Govt expenditure increases, budget deficit widens

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KATHMANDU, May 23- The first nine months of the current fiscal year 2000/01 have been marked with a deceleration in monetary aggregates and an acceleration in fiscal expenditure and revenue. Total government expenditure has accelerated due mainly to a pick up in both regular as well as development expenditure, says a press release issued by Nepal Rastra Bank (NRB) today.

Budget deficit

During the review period, resources mobilisation grew by 20.8 percent as a result of higher growth in revenue receipts, foreign cash grants and non-budgetary receipts net. However, because of higher growth of government spendings, budgetary deficit widened by 35.3 percent during the review period.

Inflation

The rate of inflation, on point to point basis, was recorded at 2.2 percent, mainly because of the decline in the prices of food and beverages group. In the external front, an impressive growth of exports accompanied by a comparatively slower growth of imports helped narrow down the trade deficit during the review period.

Forex holdings

The foreign exchange holdings of the banking system increased substantially due to a surplus in the balance of payment emanating from the growth in official and miscellaneous capital inflows and decline in the trade deficit. The resulting foreign exchange reserve was sufficient to cover merchandise imports of eleven months. In the share market, share transaction has come down compared to the previous month. In the money market, treasury bills rate remained at 3.9 percent whereas the inter bank rate stood at 3.4 percent, says the communique.

Monetary front

During the first nine months of the fiscal year 2000/01, broad money registered a decelerating growth of 8.4 percent (Rs 15674.6 million) to Rs 201795.5 million compared to a growth of 16.6 percent (Rs 25362.8 million) during the same period last year. A deceleration in the growth of both net domestic assets and net foreign assets compared to last year was attributed for such a slowdown in broad money growth. The downward revision in interest rates on deposits, availability of afternative opportunities for saving and a rapid growth in foreign currency deposits with banks led to the deceleration in the growth of time deposits from 17.3 percent (Rs 17647.2 million) last year to 7.1 percent (Rs 8847.4 million) this year. Narrow money also decelerated to 11.2 percent (Rs 6827.2 million) during the review period compared to a growth of 15.1 percent (Rs 7715.6 million) during the same period last year, the communique says.

As a result of a slow growth in credit flow to the government and government enterprises, total domestic credit of the banking system decelerated from 13.2 percent (Rs 17764.4 million) last year to 10.5 percent (Rs 16567.3 million) this year. The flow of bank credit to the private sector increased by 12.8 percent (Rs 14063.6 million) during the review period compared to 14.2 percrnt (Rs 12870.6 million) in the preceding year.

Fiscal front

On the fiscal front, total government expenditure during the review period registered a comparatively higher growth of 23.3 percent amounting to Rs 43865.6 million as against a growth of 11.6 percent during the same reriod last year. Of the total government expenditure, regular expenditure, development expenditure and freeze expenditure increased by 28.8 percent, 13.7 percent and 5.3 percent respectively. During the review period, revenue collection also inceassed by 17.7 percent to Rs 32594.7 million compared to a lower growth of 11.4 percent during the same period last year. A significant growth in revenue collection coupled with an impressive growth in foreign cash grant and non-budgetary receipts net, have contributed to the growth of resources mobilisation to 20.8 percent compared to 6.7 percent growth last year.

However, such a growth rate of resources mobilisation remaining lower than government expenditure, a budget deficit of Rs 8419.0 million was incurred during the review period. To meet the resources gap, the government issued national saving bonds worth Rs 2000.0 million, development bonds worth Rs 1000.0 million treasury bills worth Rs. 1276.2 million and mobilised foreign cash loan amounting to Rs 3372.0 million. The remaining amount of Rs 770.8 million was overdrawn from Nepal Rastra Bank, states the communique.

Consumer Price Index

The National urban consumer Price Index, on point to point basis, recorded a rise of 2.2 percent during the review period compared to a rise of 3.4 percent last year. A fall in the prices of food and beverages groups helped the rate of inflation to be contained at such a low level. Of the overall price index, price index of food and beverages group declined by 1.7 percent during the review period as aganist a decline of 0.2 percent during same period last year. Price index of non-food and services group slowed down to 6.7 percent during the review period from 7.9 percent last year. Regionwise, price indexes of Hills, Kathmandu valley and Terai have respectively increased by 6.4 percent, 2.3 percent and 0.7 percent.

A decline in the price index of food and beverages group in Terai helped the overall price index to remain at such a low level. Becasue of the depreciation of Nepalese currency and a rise in the prices of petroleum products, the price index of imroted goods increased by 7.7 percent during review period as against an increse of 3.7 percent last year. As a consequence of the upward revision in the price of pertroleum products, the price index of government controlled goods increased to 10.3 percent during the veview year compared to 8.3 percent last year, says the communique.

