Inefficient crisis mgmt prime cause of financial mess: Adhikari

Post Report

KATHMANDU, March 17:Former Finance Minister Bharat Mohan Adhikari today said that inefficient crisis management by the government is the main reason for the current financial mess in the country.

Addressing a press meet organised by the Communist Party of Nepal (Unified Marxist-Leninist) CPN-UML on the current economic and financial situation of the country, he said, "The government could not introduce efficient measures to uplift the economy that has been hard hit since the declaration of state of emergency."

There is a need for strong policies to enhance good governance, speed up the implementation of projects, control corruption and stem leakage, create employment opportunities and involve low level people in national development, he said.

Referring to the amendments made by the government to the financial Act for the current fiscal year by bringing some changes in the tax structure and reduction of budgets for development projects, Adhikari opined that such measures have affected the economy adversely.

Such a revision was unnecessary since there were several other measures by which an equal amount of additional revenue could have been collected. "We had even submitted the detailed measures to raise fund without any burden to the general public and businessmen," he said.

He further said that more than Rs 1.5 billion could have been saved from the general expenses and around Rs 4 billion from the management of duplicated projects. The size of the government has to be reduced and should be made more accountable and result oriented to reduce the soaring government expenditure.

Citing the latest statistics made public by the Nepal Rastra Bank (NRB) recently, Adhikari said that the government has to formulate a two-phased policy to revive the down turning economy. In the first phase it should announce interim measures to rehabilitate the economy with the reduction in general expenses that are not urgent.

And then, a longer-term strategy has to be adopted to uplift all sectors of the economy including foreign trade and the tourism sector. "Economic concern is a serious matter and there must be a consensus among all the major parties on preparing such policies," he added.

Dr Dilli Raj Khanal, a CPN-UML lawmaker, during the programme said that rural and agricultural sector has been much affected by the current crisis. Due to the reduction in the annual budget of the Village Development Committees (VDCs), the development activities in the VDCs have almost come to a halt, he said.

"The government’s economic policy that has been tested since the past 12 years has failed completely". As a testimony to it, Khanal said that the distribution of wealth among the rich and the poor has widened significantly.

"More than 52 per cent of the contribution to the national income is made by upper 10 per cent of the people that holds greater amount of property, which was around 23 per cent some 25 years ago," he said.

Economy, Finance and Market

By Supa Upadhyay

Domestic money market:

The Average Weighted Discount Rate (AWDR) of 91-day Treasury Bills (TBs) rose marginally by 04 basis points to 5.38 percent but 364-day Treasury Bills (TBs) dipped by 08 basis points to 5.60 percent compared to previous week. The rupee was traded higher at NPR 98.68 and lower at NPR 98.66 for 91-day TBs and traded higher at NPR 94.70 and lower at NPR 94.66 for 364-day TBs. The NRB had received 46 bids worth NPR 1177.55 million against the notified amount NPR 850 million for 91-day TBs and 39 bids worth NPR 1335 million against the notified amount NPR 400 million for 364-day TBs. The Repo rates for member banks and institutions have baeen quoted at 6.3868 for the trading days 13 to 18 March 202 for 91-day TBs. The outright purchase facility for bank, institutions and other on TBs is also available. In the regular weekly auction, the NPR is going to issue 91-day TBs worth NPR 672.2 million and 364-day TBs worth NPR 500 million on March 13, 2002,

Domestic capital market:

The share prices of banks lost sharply. The SBI Bank lost heavily by NPR 615 after declaring bonus shares and right issues. Despite good performance and healthy profit the Standard Chartered is also manipulated to NPR 1125 losing NPR 265 over the week. The price of Nepal Lever further tumbled by NPR 275 over the week. The NEPSE Index-100 opened lower at 215.59 dipped further in all consecutive trading days and finally closed lower to 198.37, netting a significant loss of 20.22 points over the week. This week, trading was estimated at 42121 shares valued NPR 15.1 million compared to 49300 shares valued NPR 18.9 million of previous week. Commercial Banks and Finance Companies shared 87.15 percent and 5.47 percent respectively of total traded amount. This week, the index of Hotel Sector, Development Bank, Insurance Sector, Finance Sector, Production Sector and Commercial Banks lost while Business Sector remain unchanged. Out of thirty-three traded companies, only two companies improved, twenty-six companies lost and five traded companies remain unchanged at their previous prices. Nepal B’desh Bank, Bank of Kathmandu and NIC Bank registered the first, the second and the third most traded companies trading 10700, 5224 and 5090 shares respectively. Shares of Nepal B’desh Bank, NIC Bank, Bank of Kathmandu, Nepal Merchant Bank & Finance, Alpic Finance, and Nepal Development Bank were able to trade in all five working days. Likewise, Nepal SBI Bank, Nepal Bank Ltd, Standard Chartered Bank, Everest Bank, Oriental Hotel, Lumbini Finance and Everest Insurance were able to trade in four working days.

Forex round-up:

The US dollar lost significantly against all major trading partners over the week despite a series of strong economic indicators in the US and comments from Greenspan that economic expansion was ‘well underway’. The market analysts, however, remarks that though the recession is over in the United States but there seems some possibility to hurt US assets and dollar by raising fears of early rate increases.

The yen strengthened against the dollar at 126.36 on Thursday on revival of the Nikkei 225, Japan’s leading stock index, which has risen 23 percent since early February. Recent calls from brokerage firms to increase holdings of Japanese stocks raise demand for the yen. However, later on Friday, Minister of Finance concerned over the rapid rise of JPY and warns against any manipulative movement and eventually closed lower at 127.56.

The INR strengthened against the greenback on the expectations of dollar supplies next week, But state-run banks checked its further gains and eventually closed at 48.72 level.

The NPR remains unchanged against the greenback over the week.