Overdraft exceeds Rs 5b
NRB to reduce Indian currency reserve

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KATHMANDU, Aug 6 - Governor of Nepal Rastra Bank (NRB) Dr Tilak Rawal has said that the government has drawn an overdraft of Rs 5 billion plus in the previous fiscal year and the NRB has sent a letter to the Finance Ministry to reduce it.

It is agreed upon that the government should not draw an overdraft exceeding Rs 1 billion in order to maintain fiscal discipline. However, the government was forced to draw an overdraft of that amount due to poor revenue mobilization in the last fiscal year.

At a formal program organized on Monday in the Capital Finance Minister Mahat said that he had already directed the Ministry not to draw an overdraft exceeding the generally agreed upon practice. Meanwhile, Governor Rawal has said that the central bank is making efforts to reduce Indian currency reserve.

Currently the NRB has an Indian currency reserve worth Rs 24 billion and the nation requires a reserve of about 12-13 billion rupees Indian currency at present.

Talking to economic journalists on Monday Governor Rawal said that NRB has been making preparation to issue debenture and has also initiated talks with the Reserve Bank of India to utilize Indian currency worth Rs 6 billion.

He also informed that the Indian currency reserve swelled as Nepal imported goods worth Rs 7 billion from India on convertible currency. Besides, the remittance that comes to Nepal from Gulf countries is routed through India and enters Nepal in Indian currency, he said.

In order to reduce the Indian currency reserve, NRB is making necessary arrangements to remove the ceiling on drawing draft in Indian currency, he said.

The governor also said that the central bank is making plans to facilitate the process of remittance. If this can be done even only to the remittance from Japan, NRB will get about an additional US $ 3 to 4 million per month, he said.

Talking about the management contract hand over of the Rastriya Banijya Bank (RBB) and Nepal Bank Limited (NBL) to private sector, he said the financial evaluation of RBB is being done and decision will be made within two months. So far as the NBL is concerned, it will take some time as the evaluation committee is being reconstituted, he said.

New regulations pertaining to the finance companies will also be introduced soon, he added.

Donors sceptical about budget implementation

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KATHMANDU, Aug 6 - Though donors have appreciated the recently presented budget for the current fiscal year, they have expressed scepticism over the effective implementation of the budgetary programs.

Representatives of various donor agencies at an interaction program on budget, organized by the Finance Ministry today, raised doubts over the effectiveness of the Poverty Alleviation Fund (PAF), micro credit and expressed deep concern over the slow pace in the privatization of Public Enterprises (PEs).

Addressing the program, Finance Minister Dr Ram Sharan Mahat admitted that weak and unnecessary delay in implementation, monitoring and financial irregularities are the major obstacles in achieving the development targets.

"Worsening law and order situation, coupled with rising security concerns, has created hurdles in the successful implementation of the development projects," he said.

He also said that due to a lack of proper coordination between the various agencies, there has been a number of duplications in the anti-poverty programs. "Therefore, to bring them under one umbrella, the government has introduced the Poverty Alleviation Fund," he added.

Although the investment climate is worsening and the tourism sector is suffering a setback, in addition to many industries turning sick, Minister Mahat said that the macro economic indicators, balance of payment and forex reserves are good, while the inflation rate is historically low.

Lawrance De Milner, Resident Representative of the International Monetary Fund (IMF), said that excessive overdraft drawn by the government in the last fiscal year shows that the government has failed to maintain fiscal discipline.

He also said that the provisions on the interest rate subsidy announced in the budget for the sick industries is not clear. He complained over the slow pace in the privatization process of loss-making public enterprises (PEs).

Dr Richard Vokes, Resident Representative of the Asian Development Bank (ADB) said, "The initiatives taken by the government to maintain fiscal discipline is a welcome step, but effective implementation is the key to its success."

He said that the state-owned enterprises have become economic burden for the government and it cannot go on financing the loss-making PEs as their performance is very disappointing.

He also said that the budget has failed to announce the much-awaited programs for supplementing the effective implementation of the Agriculture Prospective Plan (APP), without which achieving the target of the anti-poverty programs would remain a tough job. He also raised serious concern over the worsening investment climate resultant of degrading law and order situation.

"We appreciate the government’s determination to maintain law and order, but failure to improve the country’s image would make it very difficult for the government to attract foreign investment," said Mitsuaji Kojima, Japanese Ambassador to Nepal.

He further said that the donors have no intention to intervene, but said that they have been watching the situation very carefully.

Dr Henning Karcher, Resident Representative of United Nations Development Program (UNDP), said despite the fact that micro credit has helped in alleviating poverty, the budget has not paid due attention to it. He also raised concern over the sustainability of the five regional Rural Development Banks.

Carpet export dips by 11 per cent

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KATHMANDU, Aug 6 - In yet another sign of deepening gloom over the Nepalese export industry, the export of hand-knotted woolen carpet has slumped by almost 11 per cent in the last fiscal year.

