Thursday, July 30, 2009
The World Bank-administered GPOBA programme signed a grant agreement with the Government of Nepal in October 2007 providing a total of $5 million in support, which will provide payment for the verified installation of up to 37,000 new biogas plants in 48 remote districts of Nepal. The programme is being managed by the Alternative Energy Promotion Center (AEPC) with implementation support provided by the Biogas Sector Partnership Program-Nepal (BSP-N). It uses an innovative 'output-based aid' approach in which subsidy payments are made based on verified results.
"The project builds on Nepal's impressive track record with mainstreaming biogas plants as a practical and affordable solution to energy problems in rural Nepal," said Susan Goldmark, World Bank Country Director for Nepal. "It converts animal and human waste into a clean source of cooking fuel -- thereby removing the need to use wood, dried dung and other fossil fuel sources of energy. The biogas byproduct can also be used as a natural fertilizer to increase agricultural yields. This is a small but important step to improving the lives of rural Nepalis."
The GPOBA project aims to support replacement of traditional energy sources used by the rural population, such as firewood and kerosene, with modern biogas plants. Biogas plants use anaerobic decomposition of organic material (mostly animal manure) to produce a flammable gas called biogas, which can be used to meet rural cooking and lighting needs. GPOBA's grant payment is made to AEPC for successful commissioning of new biogas plants ranging in capacity from 4m3 to 8m3. Even the smallest plants with a 4m3 capacity produce enough gas to run a cooking stove for nearly 2.5 hours daily.
Switching to biogas reduces carbon emissions and decreases the frequency of respiratory infections that result from burning solid fuels in poorly ventilated households. Families will also save approximately three hours of labour per day due to the conveniences of gas in addition to financial savings by not purchasing other fuels and fertilizers. Women and girls, who are traditionally responsible for collecting firewood and cooking and cleaning, will be the project's primary beneficiaries. Furthermore, access to biogas will enable families to use gas lanterns after sunset providing light for children's studies or other household activities.
"The GPOBA fund received will help AEPC to install additional biogas plants in the future in more remote and needy areas in Nepal," said Dr Narayan Prasad Chaulagain, Executive Director of AEPC.
Saroj Rai, Executive Director of BSP-Nepal added, "The GPOBA funding for BSP is an achievement that has further motivated us to promote biogas with increasing focus on market development in remote areas."
The GPOBA funds will complement the Fourth Phase of Nepal's Biogas Support Program (BSP-IV), which aims to support biogas plant installation for over 135,000 new rural households through 2011. Biogas Support Programme was started in 1992 by the Netherlands Development Organisation (SNV) together with the Government of Nepal to promote environmentally friendly and affordable energy to remote rural areas. It has helped install over 200,000 biogas plants till date in rural Nepal.
The full Nepal Biogas Programme is co-funded by the government, SNV, and the German Development Bank (KfW). It is also receiving carbon finance revenue from the World Bank Community Development Carbon Fund (CDCF).
The recently announced Monetary Policy for the fiscal year 2009-10 has projected the price hike at 7.5 per cent -- almost half the present rate.
However, the government has been since last year failing to control price rise. Nepal Rastra Bank (NRB) and the Finance Minister -- in the budget -- project growth and price hike ritually every year. They failed last year to contain the price hike and this year too, people are feeling the heat of the price hike.
The people have not got any relief from the price spiral as neither the budget nor Monetary Policy has tried to tackle the key factors that have led to the current surge in inflation.
"It requires better management of financial, monetary and political causes as the price hike is co-related to all of them," said National Planning Commission (NPC) vice-chairman Dr Yubaraj Khatiwada. The key reason behind the price hike is insufficient supply, he opined adding that the bandhs/road blockades/syndicates have contributed 10 per cent to the total price rise.
The other major reason for price hike is more money chasing less goods. There is a shortage of goods due to hoarding, curtailing and supply constraints. The Commerce Department last week raided some of the godowns in the valley on the charge of hoarding. However, the traders protested and the government seems to have backed down as not a single trader has been booked.
