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ekantipur, 13-Mar-09
Finance Minister Dr. Baburam Bhattarai said on Friday that the 7 percent growth target set for the current fiscal year was most unlikely to be met due to the Koshi floods, strikes and power outages and the outbreak of bird flu.
The government had set this goal as a foundation to achieve double-digit growth within three years. Dr. Bhattarai, however, said that the government would make all-out efforts to achieve the target. Releasing the mid-term review of the budget, the finance minister added that the government would not be able to spend the entire budget allocated for the current fiscal year due to the slow pace of expenditure.
"Only Rs. 215 billion is expected to be spent this year against the budgetary allocation of Rs. 236 billion," he said. The government has been able to spend Rs. 88 billion as of March 6, with an increment of 17.5 percent.
Dr. Bhattarai said that the slow progress in spending the development budget had been the main challenge for the government. According to the Finance Ministry, the total capital expenditure during the first six months of the current fiscal year plummeted by 15.75 percent to Rs. 10.71 billion.
Dr. Bhattarai blamed the absence of local bodies and the delay in announcing the budget this year for the slow progress in development expenditure. He, however, expressed optimism that development expenditure would go up as the period of procedural activities have been completed.
However, revenue collection has been very good with a 36.2 percent growth. Revenues amounted to Rs. 79.6 billion. The government had targeted achieving a growth of 31.7 percent in revenue collection. The government aims to collect revenues worth Rs. 141.72 billion this year.
Dr. Bhattarai stated that soaring inflation, which reached 14.4 percent during the first six months of the current fiscal year as per the latest Nepal Rastra Bank report, was the major challenge before the government.
He added that the government was intensifying the process of intervening in the market by increasing the supply of goods at cheaper prices through state-owned enterprises and taking action against black marketers.
The government aims to keep inflation at 7.5 percent in the current fiscal year.
The Finance Ministry also said that foreign aid mobilisation increased by 34.6 percent to Rs. 18.51 billion this year. The government aims to obtain aid amounting to Rs. 65 billion this year. The report said that the government attained satisfactory progress in areas such as road building, fertilizer distribution, national literacy campaigns and self-employment programmes.
Revenue mobilisation augments by 33.1%
Nepalnews, 3-Feb-09
During the first five months of the current fiscal year, revenue mobilisation grew by 33.1 percent to Rs 43.1 billion compared to an increase of 21 percent in the same period last year, according to a report on the latest micro-economic situation of the country released by Nepal Rastra Bank (NRB) on Monday.
The revenue growth is ascribed to high growth of income tax, VAT revenue, excise, vehicle tax and registration fee as well as high growth in non-tax revenue.
According to NRB, the country’s exports also registered a growth of 30.9 percent during the period against a decline of 4.4 percent during the same period last year.
Overall balance of payment (BoP) saw a surplus of Rs 22.8 billion compared to a surplus of Rs 31.1 million the last fiscal year. Similarly, remittance grew by 65.8 percent in the first five months against a growth of 17.6 percent in the same period last year.
On the other hand, imports also soared by 32.6 percent this year against an increase of 8.2 percent last year. “During the first five months of this year, the government spending increased by 2.5 percent to Rs 48.5 billion compared to an increase of 44.3 percent in the same period last fiscal year,” the report said.
However, the government was absolutely unable to control price rise which stood at 14.1 percent in mid-December 2008 from 5.7 percent in the same period last year.
Govt bill to spend Rs 73b passed
ekantipur, 14-Jul-08
A meeting of the Constituent Assembly (CA) on Monday passed a special bill that authorizes the government, in the absence of a fiscal year budget, to incur expenditures totaling Rs 73.54 billion in the new fiscal year that begins from July 16.
Of the total, the government has proposed Rs 26.6 billion under a non-votable head, in an allocation for different sub-sectors over the whole fiscal year. The new financial arrangement that was tabled by Finance Minister Dr Ram Sharan Mahat has allocated Rs 25.96 billion, almost 97.6 percent, to service domestic and foreign loans during the next fiscal year. Likewise, the government has also earmarked Rs 2.5 million and Rs 2 million for the first president and vice-president respectively of the democratic republic of Nepal.
Similarly, the government has proposed Rs 46.94 billion under the votable head, an amount equivalent to one-third of the real expenditure of the current fiscal.
