Economy News The Rising Nepal (Daily)

By A Staff Reporter

KATHMANDU, Nov. 16: During the first two months of the current fiscal year 2002/03, both broad money and narrow money supply declined as that in the same period last year. Interest rates in both the treasury bills and inter-bank markets slumped. Total government expenditure, on cash basis, increased moderately by 7.4 per cent during the review period due mainly to a sharp decline in the development expenditure. The slow growth of total resources compared to expenditure during the review period resulted in higher budgetary deficit according to Nepal Rastra Bank.

Capital Market

The weighted average treasury bills rate stood at 3.49 per cent during the review period compared to 3.78 per cent in mid-September last year. Similarly, weighted average inter-bank rate also declined to 2.50 per cent in the review period from 2.62 per cent during the same period last year. Major indicators of the stock market registered a downward trend during the review period. NEPSE index dropped by 3.6 points to 222.98. Market capitalisation of the listed companies also went down by 1.2 per cent to Rs. 34.13 billion from Rs. 34.56 billion of the previous month. However, both the value and number of share transactions increased during the review period, the NRB said.

Based on the cash-flow data, total government expenditure during the review period has increased by 7.4 per cent of Rs. 6.7 billion as against a rise of 9.7 per cent during the same period last year. Of this, regular expendture has increased by 22.9 per cent to Rs. 4.5 billion in comparison to a decline of 4.3 per cent last year. The development expenditure, on cash flow basis, however, declined sharply by 56.4 per cent to Rs. 332.4 million as against a decline of 11.0 per cent last year. Pressing security expenses and increased repayment of loan and interest contributed to such a rise in regular expenditure, while the inability in carrying out development activities due basically to security problems led to a decline in development expenditure. The freeze expenditure, during the review period has increased by 2.9 per cent amounting to Rs. 1.9 billion as against the rise of 80.1 per cent during the same period last year. During the review period, total government resources went-up by 4.8 per cent to Rs. 6.5 billion as against the decline of 1.0 per cent last year. Of this, revenue collection, a major source of the government resource, has declined by 3.0 per cent to Rs. 6.0 billion as against the growth of 13.5 per cent last year. The revenue collection in the review period declined due to the continued sluggishness in industrial production, trade, tourism and other economic activities. During the review period foreign cash grants increased sharply by 63.5 per cent to Rs. 46.6 million as against the decline of 95.4 per cent last year. Non-budgetary receipts also increased accordingly by 138.6 per cent to Rs. 410.6 million as against the decline of 51.2 per cent last year. Despite the decline in revenue collection, the total government resources has increased by 4.8 per cent due to a sharp rise in foreign cash grants and non-budgetary receipts, net.

Higher growth in total government expenditure compared to that of total resources led to a jump in budgetary deficits by 172.4 per cent to Rs. 263.4 million during the review period compared to a decline of 118.5 per cent last year. To meet this gap foreign cash loans amounting to Rs. 791.7 million has been mobilised. Added to this differential was Rs. 19.2 million, balance remained in the other headings of the government account, resulting ultimately in the surplus of Rs. 547.5 million in the General Treasury during the review period.

Consumer Price Index

The National Orban Consumer Price Index, on point to point basis, has gone up by 2.7 per cent during the review period compared to a rise of 3.8 per cent during the same period last year. Of this, price index of food and beverages group increased by 2.5 per cent as against an increase of 3.4 per cent during the same period last year. Despite an increase in the prices of beverages, oil and ghee, grains and cereals products, pluses, fish, meat and eggs, restaurant meal and vegetables and fruits, sharp decline in the prices of spices and sugar and related products contributed to a lower rate of inflation in food and beverages group during the review period. The price of non-food and services group also went up moderately by 2.8 per cent compared to 4.2 per cent during the same period last year. The slower rise in the price of non-food and services group was mainly due to the decline in the prices of cloths. Regionwise, the price index of Terai, Kathmandu valley and Hills increased by 3.2 per cent, 2.5 per cent and 1.5 per cent respectively, NRB said.

On the external front, total exports declined sharply by 25.9 per cent to Rs. 6344.2 million during the review period as against the decline of 2.5 per cent during the same period last year. During the review period exports to India declined by 34.2 per cent in comparison to a marked growth of 31.4 per cent during the same period last year. Similarly, the exports to the third countries declined by 13.6 per cent as against the decline of 29.2 per cent during the same period last year. Exports of jewellery and readymade garments to the third countries increased whereas that of woolen carpet, pasmina and tanned skin declined sharply.

During the review period, the total imports has increased by 3.9 per cent to Rs. 17337.3 million as against the decline of 5.8 per cent during the same period last year. The imports of thread, rice, agricultural equipments and parts, cement, electrical equipments, petroleum products, M.S. wire, rod, tire, tube, tobacco, M.S. billet as well as cold and hot roll sheet from India and petroleum products, clothes, video, T.V., computer parts, cloves, raw wool, cotton, telecommunication equipments and parts as well as other machines and parts from third countries has gone up during this period.
Due to the decline in exports and increase in imports during the review period, the trade gap has widened by 35.2 per cent to Rs. 11.0 billion as against the decline of 9.0 per cent during the same period last year. The export/import ration which was 51.3 per cent in the previous year went down to 36.6 per cent during the review period.

Baed on the available balance of payment (BOP) statistics of the first month of the FY 2002/03, the current account deficit increased sharply by 287.7 per cent to Rs. 3.46 billion due to a sharp decline in service income, net, as against a decline of 39.3 per cent last year. The transfer net, which had increased by 34.7 per cent last year declined by 22.9 per cent to Rs. 1.67 billion during the review period. The service, net, also went down by 70.5 per cent to Rs. 254.7 million as against the decline of 38.7 per cent last year. The inflow of both official capital, net, and miscellaneous capital, net, could not meet the large gap in current account deficit. As a result, overall balance of payment position turned into negative by Rs. 1.07 billion as against the deficit of Rs. 0.3 billion in the previous year.
Gross foreign exchange holdings of the banking system (including exchange valuation change) grew by 2.6 per cent to Rs. 106.43 billion as at mid-September 2002. Of the total reserve, the share of convertible currencies improved to 78.3 per cent during the review period from 75.8 per cent last year while that of non-convertible currencies declined to 21.7 per cent from 24.2 per cent last year.

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