Rise in salary and remittance inflow has also contributed to the price hike. The remittance inflow has increased by 55.5 per cent and crossed the Rs 169 billion mark. But remittance has been spent on unproductive areas like land and houses, fuelling consumerism.
World Bank Economic Advisor for the South Asia Region, Ejaz Ghani said Nepal is benefitting from higher inflows of remittances and healthy availability of foreign aid. "With the decline in global commodity prices, the balance of payments (BoP) and fiscal situation are comfortable and there is no evidence of a liquidity constraint on domestic demand," he said adding that on the contrary large foreign exchange inflows are creating some demand pressure.
The private sector could not become an engine of growth as the manufacturing industries have not seen any growth while consumption is increasing. Labour disputes and frequent power outage has hit production, leading to more unemployment.
The government also could not spend on development activities that would have generated employment, It instead spent more on unproductive areas. In the first 10 months of 2008-09, recurrent expenditure increased by 26.5 per cent to Rs 81.9 billion. In the corresponding period of the year before that, this expenditure had increased by 21.9 per cent, according to NRB.
It was that upward revision of salaries of government employees as well as an increase in non-budgetary expenditure that led to such acceleration in recurrent expenditure in the review period.
All this led to a price spiral, despite the government's tall claims of containing the price rise. The year-on-year (y-o-y) consumer price index rose by 12.9 per cent in mid-May compared to that of 9.2 per cent in the same period the last fiscal year, according to NRB.
The food and beverages group pushed the price hike up as the inflation, in the review period, was driven mainly by the 16.5 per cent price rise in food and beverages group. The price index of non-food and service group increased by 8.8 per cent.
The price increase in food and beverages group was 13 per cent and that in non-food and services group was 5.3 per cent in the same period the last fiscal year. The price of items in food and beverages group like sugar and sugar-related products increased by a whopping 66.9 per cent in sharp contrast to last year's decline of 0.5 per cent, said the central bank.
Similarly, the price indices of vegetables and fruits as well as meat, fish and eggs sub-groups increased by 33.5 per cent and 27.5 per cent respectively in the review period compared to an increase of 1.8 per cent and 10.2 per cent respectively in the same period last year.
The indices of pulses also rose by more than double to 26.3 per cent compared to an increase of 12.1 per cent in the same period last year. The subgroup of grains and cereal products also witnessed a price rise of 6.3 per cent compared to an increase of 21.0 per cent in the corresponding period of the previous year.
In the review period, the y-o-y core inflation rose to 12.7 per cent from 7.5 per cent a year ago.
Recognising the high inflationary pressure, NRB has announced a cautious and tight Monetary Policy envisioning to containing inflation at 7.5 per cent. However, there has been no change in the political situation and the prevailing political instability will lead to hoarding further fueling price rise, with little or no hope for the public.
Policy measure taken by Monetary Policy
KATHMANDU: The policy has reintroduced Statutory Liquidity Ratio (SLR) to contain inflation and fuel growth as it is commonly used to contain inflation and fuel growth by increasing or decreasing it, respectively. This counteracts by decreasing or increasing the money supply in the system.
Policy measure taken by the Budget
KATHMANDU: The government is trying to get consensus on banning strikes and bandhs. Declaring the highways a strike-free zone and implementing third-party insurance, the budget has tried to protect highways from unwanted bandhs, accidents and disputes leading to bandhs for compensation. It has promised to keep the supply route -- the highways -- free of disturbances.
Factors leading to the price hike
Contributing -- Price Weightage
Indian Market -- 40 per cent
Bandhs/road blockades/syndicates -- 10 per cent
Stockists/wholesellers -- 20 per cent
Hoarders/blackmarketeers -- 30 per cent
Wednesday, July 29, 2009
Both sides agreed that the annual forum meeting held alternatively in China and Nepal is to be held as per determined by the two sides to respond to increasing mutual business activities. "The Forum's activities needs to move in a new direction as per the trade and investment opportunities created due to the changing global and regional economic dynamics and development," they agreed in the memorandum.
