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Kathmandu Saturday March 31, 2001 Chaitra 18, 2057.
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Budget deficit widens;
trade deficit, inflation decline: NRB
Post Report
KATHMANDU, March 30 – A deceleration in
both narrow and broad money has been noted during the first seven months of the fiscal
year 2000/01. Total government expenditure has slightly accelerated mainly due to
significant growth in regular expenditure while the growth in both development and freeze
expenditures have decelerated.
According a press release issued by Nepal
Rastra Bank, during the review period, resources mobilization grew by 19.7 percent as a
result of higher growth in revenue, foreign cash grants and net non-budgetary receipts.
However, because of higher government spending, budgetary deficit widened during the
review period. The rate of inflation, on a point to point basis, has been recorded at two
percent as a result of decline in the prices of food and beverages group. In the external
front, growth in exports accompanied by a relatively slower growth in imports has helped
to narrow down the trade deficit and subsequently the current account deficit during the
review period.
The foreign exchange holdings of the banking
system continued to rise due to a surplus in the balance of payments emanating from the
growth in official and miscellaneous capital inflows and a decline in trade deficit.
Foreign exchange reserves as at mid-February 2001, was sufficient to cover imports of
eleven months. In the share market, share transaction decelerated, compared to the
previous month. In the money market, treasury bills rate remained at 5.2 percent whereas
interbank rate remained at 4.1 percent.
During the first seven months of the fiscal
year 2000/01, broad money rose by 5.8 percent (Rs 10,845.5 million) to Rs 196,966.4
million compared to a growth of 14.1 percent (Rs 21,550.8 million) during the same period
last year. A slow down in the growth of both net domestic assets and net foreign assets
can be attributed for such deceleration. The downward revision in interest rates on
domestic deposits had led to the deceleration in the growth of time deposits from 13. 3
percent (Rs 13,483.9 million) last year to 6.0 percent (Rs 7,521.7 million) this year.
Growth in the narrow money supply also decelerated to 5.5 percent (Rs. 3,323.8 million)
during the review period compared to growth of 15.8 percent (Rs 8,066.9 million) during
the same period last year, states the release.
As a result of a slow down in credit to the
government and government enterprises, the growth in total domestic credit of the banking
system decelerated from 9.9 percent. (Rs 13,365.1 million) last year to 9.0 percent (Rs.
14,251.8 million) this year. The flow of bank credit to the private sector decelerated to
11.2 percent (Rs 12,235.4 million) during the review period compared to a growth of 11.9
percent (Rs 10,763.5 million) in the preceding year.
On the fiscal front, total government
expenditure went up to 19.2 percent amounting to Rs 32,676.9 million as against 18.4
percent rise during the same period last year. Of the total government expenditure,
regular expenditure went up by 24.4 percent whereas development expenditure increased only
by 9.3 percent. The increase in the freeze expenditure is recorded at 5.3 percent.
During the review period, revenue collection
increased by 18.4 percent to Rs 24,633.2 million compared to a lower growth of 12.1
percent last year.
A significant growth in revenue collection
coupled with growth in foreign cash grants and net non-budgetary receipts contributed to
the 19.7 percent growth in resources mobilization this year compared to 8.5 percent last
year.
In the context of lower resource mobilization
as compared with the government expenditure, a higher budget deficit of Rs 5,918.4 million
was incurred during the review period. To meet the resource gap, the government issued
national savings bond of Rs 1,000.0 million, treasury bills of Rs 431.8 million and
mobilized foreign cash loan of Rs 2,609.9 million. The remaining amount of Rs 1,876.7
million has been overdrawn from Nepal Rastra Bank.
The National Urban Consumer Price Index, on a
point to point basis, recorded a rise of 2.0 percent during the review period compared to
a rise of 4.6 percent last year. A fall in the prices of food and beverages group helped
to contain the rate of inflation at such a low level. Of the overall price index, price
index of food and beverages group declined by 2.6 percent during the review period
compared to a rise of 1.2 percent last year. Growth in the price index of non-food and
services slowed down to 7.3 percent from 8.5 percent last year. Regionwise, price indices
of Kathmandu and Hills have increased respectively by 3.4 percent and 6.4 percent and the
price index of Terai has declined by 0.4 percent. A significant decline of 6.1 percent in
the price index of food and beverages group in Terai, helped the overall price index of
the region to remain at such a low level. Due to the depreciation of the Nepalese rupees
and a rise in the prices of petroleum products, the price index of imported goods
increased by 7.9 percent during the review period as against an increase of 2.9 percent
last year.
In the external front, exports registered a
decelerated growth of 21.8 percent to Rs 33,751.8 million during the review period
compared to a growth of 41.1 percent during the same period last year. Exports to India
went up by 29.3 percent whereas export to third countries grew by 16.2 percent. A decline
in the export of readymade garments, woolen carpets and jewellary to third countries has
been noted whereas export of pashmina, tanned skin and pulses has increased significantly.
During the review periods Rs 5.82 billion worth of pashmina has been exported.
During the review period, the growth rate of
imports decelerated to 8.3 percent amounting to Rs 66,086.2 million from 31.4 percent
growth during the same period last year. The increase in imports can be attributed mainly
to a higher volume of imports of vehicles and parts, textiles, thread, cement, chemicals,
agricultural tools and parts as well as other machineries from India and raw wool,
petroleum products, bettle nuts, plastic granules, copper wire and sheet, thread,
textiles, transportation goods and spare parts, computer parts, aeroplane parts, medicine,
camera and palm oil from third countries.
During the review period, as the growth rate
of exports has remained relatively higher than that of imports, trade deficit during the
review period declined by 2.9 percent compared to a growth of 24.2 percent in the previous
year. The export-import ratio which was 45.4 percent last year improved to 51.1 percent
during the review period.
Based on the available balance of payments
statistics for the first five months of the current fiscal year, the balance of payments
has remianed favourable by Rs 4,571.1 million. During this period, decline in net services
income has resulted in the current account deficit of Rs 3,029.7 million inspite of a
decrease in trade balance compared to the same period last year. However, a substantial
inflow of official and miscellaneous capital items helped the balance of payments to
remain positive. Based on the monetary statistics for the first seven months of the
current fiscal year, the overall balance of payments recorded a surplus of Rs 6,202.2
million. Accordingly, foreign exchange holdings with the banking system increased by 19.2
percent to Rs 106,029.5 million at mid-February 2001.
In the share market, market capitalisation of
the companies listed in the stock exchange decreased to Rs 55.9 billion at mid-February
2001 from Rs 56.9 billion in the previous month. Likewise, NEPSE index decreased from
464.76 in the previous month to 455.34 at mid-February 2001, the release concludes.
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