The endorsement will allow the government to incur expenditures. Education will absorb the largest chunk of Rs 9.48 billion followed by Rs 4.70 billion for internal security and Rs 4.05 billion for infrastructure development under the Ministry of Physical Planning and Construction.
Likewise, following endorsement of the bill, the government will have the authority to impose taxes and collect revenue as per the arrangements made in the Finance Act 2007.
If revenue collected during the period remains insufficient to meet planned expenditures, the government will have the authority to mobilize overdrafts equivalent to 5 percent of the total revenue mobilized in the current fiscal year. "However, such overdrafts will be included in internal loans under the upcoming budget for year 2008/09," states the special bill.
Informing the CA meeting about the major economic activities of the current fiscal year, Finance Minister Dr Ram Sharan Mahat said that creeping inflation and soaring petroleum losses are major concerns that can pose a challenge to future macro-economic stability.
He further informed that the government had to bear an additional burden of Rs 5 billion due to the emergence of unexpected financial obligations while settling political differences among various parties. However, he praised the revenue administration, which was able to mobilize revenue of Rs 107 billion, which is more than the annual target of Rs 103.66 billion.
All eyes on the budget
ekantipur, 7-Jul-08
BY PROF SRI RAM POUDYAL
The upcoming budget is going to be the first to be presented by the Maoist-led government. Rightists are watching how it will embrace socialist vision and programs in the context of a liberalized economy, while leftists are pondering how the budget will combine the ideals of socialism with those of capitalism.
Whatever they may be speculating, the budget has to be designed to maintain the growth momentum, fulfill the mandate of the people's movement and adhere to fiscal discipline. The Maoists have to deliver what they promised in their CA election manifesto. Besides, there are mounting claims and aspirations of all classes and interest groups. The finance minister has the difficult task of balancing these expectations when allocating and generating the required resources. He also has to make a tradeoff between short- and long-term objectives.
The most important thing the budget should mention, even if in general terms, is the direction in which the government is steering the economy.
The finance minister inherits a legacy of fiscal profligacy characterized by a persistent budgetary deficit. In 1974, the gross fiscal deficit (excluding grants) was Rs 505.4 million. It surged to Rs 12,819.9 million in 1991 and is estimated to have ballooned to Rs 65,328.3 million today.
As a proportion of the GDP, the deficit has remained at the 6 percent level in recent years. The growing deficit has tended not only to cause a sharp increase in the debt-GDP ratio, but also exerted pressure on domestic prices and adversely affected savings and investments, and consequently, growth. Foreign grants and loans covered 57 percent of the gross deficit in 2006 and 2007. The estimate for the current fiscal year is 68.6 percent.
The question is how long and to what extent we should depend on foreign help to meet our budgetary expenditure when we are all aware of the consequences of excessive dependence on foreign aid. Keynesian intellectuals are losing ground as Nepal's tradition of unbalanced budgets has not yielded any tangible results.
So the first task is reducing the deficit. This can be done by increasing expenditure marginally if it is not possible to reduce it and if there is no rise in revenue. This brings up three important questions. First, what should be the size of the government budget? Second, how should the allocations be made? And, third, how can revenue be increased?
Nepal Rastra Bank's data for the first 10 months of the current fiscal year shows that actual expenditure is 60 percent of the estimated amount (Rs 168,995.6 million), while revenue mobilization is 76 percent of the target (Rs 103,667.3 million). It seems very likely that both the expenditure and revenue collection targets will be met. The estimated expenditure for next year will have to be certainly higher, say around Rs 200 billion, representing an increase of 18.3 percent over this year's estimate.
As inflation is estimated to be around 8 percent, the real increase will be 10 percent. The government should contain current expenditure at the present level allowing for inflation and increase the share of capital expenditure. In the last five years, capital expenditure amounted to 26 to 27 percent of total expenditure. This is just the reverse of what prevailed during the years 1975 to 1994 when the share of capital expenditure ranged between 63 to 71 percent.
The high share of current expenditure in total expenditure witnessed during the last one and a half decades has been largely due to the unnecessary expansion of the state machinery by successive governments to serve the political interests of the party in power. One can see how the staff are only partially employed at almost all the government offices. Therefore, there is a need to restructure administration to make it more effective and accountable. Unjustifiable current expenses also need to be eliminated. This will result in significant savings that could be used to meet obligations warranted by circumstances.