Both sides also agreed that under the framework of the Forum, multi-fold commercial activities between the two countries would take place such as exchange of trade delegations, training for Nepalese entrepreneurs and exchange of assistance for entrepreneurs.
Dhakal, who is leading a 23-member FNCCI team, expressed his satisfaction over the outcome of the meeting. The Chinese side also expressed its commitment to enhancing the Forum's role for mutually beneficial trade, investment and economic relations.
The Forum was established in 1996 by agreement between the governments of Nepal and China to promote trade, investment, cultural and other relations between the non-governmental and private sectors of the two countries. This is the 10th meeting of the Forum and was held in Chengdu City of Sichuan Province of the People's Republic of China.
The meeting also reviewed past activities and explored new investment opportunities for the future. The theme of the meeting was investment in Hydropower and Agriculture sectors of Nepal.Li Chongxi, vice-secretary of Sichuan Provincial Committee of the communist Party of China and Huang Xiaoxing, vice-governor of People's Government of Sichuan Province and Jinrong also graced the meeting.
On the occasion, FNCCI vice-president Bhaskar Raj Rajkarnikar gave a presentation on investment opportunities in Nepal and Nepal's initiatives in attracting Foreign Direct Investment (FDI), while coordinator of Hydro Forum in FNCCI Gyandra Lal Pradhan presented papers on the potentialy of Chinese investment in hydropower sector in Nepal.
An FNCCI team also held discussions with Chinese private sector representatives and authorities on construction of Trishuli-Syaprubesi-Rasuwagarhi road, direct air link between Nepal and Chengdu, foreign exchange facilities to Chinese tourist, listing of Nepal in major tourist destinations for Chinese tourists and quarantine facilities on the Nepal-China border.
Nepal needs more Chinese investment to bridge the gap of widening trade deficit that is around Rs 22 billion with China. Nepali entrepreneurs have been requesting the Chinese authorities to recognise Nepal Standard (NS) mark to facilitate trade between the two countries.
China has also shown interest in investing in cement, tourism, agriculture and hydropower sectors in Nepal.
"By the end of the fiscal year 2006-07, the NPA of A-class commercial banks was 10.3 per cent, which came down to 6.3 per cent by the end of the fiscal year 2007-08," said the Monetary Policy 2009-10.
The NPA decreased to 4.9 per cent by April 13, 2009, according to the unaudited report of the commercial banks.
Of the total 25 commercial banks then, except three government and semi-government commercial banks -- Nepal Bank Ltd (NBL), Rastriya Banijya Bank (RBB) and Agriculture Development Bank Ltd (ADBL) -- 22 commercial banks' NPA is at 2.4 per cent, the eighth Monetary Policy said. NBL and RBB -- by the end of the fiscal year 2007-08 -- had 12.4 per cent and 21.7 per cent NPA respectively. They further reduced their NPA to 8.6 per cent and 18 per cent respectively by April 13, 2009. They have succeeded in reducing the NPA under the Financial Sector Reform Programme which had categorically said them to reduce the NPA.
However, the number of commercial banks, development banks and finance companies has also increased. Currently, there are 26 commercial banks, 63 development banks, 78 finance companies, 12 micro-finance companies -- making it a total of 173 banks and financial companies.
By April 13, 2009 -- the end of fiscal year 2008-09 -- the total number of branches of commercial banks also increased to 681 from 555. Within six months, 126 new branches of commercial banks were added, according to the policy that has stated that regionwise the branches of commercial banks stood at 127 in Eastern Development Region, 337 in Central Development Region, 135 in Western Development Region, 51 in Mid-Western Development Region and 31 in Far-Western Development Region.
Though commercial banks claim that they are moving towards rural areas, their reach through branches is less in the hilly region. According to the report, the populace in Western Development Region has little access to commercial banks. "The urban-centric banks should go to rural areas," NRB governor Bijaya Nath Bhattarai said during his reinstating ceremony the other day.
What is NPA
KATHMANDU: Non-Performing Assets (NPA) is a classification used by financial institutions that refer to loans in jeopardy of default. Once the borrower has failed to make the interest or principal payments for 90 days the loan is considered NPA and also known as Non-Performing Loan (NPL). Non-performing assets are problematic for financial institutions since these institutions depend on interest payments for income. Troublesome pressure from the economy can lead to a sharp increase in NPA and often results in massive write-downs.
