NRB macroeconomic report - Salarymen, wage earners gain

NRB macroeconomic report - Salarymen, wage earners gain
eKantipur.com, 8-Aug-2007

Salaried staff and wage earners found their living conditions ease, as their salary and wages grew at higher rate than prices of goods and services in the market during the first 11 months of 2006/07, shows a latest Nepal Rastra Bank (NRB) report.

The report on macroeconomic situation of the country for the period says the average inflation stood at 6.6 percent during the period, whereas salary and wage rate index rose by 11.6 percent.

In the same period last year, prices of goods had grown by 7.9 percent, whereas salary and wage had grown by 5.7 percent.

The central bank has attributed the easing in prices to the moderation in the prices of both food and beverage items as well as non-food and services. “The impact of recent appreciation of the Nepali currency against the US dollar also eased consumer prices of imported commodities,” says the report.

The Nepali currency vis-à-vis the US dollar appreciated by 13.30 percent in mid-June 2007. Likewise, prices of food and beverages rose by 5.8 percent only, compared to a rise of 9.1 percent a year ago.

Rise of salary and wage rate index, on the other hand, is attributed to ten percent increase in allowances of civil servants, rise in the wages of industrial laborers in recent months, and labor supply constraints in rural areas.

Among the wage earners, industrial labor saw their wages increase by 20.7 percent, construction laborer by 11.2 percent and agriculture labor by 9.4 percent. During the period, inflow of remittances grew by mere 3.9 percent, compared to the substantially higher growth of 48.4 percent in the first eleven months of 2005/06. In dollar terms, remittances rose by 5.7 percent.

Increased flow of remittance, meanwhile, grew consumer confidence, thereby contributing in higher collection of value added tax and import duty, among others. Rise in consumption shot up revenue collection of the government up by about 21 percent.

Despite rise in consumption, imports grew at slower rate of 11 percent during the period, compared to 16.6 percent growth of the same period last year. Exports also slowed down, and grew by mere 0.8 percent.

The central bank has attributed the deceleration in the growth of exports to factors such as the lack of improvement in the investment climate and security condition, regular bandas and power shortages.

According to the report, exports to India rose by 2.1 percent in the first 11 months of 2006/07, while exports to other countries declined by 2 percent. Imports from India increased by 10.8 percent, and imports from other countries rose by 11.3 percent.

As a result of appreciation of the currency, foreign exchange reserves of the country declined by 1.6 percent to Rs 162.41 billion over the 11 months of the fiscal year.

Investors, who bet their money on shares, reaped handsome returns during the first eleven months of the last fiscal year, as NEPSE index increased by 54.6 percent to 575.04 points in mid-June 2007 and market capitalization increased by 67.2 percent to Rs 155.24 billion during the period.