The allocation of capital expenditure should be done in such a way so as to maintain the growth momentum witnessed in the current year. In the course of maintaining the growth momentum, the focus should be on inclusive growth, which means concentrating on agriculture. Farming, the mainstay of 85 percent of the country's population, has been lagging behind with a nominal growth rate of 0.7 percent in 2007 and 1.1 percent in the preceding year.
The agricultural sector needs to be transformed by steering it towards greater commercialization and gradual substitution of integrated farming by enterprises specialized in crops, vegetables, horticulture, livestock and poultry. This requires development of fodder markets, effective delivery of agricultural and veterinary services to the farms and sustained investments in rural markets, transportation and communication. Moreover, crop and livestock insurance has to be provided, and floor prices and minimum wages have to be fixed.
Commercialized farming and specialized enterprises can be best achieved through producers' cooperatives. Although such organizations have proliferated, there is no vision and perspective of cooperative development. Therefore, specific policies are required to develop a new generation of cooperatives to have an impact on the agricultural sector. Such cooperatives should be able to face market competition with vertical integration and coordination as is prevalent in India, the US and Canada. Other sectors that should receive due attention in the budget are the social sector and the needs of underprivileged communities and victims of the people's movement.
With respect to industry, the strategy should be to promote public-private partnership by developing viable mechanisms and easing infrastructural and policy bottlenecks. There is a need to bring a new industrial policy to encourage the growth of export industries and discourage the rampant tendency of holding licenses - particularly for micro-hydro, mining, forestry and trading - instead of executing the projects within the stipulated time.
On the revenue front, there is plenty scope for mobilizing additional resources by enhancing tax compliance, expanding the tax base (i.e., urban property tax) and enforcing VAT. A modern computerized information system and simplified procedures will help improve tax compliance considerably. Local authorities need to be motivated to explore and tap potential revenue sources within their jurisdiction. And, of course, malpractices and corruption by tax collectors should be stopped. They siphon off a significant amount of money that would otherwise go into the state treasury.
CA members to consume 300 mln in monthly perks
Telegraph Nepal, 3-May08
A latest report published in the Naya Patrika(NP) Daily states that more than 3 crore rupees are required per month for the salary of the Constituent Assembly members in Nepal for the coming two years period during which the CA is to draft a new constitution.
All the 601 members of the CA will receive in total 45 thousand 98 rupees each per month adds NP daily. A colossal amount by any means for a poor and donor driven country like Nepal.
The president of the Constituent Assembly will however, receive net salary of 28 thousand 8 hundred rupees plus 29 thousand rupees for the purpose of the home rent, 2 thousand 5 hundred in miscellaneous, newspaper cost 3 hundred rupees and 2 hundred fifty liters of petrol per month.
Similarly, the vice president of the CA is fixed 24 thousand 3 hundred rupees as a monthly salary. The vice president will receive 6 thousand 7 hundred rupees for the drinking water and electricity purposes; home rent 10 thousand rupees, miscellaneous 1 thousand seven hundred; news papers 3 hundred rupees; petrol 2 hundred liters.
The members of the CA will receive 23 thousand one hundred net salaries; Drinking Water & Electricity one thousand 2 hundred forty eight rupees; Telephone cost 2 thousand rupees; home rent 6 thousand; miscellaneous 1 thousand and newspapers 3 hundred rupees per month.
They CA meeting is to be convened at the BICC (Birendra International Convention Center) at New Baneshwor. The government has already earmarked 1 crore 38 Lakh rupees for replacing old chairs and tables by new ones and repairing the microphones.
At today’s market price, the petrol costs 89 rupees per litre.
The road to a new Nepal thus begins.
Budget deficit Rs 7.41b
eKantipur, 29-Dec-07
On the back of rising non-budgetary expenditures caused by peace building-related activities, the budget deficit reached Rs.7.41 billion in the first four months of the current fiscal year. A surplus of Rs.1.97 billion had been recorded in the same period last year, shows data of Nepal Rastra Bank (NRB).