The NPA level
2007 July 16 -- 10.3 per cent
2008 July 16 -- 6.3 per cent
2009 April 13 -- 4.9 per cent (unaudited report)
Tuesday, July 28, 2009
Under the agreement, Australia is supplying an Aus$21.5 million grant for the Carbon Capture and Storage Fund. The fund will support geological investigations and environmental studies into potential carbon dioxide storage sites, capacity building, and community awareness programs which can help accelerate the deployment of carbon capture and storage demonstration projects around Asia. “Asia’s share of worldwide energy-related carbon dioxide emissions is now three times bigger than it was 30 years ago, and under current trends it will soon be the globe’s biggest emitter,” said Bob Pegler, deputy chief executive officer (CEO) of the Global Carbon Capture and Storage Institute. “This growing rise in greenhouse gas emissions, combined with other pollutants, threatens the sustainability of Asia’s future growth, as well as its efforts to reduce poverty and to meet other Millennium Development Goals.”
The new fund aims to support ADB’s developing member countries (DMCs), with initial priority given to the People’s Republic of China, India, Indonesia, and Vietnam. Central and local governments, the private sector, and other entities eligible for ADB assistance will be able to tap it, with projects to be selected on criteria drawn up by Australia and ADB.
The fund will form part of the Clean Energy Financing Partnership Facility (CEFPF), which is an important tool to facilitate more investments in clean energy projects in ADB’s DMCs. Its goal is to help DMCs improve energy security and transition to lower carbon economies. CEFPF’s five donor countries — Australia, Japan, Norway, Spain and Sweden — have committed a total of $60.2 million to the facility since it was established in April 2007.
“ADB is committed to, and currently promoting, greater use of clean energy in our DMCs,” said Werner Liepach, Principal Director of ADB’s Office of Cofinancing Operations. “The CEFPF and funds like the Carbon Capture and Storage Fund provide quick access to much needed support for ADB’s clean energy agenda and high priority clean energy investments in the region,” Liepach added.
Starting in 2013, ADB will increase its target of clean energy investments to $2 billion a year from a previous target of $1 billion, in a bid to accelerate low-carbon growth and reduce greenhouse gas emissions in the region.
Sunday, July 26, 2009
The first day of trading was suspended for half an hour after the index dropped by four per cent during an hour-and-a-half of the start of trading at the sole secondary market.
The market closed 4.03 per cent lower or 29.73 points less, though it resumed operation after half an hour. The investors lost confidence after a rumour spread that banks and financial institutions do not need to increase paid-up capital. "The rumour is not true," said Rabindra Bhattarai, a share analyst. The Monetary Policy announced on Friday has not changed the minimum level of paid-up capital required.
The minimum level of paid up capital -- kept unchanged according to the policy -- is Rs 2 billion for commercial banks, Rs 640 million for development banks and Rs 200 million for finance companies. And the banks and financial institutions will issue bonus shares and rights shares to increase their paid up capital as most of them have to increase
There is an unofficial rule in the stock business called the 'Odd Lot Theory'. It states that when small investors buy into a stock it's a sell signal and visa-a-versa. A 'small investor' is defined as someone who buys small lots or odd lots (less than one hundred shares). The reasoning is that the small investor is consistently wrong about when and what to buy or sell. So if the little guy is buying, it's time to sell and if the little guy is selling its time to buy."This unofficial rule is painfully accurate in the Nepali stock market," said one investor. The small investor consistently takes too little risk or too much risk or buys in after the market or an individual stock runs up. These are the only consistent qualities of this class of investor and they always result in losses. "Take a look at what the small investor has been doing lately in Nepse," Bhattarai said adding that they are nervous and trying to exit from the market by selling their shares whereas 'the players' are comfortable and buying.A week before the budget and a week after the budget Nepse gained, but the market on Sunday, the first day of this week, plummeted. Small investors -- fearing a further fall in the secondary market -- rushed to sell and the big investors gained from them.