Export/Import

On the extenral front, exports registered a decelerated growth of 21.5 percent to Rs 43441.0 million during the review period compared to a growth of 37.6 percent during the same period last year. Exports to India and third countries have decelerated by 35.1 percent and 11.9 percent respectively. The export of readymade garments, woolen carpets and jewellery to third countries has declined whereas that of pashmina, tanned skin and pulses increased significantly. During the review period, Rs 6.28 billion worth of pashmina was exported. Lately, there has been a slowdown in pashmina exports as well, says the communique.

During the review period, the growth rate of imports has declined to 6.9 percent amounting to Rs 85117.2 million as against a growth of 28.6 percent during the same period last year. During the review period import of vehicles and parts, textile, thread, chemicals, agricultural tools and parts from India and raw wool, petroleum products, beatle nut, plastic granules, copper wire and sheets, thread, textile, computer parts, aeroplane parts, medicine, camera and plam oil from third countries have increased compared to a year earlier level.

During the review period, the growth rate of exports was higher than that of imports. Consequently, trade deficit, during the review period, declined by 5.0 percent and amounted to 41676.2 million compared to the growth of 22.2 percent in the previous year. The export-import ratio, which was 44.9 percent in the previous year, improved to 51.0 percent during the review period, the communique says.

Balance of Payments

Based on the available balance of payments statistics for the first seven months of the current fiscal year, the balance of payments remained favourable by Rs 6181.7 million. During this period, decline in net services income has resulted in the current account deficit of Rs 4092.2 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 payments to remain postive. Based on the monetary statistics for the first nine months of the current fiscal year, the overall balance of payments recorded a surplus of Rs 4993.4 million. Foreign exchange holdings in the banking system increased by 14.1 percent to Rs 102871.0 million as at mid-April 2001. Of the total reserve, convertible currency accounted for 79.4 percent.

In the share market, market capitalisation of those companies listed in the Stock Exchange decreased to Rs 48.4 billion at mid-April 2001 from Rs 50.2 billion in the previous months. Likewise, NEPSE index decreased from 395.9 in the previous month to 369.1 at mid-April 2001, the communique concludes.

Narayani CCI to support Rabi Bhakta

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CHITWAN, May 23 - Chambers of Commerce and Industry of the Narayani zone has declared to support the appointment of Rabi Bhakta Shrestha as the next President of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).

The decision was taken here Monday at a meet attended by six chambers of commerce and industry of the zone. The meet was chaired by Ananda Raj Mulmi, former President of FNCCI.

The decision to support Rabi Bhakta Shrestha, presently the first Vice-president of the FNCCI, comes at a time when the federation is poised to hold its elections in the second week of June, when it celebrates its 35th anneversary. The term of the present President, Pradip Kumar Shrestha, expires then.

This will be the second time that Rabi Bhakta Shrestha would be vying for the post of the FNCCI President. Rabi Bhakta Shrestha, two years back, had withdrawn his nominations for the post leaving it vacant for the current president.

Business unfriendly activities flayed

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KATHMANDU, May 23 - A meeting of various commodities association affiliated with Federation of Nepalese Chambers of Commerce and Industry (FNCCI) held today has strongly flayed the various business unfriendly activities and has stated that such activities has greatly eroded the business atmosphere.

Similarly, the meeting also expressed deep concern over increasing incidents of theft, looting and robbery and has demanded to take concrete steps to curb such activities by taking legal action against the involved ones, states a press release issued here today by the federation..

The meeting has also warned that since industries and business organizations are forced to closedown their activities for days due to the bandhs called by the political parties, they might refuse to pay salaries, interest rates of bank loans and revenue of the bandh days.

The gathering also underlined that no such activities should be conducted that adversely affect business and social environment and has also requested all the political parties to rollback all the bandhs and strikes since such activities are against the welfare of the nation.

Addressing the gathering, Pradeep Kumar Shrestha, President of FNCCI said that the frequently occurring bandh and strikes have deteriorated the productivity of domestic industries and urged political parties to use other alternative ways to stage anti government demonstration.

Rabi Bhakta Shrestha, first Vice-president of the federation stressed the need to create awareness among the public against the strike and bandhs and urged the government to implement various suggestions presented by the federation regarding the need of urgent steps to be taken to improve the law and order condition of the nation.

Binod Bhahadur Shrestha, second Vice-president of the federation said that tussle between the political parties have damaged much-required business friendly environment and stressed upon the need of strong solidarity of the business community to defeat such anti development activities.

Speaking on the same occasion, Rohini Thapaliya, Coordinator of Commodities Associations’ Council of FNCCI said that the council has presented various recommendations with the Federation to sort out existing problems of the council.