The government grew by 34.5 percent to Rs.34.54 billion, pushed up mainly by rising recurrent expenditures. Government expenditures had increased by 9.9 percent in the corresponding period of the previous year.
Increased expenditure on relief-related activities, salary increment of civil servants, and preparation for the constituent assembly elections resulted in a higher than projected growth in recurrent spending, said the central bank in a statement. The NRB has also suggested that the government be prudent on non-budgetary expenses.
On debt servicing, expenditure on principal repayments increased by 83.0 percent to Rs 4.39 billion as compared to a rise of 35.2 percent in the corresponding period of the previous year. Of the payment, Rs 2 billion went for repaying domestic debt and Rs.2.39 billion for the external debt.
Revenue mobilization also slowed down. The total revenue mobilization rose by 13.2 percent to Rs.24.35 billion, while it had grown by 20.3 percent in the same period last year. NRB blamed the low revenue collection on adverse impact of frequent bandas, strikes in tarai on business and industries, and problems in revenue mobilization in bordering customs offices.
Situation was not encouraging on the foreign grants front either. The government received foreign cash grants of Rs 2.26 billion, as against receipt of Rs 3.31 billion in the same period last year.
Both exports and imports performed badly. The total volume of exports fell by 6.3 percent due to decline in the exports of vegetable ghee, toothpaste, textiles, chemicals and pulses to India and woolen carpet, pashmina, readymade garments to other countries. Likewise, imports rose by one percent.
The overall balance of payments (BoP) recorded a deficit of Rs. 3.61 billion, while it had registered a surplus of Rs 180.8 million in the period last year. Foreign currency reserves decreased by 1.2 percent in the first four months of this year to settle at Rs 163.12 billion. To meet the rising demand of Indian currency, the NRB purchased Indian currency equivalent to Rs 20.63 billion by selling US$ 321.4 million.
Inflation slightly eased down. The inflation based on consumer price index grew to 6.3 percent by mid-November, as compared to 7.1 percent a year ago.
Revenue collection up by 15.4 pc
eKantipur.com, 1-Oct-2007
The government's revenue collection maintained its growth trajectory and rose by 15.4 percent in the first two months of the current fiscal year, compared to the same period last year.
According to the Ministry of Finance (MoF), the government collected revenue amounting to Rs 12.41 billion during the period. The collection stands at about 12 percent of the target the government set for the year. The government is targeting to raise Rs 103.66 billion in revenue during the 2007/08 fiscal year.
An official at the MoF said that growing consumption and consequent rise in imports had pushed up the collection. "With the 11-year conflict ending, some sectors of the economy, like tourism, have begun to revive," he said. "However, the collection is still not encouraging because the situations of the industrial and export sectors have not improved yet."
He stated that frequent strikes, protests, and highway closures had hampered the government's efforts to tap the revenue potentiality. "Many industries have remained closed, while operations of others have remained disturbed at different intervals due to trade unions' protests," he said, elaborating on the reason behind the less than required volume of collection.
The government's total expenditure during the period amounted to Rs 8.87 billion, which is a rise of 10.6 percent compared to same period last year. Around Rs 891.8 million was spent under capital expenditure, which covers investment in development projects. This indicates that development activities have moved on at a snail's pace. The budget for the current fiscal year has allocated over Rs 55 billion under capital expenditure.
Normally, the development expenditure remains negligible in the initial months of the fiscal year, said officials. They, however, added the development process is reeling under the structural inflexibility in the spending system, poor absorptive capacity and multilayer as well as complicated decision-making channels. They expressed hope that the pace of spending will speed up after the first half of the fiscal year.
Of the allocated Rs 98 billion for regular expenditures, the government utilized Rs 7.54 billion during the period, says a MoF press release. Likewise, the government paid back Rs 439.8 million of debt stock.
The total spending recorded during the period was 58 percent of the total fund released. The central bank had released Rs 15.23 billion for the total spending during the period, which included Rs 12.93 billion as regular expenditure, Rs 1.69 billion as capital expenditure and Rs 599 million for repaying debts.
Revenue collection more than targeted: Govt
Nepalnews.com, 4-Aug-2007
Despite nominal economic growth, terai unrest as well as various political ups and downs, the government's revenue collection last fiscal year was more than it had targeted.