Dr Poudel quits
KATHMANDU: Nepse chairman Dr Narayan Poudel resigned citing non-cooperation from the Nepse management. The first PhD-holder in the capital market in Nepal said that the employees, management and board should work together for the benefit of a company. "I want Nepse to set an example of good corporate governance," he said. Poudel also said that the Central Depository System (CDS) would be set up by the end of this fiscal year. However, finance minister Surendra Pandey in his budget has promised to bring CDS into effect from this October.
Saturday, July 25, 2009
The transaction amount has also increased by a minimal 3.52 per cent to Rs 407.91 million against last week's Rs 394 million. Last week -- after the budget -- the Nepse gained 32.99 points against 35.45 points a week earlier.
However, the shareholders of commercial banks and finance companies sub-groups gained as these two sub-groups gained 18.19 points to 782.67 points and 7.17 points to 699.36 points respectively. The remaining -- development banks, insurance companies, trading, hydropower companies, others and hotels -- sub-groups lost except the manufacturing sub-group that did not witness any trading this week.
The hydropower companies and others sub-groups plunged by 37.36 points to 980.07 points from last week's closing of 1028.43 points and 37.58 points to 687.31 points from 724.89 points putting a break to Nepse's last two weeks impressive growth.
The sensitive index -- the barometer of Group-A companies -- gained 2.59 points to 197.77 points from last week's closing of 195.18 points. Last week, the 78-scrip sensitive index had flared by 7.09 points to close at 195.18 points.
Similarly, the float index -- calculated on the basis of real transactions -- also gained 1.07 points to 71.15 points from last week's closing of 70.08 points.
This week Nepal Bangladesh Bank (with Rs 44.04 million) topped the chart in terms trading amount followed by Bank of Kathmandu (with Rs 35.27 million), Nabil Bank (with Rs 28.71 million), Standard Chartered Bank Nepal (with Rs 28.01 million) and Nepal Investment Bank (with Rs 26.63 million).
In terms of number of share units traded National Hydropower Company topped the chart with 1,68,000-unit shares changing hands and in terms of number of transactions Citizens Bank International topped the chart with 561 transactions.
Monetary Policy offers nothing
KATHMANDU: Monetary Policy has neither good nor bad news for the investors. The closely watched policy document announced yesterday by Nepal Rastra Bank (NRB) could have a huge impact in the Nepse as the domestic capital market has over 85 per cent contribution of banks and financial institutions. But the Monetary Policy didnot increase the paid-up capital -- as expected by some investors -- of the banks and financial institutions. "The limit of minimum level of paid up capital has been kept unchanged," the Monetary Policy said adding that nowonwards, the base for increasing capital of licenced banks and financial institutions by the NRB will be their capital fund. The capital fund includes core capital and supplementary capital. The minimum level of paid up capital -- that is kept unchanged according to the policy -- is Rs 2 billion for commercial banks, Rs 640 million for development banks and Rs 200 million for finance companies. Only a couple ofbanks like Nepal Investment Bank and Kist Bank has already increased their minimum level of paid up capital but remaining commercial banks yet have to increase their paid up capital by the end of 2010.
Warren Buffett to star in cartoon
NEW YORK: The so-called Sage of Omaha, Warren Buffett, is a billionaire, a philanthropist, a stockpicker and an author. In a new turn, the wily 78-year-old investor will shortly add cartoon star to that list. An animated version of Buffett will teach children about finance in a series called The Secret Millionaires Club, to be created by internet empire AOL and media firm A Squared Media. Episodes lasting three to five minutes will appear on AOL before being distributed across the web via social networking sites. The world's second richest man is in august company. Others featuring in cartoons as part of the same project include the supermodel Gisele Bundchen, who plays a superhero protecting the environment, and Martha Stewart, who will educate viewers in cooking, craft, gardening and creating 'unforgettable' events. Nebraska-based Buffett has built a vast army of US followers who admire his flair for picking successful investments and acquisitions. Hisfortune is estimated at $37 billion, second only to Bill Gates's $40 billion, in Forbes magazine's annual ranking of the world's richest people. Buffett said the credit crunch was a reminder of the need to teach children about money, "What better time to help educate our kids about financial responsibility." It has been a tough year for Buffett. His Berkshire Hathaway investment company suffered a rare drop in its asset value during 2008, partly due to what Buffett admitted were 'dumb' choices. It recently lost its triple-A credit rating and its shares have slipped by 18 per cent over the last 12 months. -- The Guardian
The six-member committee formed under Santosh Poudel, deputy director of the NTA will prepare a report within two months. "The NTA will take action on the basis of the report produced by the committee," said Ananda Raj Khanal, director at the Nepal Telecom Authority -- the regulatory authority of the telecom service providers.
