NRB report paints gloomy picture

The macroeconomic report of the first quarter of this fiscal year paints a gloomy picture of the national economy, as it shows a rise in government expenditure but decline in revenue collection, fall in gross foreign exchange reserves, exports, and deficit in budget and overall balance of payments (BoP).
In the first quarter of this fiscal year, total government spending has increased significantly by 53.7 per cent to Rs 30.03 billion, states a macro-economic report of Nepal Rastra Bank (NRB). It had increased by only 17.7 per cent in the corresponding period last year. The upsurge in total expenditure is blamed at substantial increase in government expenditure, including principal repayment.
"In the first three months, recurrent expenditure rose by 35.6 per cent to Rs 21.32 billion in comparison to an increase of 28.5 per cent in the same period last year," stated the report.
The central bank's report blamed the high growth of recurrent expenditure on increased expenditure on relief-related activities, salary-hike, a rise in peace related expenditure and additional expenditure relating to the preparation for the election of constituent assembly.
According to the central bank, the government budget also showed a deficit of Rs 9.40 billion as against the surplus of Rs 352.9 million in the corresponding period last year. A whopping rise in government expenditure and significant deceleration in the growth of non-debt resources have resulted in a budget deficit, claimed the report.
Similarly, revenue mobilisation has grown by 18.8 per cent to Rs 19.26 billion in comparison to a higher growth of 26.7 per cent in the corresponding period of the previous year. "The low growth of revenue is due to frequent bandhs and strikes in Tarai, problems in revenue collection in bordering customs and closure of some customs offices as well. The low collection of VAT and income tax has also pulled revenue growth down."
Exports have also declined by 0.6 per cent in comparison to a decrease of 0.3 per cent in the same period last year. "Of the total exports, export to India decreased by 0.2 per cent," according to the report. Exports to other countries also declined by 1.2 per cent in contrast to a rise of 7.1 per cent in the same period last year.
Imports have increased by 8.1 per cent in comparison to a slightly higher increase of 9.9 per cent in the corresponding period of last year. "While imports from India went up by 7.2 per cent compared to a growth of 13.1 per cent in the same period last year," stated the report. However, imports from other countries rose by 9.5 per cent compared to a growth of just 4.9 per cent last year.
The report stated that overall BoP recorded a deficit of Rs 5.88 billion. In the corresponding period last year, it has recorded a surplus of Rs 1.13 billion.
The gross foreign exchange reserves stood at Rs 158.08 billion in mid-October 2007, a decline by 4.3 per cent from Rs 165.11 billion in mid-July 2007.
In terms of US dollar, gross foreign exchange reserves declined by 1.8 per cent to $2.50 billion in mid-October 2007. In the same period last year, it had gone up by 1.9 per cent. However, the current level of reserves is sufficient for financing merchandise imports of 9.6 months and merchandise and service imports of 7.5 months.
Indian currency equivalent to Rs 20.58 billion was purchased through the sale of $320 million in the review period compared to a purchase of Rs 13.32 billion by selling $180 million in the same period last year. "The rise in the purchase of IC was due to widening trade deficit with India in the review period," stated the report.