According to Ministry of Finance, last year Rs 87.19 billion had been collected as revenue by the government, a healthy 20.64 percent increase compared to what was a year before that during which time revenue growth rate was disappointing.
The government had set itself a target of collecting around Rs 86 billion in revenues last year. If the revenue maintains this steady growth rate then in the current year also the revenue collection would be more than targeted. This year the government has set itself a target of collecting Rs 103 billion.
In the latter period of last year, the terai unrest was at its peak, owing to which there had also been disruption in revenue collection for a few days. But notwithstanding this the revenue collection was more than targeted.
Economy signals gloomy outlook
eKantipur.com, 9-Jul-2007
BY PREM KHANAL
Fiscal year 2006/07 is ending in a week's time on a pessimistic note. Worst, yawning growth, worsening fiscal position, murky investment climate and messy politics all have combined for a grim outlook.
Besides few, almost all the vital sectors of economy are in sorry state, indicating that much-needed economic revival is something hard to achieve any time soon.
Most distressful is the dwindling economic growth rate, which has slipped to 2.29 percent, lowest since the country recorded a negative growth in 2001/02 and half of the target.
Agriculture sector, which contributes nearly 33 percent to the national economy, is estimated to grow by 0.62 percent -- lowest in 12 years. The agriculture growth rate that is less than the annual population growth reflects how badly food availability is shrinking.
The plight of industrial sector, which has been sandwiched between terai unrest and labor agitations, is no less painful. Though the government predicts the manufacturing sector to grow by 2.16 percent, many doubt it owning to the fact that terai unrest was at its height on the last quarter. “The growth rate will significantly go down, once the annual data is computed,” said Narendra K Basnet, vice president of Confederation of Nepalese Industries.
The problems in foreign trade have deepened further due to widening trade deficit. The continuously shrinking major exports like carpet, garment and pashmina and double digit growth in imports has widened the trade deficit to cross Rs 100 billion mark in the first ten months. The declining growth rate of remittance, which has shrunk to 3.1 percent against last year's whopping 47 percent growth, has emerged as a matter of concern. However, officials say that the decline is solely due to nearly 12 percent appreciation of domestic currency against the US dollar.
The poor budgetary operation represents another thick cloud hovering over the economy. Like the past years, the budget has missed expenditure targets. It had a target of expending Rs 143.92 billion, but the actual expenditure is likely to remain at around Rs 135 billion - almost 94 percent.
The capital expenditure, which mainly finances development activities, is likely to remain around Rs 36 billion, which is 80 percent of the yearly allocation. Like past years, the low development spending is mainly due to slow progress made at major development projects like Marsyangdi Hydropower Project, Melamchi Water Project, among others.
Likewise, the recurrent expenditure is likely to cross Rs 82 billion, which is almost 19 percent more than last year's similar expenditure. The government had allocated Rs 83.8 billion for the recurrent expenditure but it was raised to Rs 88 billion during midterm review to manage huge expenditure for Constituent Assembly (CA) poll that was planned in May.
This year also saw a record non-budgetary expenditure of around Rs 7.50 billion, which according to an official was managed by diverting funds of under performing projects and CA poll budget. The releases of Rs 1.12 billion for managing Maoist cantonments, and financing their perks and other facilities, Rs 1.10 billion for recruiting 8,000 more policemen were the major absorbers of unplanned expenditure.
Despite all grim scenarios, some bright spots do stand out. Revenue mobilization remained historically strong this year. The total revenue is likely to hit the target, thanks to strong growth seen in excise duty, income tax and VAT.
Inflation has eased to 6.5 percent though it was slightly higher than the budgetary target and the total foreign currency reserve has increased to Rs 171 billion, enough to support imports of 11.1 months.
Demands on budget threaten financial stability: Mahat
eKantipur.com, 27-Jun-07
Finance Minister Dr Ram Sharan Mahat has said that the process of formulating budget for the upcoming fiscal year has become a daunting task due to unprecedented pressure from all sectors for unjustifiably high budget allocations.
"What we all need to understand is that the government is not in a position to meet all those unmanageable demands, because the economy is not expanding, and government has limited resources," he told the Post.
The finance minister also warned that if the government formulates an expansionary budget by addressing the existing pressures, it would erode Nepal's international credibility thereby affecting future foreign assistance.
