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Kathmandu Tuesday January 02, 2001 Paush 18, 2057.
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Fiscal deficit widens, exports boom &
inflation dips
The first four months of the current fiscal year 2000/01 was marked with a
deceleration in both narrow and broad money. Total government expenditure accelerated
mainly due to the significant growth in both regular and development expenditures, states
a press release here today by Nepal Rastra Bank. During the review period, resources
mobilisation grew by 31.3 percent as a result of the growth in both revenue receipts and
foreign cash grants. However, because of higher government spendings, budgetary deficit
widened during the review period. The rate of inflation, on point to point basis, was
recorded at two percent mainly because of the decline in the prices of food and beverages
group. In the external front, a robust growth of exports accompanied by a comparatively
slower growth of imports helped narrow down the trade deficit during the review period.
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 and
decline in the trade deficit. The resulting foreign exchange reserves was sufficient to
cover merchandise imports of more than eleven months. In the share market, share
transaction increased significantly compared to the previous month.
During the first four months of the fiscal year 2000/01, broad money
registered a decelerating growth of 1.6 percent (Rs 2961.5 million) to Rs. 189082.4
million compared to a growth of 6.2 percent (Rs 9510.8 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. The downward revision in interest rates on deposits, upsurge
of the share prices in the stock market and rapid growth in foreign currency deposits with
banks has led to the deceleration in the growth of time deposits from 5.9 percent (Rs
5971.2 million) last year to 1.9 percent (Rs. 2392.8 million) this year. Narrow money also
decelerated to 0.9 percent (Rs. 568.7 million) during the review period compared to a
growth of 6.9 percent (Rs. 3539.6 million) during the same period last year.
In spite of the higher growth of credit to government as well as government
enterprises, total domestic credit of the banking system decelerated from 5.6 percent (Rs.
7567.6 million) last year to 5.3 percent (Rs. 8368.6 million) this year mainly due to the
deceleration of credit to the private sector. The flow of bank credit to the private
sector decelerated to 5.7 percent (Rs. 6265.0 million) during the review period compared
to a growth of 7.1 (6401.7 million) in the preceding year mainly due to the sluggish
demand for credit for imports.
On the fiscal front, government expenditure during the review period
registered a significant growth of 33.7 percent amounting to Rs. 17217.6 million compared
to 18.2 percent during the same period last year. Of the total expenditure, regular
expenditure and development expenditure increased by 39.3 percent and 32.1 percent
respectively, while freeze expenditure declined by 9.2 percent. During the review period,
revenue collection increased by 22.0 percent to Rs. 12593.0 million compared to a lower
growth of 8.6 percent last year. A significant growth in revenue collection as well as
foreign cash grant receipts has contributed to the growth of resources mobilisation to
31.3 percent compared to 5.8 percent only last year. However, such a growth rate of
resources mobilisation remaining lower than government expenditure, a higher budget
deficit of Rs. 3614.0 million was observed during the review period. During the review
period, the government received foreign cash loan amounting to Rs. 1423.4 million and
overdrew an amount of Rs. 2190.6 million from Nepal Rastra Bank to meet the resources gap.
The Natural Urban Consumer Price Index, on point to point basis, recorded a
rise of 2.0 percent during the review period compared to 2.7 percent rise last year. A
fall in the prices of food and beverages group helped the rate of inflation to remain at
two percent. Of the overall price index, price index of food and beverages group declined
by 3.8 percent during the review period compared to a decline of 0.4 percent during the
same period last year. Price index of non-food and services group increased from 6.8
percent in the previous year to 9.3 percent during the review period. Regionwise, price
index of Hills, Kathmandu and Terai increased by 4.2 percent, 3.3 percent and 0.4 percent
respectively. Because of depreciation of Nepalese currency and a rise in prices of
petroleum products, the price index of imported goods increased by 15.0 percent during the
review period compared to a rise of 3.3 percent last year. Likewise, prices of government
controlled goods increased from 4.5 percent last year to 20.2 percent during the review
period as a consequence of upward revision of the prices of petroleum products, says the
release.
Foreign trade
On the external front, exports registered an accelerated growth of 38.9
percent to Rs. 19163.6 million during the review period compared with a growth of 35.0
percent during the same period last year. Exports to India went up by 50.6 percent whereas
that to third countries grew by 30.5 percent. The exports of readymade garments, woolen
carpets and jewellery to third countries have declined whereas that of Pashmina, tanned
skin and pulses have increased compared to that of last year. During the review period,
Rs. 4.31 billion worth of Pashmina was exported.
During the review period, imports’ growth decelerated to 15.2 percent
from 30.4 percent during the same period last year. In absolute amount, total imports
increased to Rs. 35619.5 million as a result of higher imports from India. The increase in
imports was attributed mainly to a higher imports of vehicles and parts, textile, thread,
chemicals, chemical fertiliser, 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, aeroplane parts, medical
equipments and palm oil from third countries. During the review period, 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 3.9 percent amounting to Rs. 16455.9
million compared to the growth of 26.9 percent in the previous year. The export-import
ratio, which was 44.6 percent in the previous year, improved to 53.8 percent during the
review period, adds the release.
Based on the available balance of payment statistics for the first two months
of the current fiscal year, the balance of payment remained favourable by Rs. 517.1
million. During this period, decline in net services income as well as transfer income has
resulted in the current account deficit of Rs. 2662.0 million in spite of a decrease in
trade balance, compared to the same period last year. However, a substantial inflow of
miscellaneous capital items helped the balance of payment to remain positive. Based on the
monetary statistics for the first four months of the current fiscal year, the overall
balance of payment recorded a surplus of Rs. 1446.2 million. Foreign exchange holdings of
the banking system increased by 26.3 percent to Rs. 100882.3 million as at mid-November
2000. Of the total reserves, 82.6 percent accounted for convertible currency and 17.4
percent for non-convertible currency.
In the share market, market capitalisation of those companies listed in the
Stock Exchange increased to Rs. 63.54 billion at mid-November, 2000 from Rs. 53.09 billion
in the previous month. Likewise, NEPSE index increased from 433.92 in the previous month
to 519.33 at mid-November, 2000, the release concludes.
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