According to the latest carpet export statistics, the total export of country’s second largest overseas exportable item, during the fiscal year 2000/01 touched 2.24 million square meter against the export volume of 2.51 million square meter recorded during the corresponding period of previous year.

The slump, in terms of US dollar earnings is wider. With a decline of over 17 per cent, the total carpet export earnings, during the period, remained at US $ 117.47 million as opposed to US $ 142.37 million earned during the fiscal year 1999/2000.

The continuing decline in the export of carpet to Germany, the largest importer of Nepalese woolen carpet that alone absorbs around over 60 per cent of the total export, is the main cause for such slump. The export towards Germany , during the review period, recorded a slump of almost 25 per cent to remain at 1.35 million square meter from 1.78 million square meter. The slow down of the German economy, the largest European economy, along with the declining consumer spending, is another factor of declining export to Germany.

In addition, the tough competition posed by the Indian carpets in the international market including in the German market, is another cause of slowing carpet export. Besides being cheap, the Indian carpet is almost similar in look with the Nepalese carpet and also often marketed in the Nepalese brand.

Despite the squeezing export towards Germany, an encouraging silver lining form the world’s largest economy has relieved the Nepalese carpet industry to some extent. The total carpet export towards USA, during the period, registered a single-digit growth of almost 4 per cent to touch 296 thousand square meter from 284 thousand square meter recorded during the previous year.

However, despite the surge in the export volume, the declining total income in terms of dollar earnings indicates that per square export price has declined. The total export incomes, during the period recorded a slight decline of 1.39 per cent to remain at US $ 19.8 million from the US $ 20.12 million recorded in the previous year.

Similar slump was also recorded in the export of carpet towards Belgium, the third largest Nepalese carpet importer. Carpet export to Belgium slipped to 88 thousand square meter from 113 thousand square meter. In the like manner, the imports of Switzerland and United Kingdom also declined during the period.

Along with the shrinking export of carpet, the import of wool, principal raw materials of the carpet industry has also fallen. With the slump of 11 per cent, the total import of wool during the fiscal year 2000/01, has also slumped to 9.05 million tons from 10.19 million tons recorded in the previous year. In terms of US dollars, the slump stands at 14.5 per cent as compared to like period of the previous year.

Nepal, during the period imported wool worth US $ 21.13 million whereas such import in the previous year was US $ 24.70 million. Nepal imports carpet wool from New Zealand and Tibet and blend them as demanded by the importers to make thread for waving woolen carpet.

Germany starts labour camp compensation payouts in Ukraine

By Yulia Sabry

KIEV, Aug 6 (AFP) - Germany began making compensation payments to tens of thousands of Ukrainians who survived Nazi slave labour camps Monday, some 56 years after the end of World War II.

Prime Minister Anatoly Kinakh presided a ceremony at which Michael Jansen, president of the German "Remembrance, Responsibility and the Future" compensation fund, symbolically handed cash payments to 14 survivors of Nazi Germany’s forced labour regime.

"We Germans acknowledge our responsibility. We obviously cannot pay back the years that were taken away. Please accept this compensation as a gesture of good will," Jansen said.

"The victims have waited a long time. But even though this compensation is being paid, the matter is not over. We do not intend to draw a moral and political line under it. You cannot forget history," he stressed.

Kinakh noted that the event was "very important financially, but also a symbolic moment which confirms that the principles of human rights are gradually taking precedence in Europe."

But not all the recipients were happy. "This money is too little and comes far too late," Yosip Krakovstky, a 67-year-old former deportee, told AFP. "A lot of the victims have been dead for a long time."

And Grygory Sagaidak, 76, a survivor of the Mauthausen forced labour camp in Austria, said he would be using his 15,000 marks (6,750 dollars, 7,650 euros) compensation payment for writing and publishing his memoirs at his own expense.

Around 477,000 Ukrainians are due to receive compensation ranging between 1,500 and 15,000 marks, depending on individual circumstances.

A fund totalling 1.7 million marks has been set up to compensate the Ukrainian victims. The money is to be distributed by a special Ukrainian fund under the supervision of the country’s national bank.

Germany has set up a 5.1-billion-euro (4.5-billion-dollar) fund to compensate the forced labours from the various countries that fell under Nazi rule, with half pledged by the Berlin government and half by German industry.

The compensation fund organisers deal with seven partner organisations around the world which submit compensation claims to it and hand out the money to victims.

Four of these organisations have already received the first payments — for victims from Poland, the Czech Republic, Russia and the US-based Jewish Claims Conference (JCC).

The first compensation payments were made in Germany on June 23 after a US judge dropped a number of outstanding lawsuits that had been holding up the process.

Estimates of the number of survivors considered eligible to claim damages for having been forced to work as slaves during the Third Reich varies widely. The final figure following the extension last month of a deadline for making claims could be as high as 1.8 million people.

The German parliament agreed to put back the deadline from August 11 to December 31, 2001. Most of the victims are from Eastern Europe — Russia, Ukraine, Belarus, Poland and the Czech Republic.