"The financial stability that the government has been able to maintain in difficult periods over the years will be at stake should we address all those demands," Dr Mahat said.
Dr Mahat reiterated that the topmost priority of the upcoming budget is to hold elections of constituent assembly and government will earmark necessary budget for that purpose. However, he added that extremely high demand of budget for the poll, which is running at around Rs 8 billion (Rs 2 billion from Election Commission and Rs 6 billion for the Home Ministry for election security) is something unmanageable. "Bringing the demand into a realistic size and allocation required for ongoing projects is a big challenge," Mahat said
He further said that almost all the demands have been placed in ad hoc manner and lack due processing, related to total cost, technical evaluation and viability.
"There are certain procedures that a project should go through to be included in the national budget," Dr Mahat said, adding, "Even if we allocate budget for such projects, it will have to face various problems in their implementation phase."
"The demand for additional budget is high in recurrent expenditure, especially in the consumption sector like raising perks and benefits, and recruiting additional manpower whereas we want to increase budget in the development activities with high returns," said Dr Mahat.
Referring to the demand of government employees to raise their salary, he said that the government is studying a report submitted by the pay commission, inflationary trend and revenue mobilization and the understanding recently reached between the government and representatives of government employees, and a positive conclusion will be reached soon.
Revenue collection shoots up
eKantipur.com, 25-Jun-07
Revenue collection increased by an impressive 20.77 percent in the first 11 months of the current fiscal year, even though the economy is yet to see a convincing revival.
The data released by Ministry of Finance shows that the government collected revenue amounting to Rs 71.28 billion during the period. During the period, the government spent around 61 billion rupees under the recurrent expenditures. It has earmarked around 83 billion rupees under the recurrent expenditure for the current fiscal year.
The government's development budget, however, has been progressing at a snail's pace. The government expended only Rs 20.62 billion under the capital expenditure. The government has appropriated Rs 44.97 billion under capital expenditure for this fiscal year.
On the repayment of loans, the government paid off Rs 14.37 billion as principal debt of both foreign and domestic loans during the period.
Over the period, over Rs 105 billion was released from the government's coffer, a steady 22.8 percent rise, as compared to the amount release in the same period last year. Of the total, Rs 67 billion was released under the recurrent expenditure and Rs 23 billion under the capital expenditure.
Interim Plan to invest Rs 587 billion
eKantipur.com, 22-Jun-2007
BY PREM KHANAL
The three-year Interim Plan that will be implemented from the coming fiscal year aims to spend Rs 587.7 billion on development activities to achieve an average 5.5 percent economic growth and lower incidence of poverty by seven percentage points to 24 percent.
Likewise, the plan also aims to increase per capita income by 3.3 percent on annual average and set a target of limiting inflation to 5.6 percent during the plan period.
According to a copy of draft concept paper of the plan obtained by the Post, the plan also targets to achieve average annual growth of 3.6 percent for the agriculture sector and 6.5 percent for non-agriculture sector.
To achieve the targets, the government is planning to invest 28.84 percent (Rs 169.49 billion) of the total planned expenditure while the remaining amount is expected to come from the private sector. The private sector is estimated to invest Rs 418.19 billion during the three-year period that will end in the fiscal year.
Of the total government's development expenditure, 87.68 percent will be spent on non-agriculture sector. With an estimated expenditure of 26.07 percent of the total, transportation and communication sector is expected to be the largest absorber of government investment.
Similarly, community sector will get 20.38 percent while electricity, gas and water sector is expected to attract 18.97 percent. Education sector will receive 18.25 percent while health is allotted 7.32 percent.
However, the government's total expenditure, including recurrent expenditure, is estimated to remain Rs 493.38 billion during the plan period. The recurrent expenditure, which mainly finances salaries of government employees, security expenditure and interest of loans, among others, is expected to absorb 55.28 percent (Rs 272.72 billion) of the total expenditure.
Likewise, capital expenditure that mainly deals with the expenditure related to development activities is likely to be second largest absorber (Rs 175.28 billion or 35.53 percent of the total) followed by the principal repayment of loans (9.20 percent).
Of the expected sources of financing, revenue will be financing Rs 312.53 billion (63.35 percent) while foreign assistance Rs 133.54 billion (27.07 percent) and internal loan Rs 47.3 billion (9.59 percent).
