budgetary deficit was recorded as a
consequence of low resource mobilization in comparison to government expenditure, states a
press communique issued by the Nepal Rastra Bank today.
In the external sector, although the growth rate of exports
outpaced that of imports, trade deficit widened mainly due to the relatively larger volume
of imports. The foreign exchange holdings of the banking system rose substantially due to
a surplus in the balance of payment emanating from the growth in miscellaneous capital
inflows. The resulting foreign exchange reserve was sufficient to cover merchandise
imports for ten months and a half. In the share market, share transaction grew
significantly compared to the previous month, says the communique.
In the review year, real economic growth rate stood at 6
percent due mainly to improvement in agricultural sector followed by marked growth in
manufacturing, electricity and trade sectors. The manufacturing sector grew by 9 percent
due mainly to higher output growth in beverages, construction and export related
industries, the communique says.
Monetary
During the fiscal year 1999/00, broad money registered a
decelerating growth of 19.2 percent (Rs. 29411.5 million) amounting to Rs. 182211.6
million compared to the growth of 20.8 percent (Rs 2637.5 million) in the previous year.
This was mainly due to deceleration in the growth of net domestic assets of the banking
systems in spite of acceleration in net foreign assets. As a consequence of downward
revision of interest rate on deposit, growth of imports and expansion in resource
mobilization activities of non-bank financial institutions, growth of time deposits
decelerated from 25.1 percent (Rs. 20438.9 million) in the previous year to 20.6 percent
(Rs. 20931.5 million) during the review year. However, the growth of time deposits
remained high mainly because of high economic growth rate and positive real interest rate
in time deposits due to low inflation during the review year. Narrow money growth
accelerated from 13.1 percent (Rs. 5898.6 million) in the previous year to 16.6 percent
(Rs. 8480.0 million) during the review year.
As a result of deceleration of credit to the government as
well as government enterprises, total domestic credit of the banking system decelerated
slightly to 16.1 percent (Rs. 21652.1 million) during the review year from 16.4 percent
(Rs. 19020.7 million) in the preceding year. However, because of decline in interest rate
on bank credits and increase in credit flow to imports and service sector, the flow of
bank credit to the private sector increased by 20.1 percent (Rs. 18246.5 million) during
the review year compared to 18.2 percent (Rs. 13970.5 million) growth in the preceding
year, according to the communique.
Fiscal
On the fiscal front, government expenditure increased by 9.9
percent amount to Rs. 55764.8 million during the review period compared to 8.8 percent
growth in the preceding year. Of the total expenditure, regular expenditure increased by
10.4 percent, development expenditure by 7.8 percent, and freeze expenditure by 43.1
percent. During the review period, regular expenditure decelerated while development
expenditure moved up compared to that of the previous year. Resource mobilization marked a
growth of 9.1 percent during the review year compared to 18.1 percent last year. Revenue,
the major source of resources, stood at Rs 42870.0 million marking a 15.1 percent growth
compared to 13.1 percent in the previous year. However, decline in the receipts from
foreign cash grants and non-budgetary income resulted in the slower growth in total
resources. AS a consequence of lower resources mobilization compared to expenditure
occurred, budget deficit of RS 10214.3 million was recorded and this was 13.5 percent
higher than that of the previous year. During the review year, the government issued
treasury bills worth Rs 2510.0 million, national saving certificates worth Rs 2200.0
million and development bond worth Rs 790.0 million in the treasury, the communique says.
Price Index
The annual average National Urban Consumer Price Index,
recorded a rise of 3.3 percent during the review year compared to a rise of 11.3 percent
in the previous year. A fall in the prices of food and beverages group helped lower down
the annual average inflation rate to a single digit. Of the overall price index, the
annual average price index of food and beverage group increased by 0.4 percent compared to
16.1 percent in the preceding year. Despite an increase in the price index of grain and
cereal products, restaurant meals, meat, fish, and eggs, milk and milk product, beverages,
as well as spices, the declining prices of oil and ghee, vegetables and fruits, sugar and
sugar products as well as pulses contributed for such a decrease in the annual average
price index of food and beverages group. However, the annual average price index of
non-food and services group increase fro 5.8 percent in the previous year to 7.0 percent
during the review period. This was mainly due to the rise in prices of transport and
communications, education and recreation, housing, medicine and personal care, tobacco,
cloth, clothing and sewing services as well as shoes. Region-wise the annual average price
index of Kathmandu, Hills and Terai increased by 3.6 percent, 3.7 percent and 3.0 percent
respectively, mentions the communique.
Foreign Trade
On the external front, exports and imports both registered
respective growths of 44.7 percent to Rs 51622.6 million and 22.2 percent to Rs 106967.0
million during the FY 1999/00. In the export side, export of ready-made garments increased
significantly whereas that of woolen carpets and jewelry showed only a marginal increment.
However, export of Pashmina increased significantly and stood at Rs 6220.0 million whereas
the export of pulses. Tanned skin and nigerseed declined during the review period. The
export-import ratio, which was 40.8 percent in the previous year improved to 48.3 percent
during the review period. The surge in imports was attributed to higher imports of food
grains, medicine, textile, thread, chemicals, agricultural tool, machineries etc from
India and rice, sugar, betel nuts, crude oil, chemical fertilizer, copper wire and sheet,
thread, transportation goods and spare parts, aeroplanes and parts, gold and other
machineries as well as their spare parts from third countries. Although exports increased
at a higher rate than imports, trade deficit which had declined in the previous year
increased by 6.7 percent amounting to Rs 55344.4 million during the review period, mainly
due to a relatively larger volume of imports compared to exports, the communique states.
Balance of Payment
Based on the available statistics for the first ten months of
the fiscal year 1999/00, the balance of payment remained favorable by Rs 13468.9 million.
During the review period, the growth of trade deficit outpacing the increase in net
service and transfer income resulted in the current account deficit of RS 4280.4 million.
However, a substantial inflow of miscellaneous capital items helped balance of payment to
register a sizable surplus. Based on the monetary statistics for the fiscal year 1999/00,
the overall balance of payment recorded a surplus of Rs 14047.6 million. As a result
foreign exchange holdings of the banking system increased by 22.6 percent to Rs 94007.7
million as at mid-July 2000. Of the total reserves, 85.6 percent accounted for convertible
currency and 14.4 percent for non-convertible currency, the communique says. |
