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Kathmandu Sunday June 10, 2001 Jestha 28, 2058.
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Per
capita debt soars to 50 pc of income
Post Report
KATHMANDU, June 9 -The total foreign debt of Nepal by the
end of third quarter of the current fiscal year has moved upward to mark Rs 200 billion.
According to the statistics prepared by the Ministry of
Finance, along wiAth the ballooning total foreign debt, the per capita debt burden of
Nepal has also surged considerably in the recent years touching Rs 9,100, which is almost
50 per cent of the estimated per capita income.
Despite the huge foreign debt burden, Nepal has not yet
been included in the list of Highly Indebted Poor Countries (HIPCs), prepared by the World
Bank and the International Monetary Fund. Furthermore, Nepal has been allocating a
substantial portion of the annual budget for debt servicing. The problem of foreign debt
servicing has further been aggravated by the continued depreciation of the Nepali currency
against the dollar.
Concerned officials at the Foreign Aid Division at the
Finance Ministry informed that the inflow of foreign loans in the current fiscal year has
increased satisfactorily. The total foreign aid commitment alone in the first ten months
of the current year has been around Rs 30 billion. The major cause of such an increase in
the foreign aid commitment is due to the huge loan commitment of US $ 120 million from
Asian Development Bank, a multilateral lending agency, for the proposed Melamchi Water
Development Project. The committed loan amount of the ADB is only about 25 per cent of the
total proposed cost of the project.
The swelling mismatch between the internal resources
mobilization and total expenditure has been the prime cause for growing foreign loans.
Weak internal revenue mobilization, which hardly covers 55 per cent of the total yearly
expenditure, forces the government to look into the foreign loans to finance the
much-needed development activities.
The government expenditure in the past few years is
increasing more rapidly compared to the revenue collection, resulting a multi-fold
increment in the foreign loans. The regular expenditure of the government, during the last
decade has increased by over four fold, whereas the increment in revenue during the same
period was far below. The total foreign loan during the same period has increased by
almost three fold to touch Rs 178 billion in 1999/2000, from hardly Rs 60 billion in
1990/91.
Poor revenue mobilization accompanied by skyrocketing
expenditure is also clearly reflected in the soaring budget deficit, which during the
first nine months of the current fiscal year has scaled to Rs 8.3 billion. In order to
bridge the budget deficit, the government, in the same period, has mobilized Rs 3.37
billion of foreign cash loan along with huge internal loans.
Furthermore, huge gap between the Gross Domestic Saving
(GDS) and total investment is another cause for growing dependency on the foreign loans.
During the last fiscal year, total investment was 21 per cent of the GDP, whereas the GDS
was just over 13 per cent. The existing saving-investment gap is being bridged by foreign
loans and grants.
Though experts have expressed deep concern over the soaring
dependency of foreign loans to finance larger portion of the development expenditure,
concerned government officials argue the present foreign loan burden is not much worrisome
since almost all the loans are long term in nature carrying nominal interest rates.
Of the total budgeted expenditure of Rs 91.62 billion for
the current fiscal year, over Rs 31.62 billion has been proposed to be met through foreign
loans and grants, which is 34 per cent of the total expenditure and 65 per cent of the
total proposed development expenditure.
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