The plan, which is being implemented with the main purpose of providing the feeling of change to common people by lowering existing level of unemployment and poverty, has focused its main emphasis in restoration of peace, reconstruction and rehabilitation.
Likewise, preparation of economic basis based on inclusive employment opportunities, promotion of peace and good governance, increment of investments in infrastructure development, acceleration of development activities with policy of social inclusion and targeted programs are major strategies of the plan.
Trade deficit continuous to widen: NRB
Nepalbiznews.com, 11-Jun-2007
Due to continuous rise in imports against export, Nepal's trade deficit continues to widen, as it crossed Rs 70 billion during the first nine months of the current fiscal year 2006-07, states a recent data of Nepal Rastra Bank (NRB).
According to the macroeconomic situation report released by NRB on Sunday, total exports fell by 2.9 per cent in the first nine months, while imports registered a growth of 7.4 per cent. Total exports in the corresponding period in the previous year had risen by 9.1 per cent and a 21 per cent rise was recorded on imports.
While exports to India declined by 2.3 per cent in 2006-07 as against a significant increase of 15.4 per cent in the same period of 2005-06, exports to other countries fell by 4.2 per cent in comparison to a decline of 2.6 per cent in the preceding year.
The responsible factors for the dismal performance of the export sector included the unfriendly investment climate, worsening security situation, load shedding and the Terai bandh, among others.
The decline in exports to India was ascribed to the decline in exports of polyester yarn, cattle-feed, plastic utensils, G.I. pipes and readymade garments. Likewise, the decline in exports to other countries was due to the decline in the export of readymade garments, pashmina, woollen carpets, and handicrafts and tanned skin.
On the other hand, total imports from India increased by 9.5 per cent in the review period compared to a higher growth of 26.4 per cent in the corresponding period last year. Similarly, imports from other countries registered a rise of four per cent compared to a growth of 13.4 per cent a year earlier.
The rise in total imports during the period was attributed to the rise in imports of vehicles and spare parts, petroleum products, cold rolled sheet in coil, electrical equipment and cement, among others, from India as well as a rise in imports of crude palm oil, computer parts, chemical fertilizer, zinc ingot and medicine, among others, from other countries.
On the external front, the overall balance of payments (BoP) posted a surplus of Rs 10.79 billion in the first nine months of 2006-07. In the corresponding period of 2005-06, the BoP surplus was significant at Rs 17.15 billion.
Of this BoP surplus, the current account surplus was Rs 6.85 billion and the remaining Rs 3.94 billion emanated from the capital and financial account.
In the government budgetary operations, the total expenditure, on a cash basis, increased by 13.3 per cent to Rs 68.68 billion. Of the total government expenditure, recurrent expenditure increased by 12.7 per cent to Rs 47.76 billion, while the capital expenditure rose by 25 per cent to Rs 11.67 billion.
Increase in the allowance of government employees, expenses on the management of Maoist's army, re-establishment of the police posts accounted for the acceleration of recurrent expenditure in the review period, while a frequent Terai unrest and absence of elected representatives in local bodies accounted for deceleration in capital expenditure.
During the review period, total revenue grew by 22.2 per cent to Rs 56.65 billion compared to a growth of a mere 0.1 per cent in the previous year. Revenue collection grew on the account of adjustment in customs and excise rates, improvement in customs valuation, increased tax compliance, a rise in corporate income tax and value added tax as well as an increase in some non-tax revenue.
In the review period, the government incurred a cash budget surplus of Rs 2.50 billion in contrast to a deficit of Rs 5.99 billion in the corresponding period last year. In the review period, the government mobilised Rs 12.41 billion through borrowing, consisting domestic borrowing of Rs 10.03 billion and external borrowing of Rs 2.38 billion.
As capital expenditure did not increase as expected, the government recorded a cash reserve of Rs 16.78 billion with the NRB in the review period.
As a result of higher cash surplus with the NRB and domestic debt repayment of Rs. 3.03 billion, the net domestic financing of the government budget stood at a negative of Rs 9.78 billion in the review period.
Development spending sluggish
eKantipur.com, 31-May-2007
BY KRISHNA REGMI
Even though peace has been restored in the country, development process is still going ahead at a snail's pace with a large chunk of the development budget remaining unspent.
The data of the Financial Comptroller General Office shows that during the first eight months of the current fiscal year, the country used up just 26 percent of the total allocated capital expenditure, which mostly entails development spending. Of the cash allocation of Rs 33.36 billion, only Rs 8.75 billion was spent.
During the same period last year, the government had spent nearly 39 percent of the total cash earmarked for development budget.
The government's inability to spend affects projects ranging from key social sectors to major infrastructure.
On the social services like health, education, and drinking water, and local development, the expenditure was nowhere close to allocation. Of the allocated Rs 18.76 billion, only Rs 3.76 billion, a meager 20 percent, was utilized during the period.
The agriculture sector, the lifeline of two-third of Nepalis, is in a sorry state. A little over 87 million rupees was expended on agriculture sector. The government earmarked Rs 867.5 million for agriculture under the capital expenditure.
The scenario is much the same on transportation, including road network, a prerequisite for anchoring future development process, where only 20 percent of the appropriated budget was spent. Of the total earmarked budget of Rs 6.88 billion, only Rs 1.46 billion was utilized.
The expenditure on major development projects has also progressed at a very slow pace. Mid-Marsyangdi hydro project saw spending of Rs 190 million, far too below of what the government allocated -- Rs 3.05 billion. The spending on the much-needed Melamchi drinking project, which is now close to deathbed, is at low ebb. The project used up 400 million rupees, while the allocation is Rs 1.62 billion.
Economists blame unrealistic and ambitious allocations, multilayer and complicated decision-making channels, and donors' strings attached to big projects for the low spending levels.
Due to poor implementation of projects, US$ 8 billion meant for Nepal has been lying idle at the Asian Development Bank and US$ 400 million at the World Bank. Still disturbing is the fact that the government has a staggering 15 million rupees as treasury surplus in its coffers by this mid-May while a large number of people are deprived of basic services like health facilities and education.
Summing up the poor scenario on the development process, Dr Bimal Koirala, former chief secretary, said the process is feeling the punch of structural inflexibility in the spending system, poor absorptive capacity and absence of local bodies.
He said governance was weak, and civil servants morale down. “Conventional delivery system of public services no longer works. A system that has accountability of the people, and establishes their claims should be put in place to push the development process,” he said.
“After all, the government has put the economic agenda on a backburner, even though there is a greater need to give peace dividend to the people.”
He said the political parties seem to be unaware that peace, democracy and development are complementary to each other.
Krishna Hari Baskota, joint secretary at the MoF said two-month strike of contractors in the beginning of the fiscal year, terai protest and frequent shortages of petroleum products, primarily diesel have hampered development works.
Record high revenue growth
eKantipur.com, 28-May-2007
Amid deepening economic sluggishness mainly due to escalating political turmoil and poor law and order situation, the revenue administration is moving ahead with record growth rate.
According to a press statement issued by Ministry of Finance, the overall revenue collection during the first quarter of the current fiscal year remained at Rs 63.7 billion and the amount was 22.47 percent more than last year's collection and well ahead of the budgetary target of 15 percent.
In addition, the total government cash expenditure during the period has also scaled up to Rs 77 billion, which was 13.4 percent more than last year's expenditure and almost 60 percent of the total cash allocation for the current fiscal year.
The press statement further started that of the total expenditure, the government used Rs 53.15 billion for the purpose of recurrent expenditure, which mainly finances salaries for government employees, security expenditure and expenses for maintaining law and order situation.
Likewise, the total capital expenditure during the period remained pessimistically low at Rs 15 billion, juts 45 percent of the total cash expenditure of Rs 33.35 billion planned for this year. Likewise, the government expended Rs 8.83 billion in repaying principal of domestic as well as foreign loans. The government has allocated Rs 15.17 billion for the purpose of repaying principals of domestic and foreign loans for this current fiscal year.
According to the press release, Nepal Rastra Bank, the central bank of the country, released a total Rs 86.51 billion during the period. Of the total released amount, Rs 53.39 billion was released under the recurrent expenditure while remaining Rs 18 billion for capital expenditure and Rs 9.06 billion for repaying principals of loans, stated the release.
ekantipur, 13-Mar-09