The committee has the representatives of four telecom service providers -- Nepal Telecom (NT), Spice Nepal (Mero Mobile), United Telecom Ltd (UTL) and STM and an Internet Service Provider (ISP) Association.
Telecom providers are losing billions in fraudulent international calls. "NT alone is losing around Rs 1 billion because of international calls made to bypass the official gateway," said the NT. Other telecom service providers -- Spice Nepal, UTL and STM -- are also losing out.
Call bypassers use V-SAT to divert international calls from the official gateway to Voice Over Internet Protocol (VoIP). VoIP is a general term for a family of transmission technologies for delivery of voice communications over IP networks such as the Internet or other packet-switched networks. The call is then transferred to the telecom client through a landline or mobile. Such international calls show local numbers on the receiver's set.
If a local number appears on one's caller ID while receiving an international call, it is a by-passed call. International call-bypass has become a serious problem to the NTA as it is not only creating misunderstanding between the telecom service providers but also bleeding the national coffer white.
"Callers are also being cheated because the reception is unclear and it is hard to connect," Khanal said. "Getting an internet connection and a phone line is not difficult now. If one has an internet connection, one can easily bypass a call from anywhere with a VoIP device that is small enough to fit in a back-pack and is easily available."
"Because there is no need to pay the service charge or the tax, these calls are cheaper for the end-user," he said adding that sim cards of all the telecom operators are used for bypass purposes.
The telecom operators have been blocking sim cards, when they suspect or get complaints of their sim cards being used for call bypass but NTA needs a teeth to take strong action against those involved in the fraudulent act.
"We will prepare Act or do whatever needed -- after the report comes -- to control this," Khanal assured.
Friday, July 24, 2009
Recognising the high inflationary pressure, Nepal Rastra Bank (NRB) today announced a cautious and tight Monetary Policy for the fiscal year 2009-10.
"It is believed the policy will contribute to the prudent macroeconomic management, consolidation of the financial and external sectors and secured internal payments system to create a conducive economic environment for higher growth," said NRB governor Deependra Bahadur Kshetry, unveiling the eighth Monetary Policy.
"The existing liquidity overhang in the economy is sufficient to facilitate economic growth of 5.5 per cent," Kshetry said adding that the policy also envisions containing inflation at seven per cent. However, the Monetary Policy -- in the last fiscal year also -- failed to contain the price hike and it is still doubted whether it will fuel growth and contain the price hike.
The policy has reintroduced Statutory Liquidity Ratio (SLR) after one-and-a-half decades to contain inflation and fuel growth.SLR is commonly used to contain inflation and fuel growth by increasing or decreasing it, respectively. This counteracts by decreasing or increasing the money supply in the system. The commercial banks, development banks and finance companies are now required to invest in government securities six per cent, two per cent and one per cent of their total deposit mobilisation by second quarter, respectively and which will be increased to eight, three and two per cent respectively by the end of the fourth quarter.
"The old banks already have invested in government bonds and securities over the limit fixed by the policy," said Anil Shah, vice-president of Nepal Bankers' Association (NBA) and CEO of Nabil Bank. "However, the new banks will feel the heat and it might put pressure on lending rates," he added.
Kishore Maharjan, CEO of Sunrise Bank agreed with Shah. "Lending rates may go up," he said.
Though the limit of paid-up capital is unchanged, the policy has made capital fund the main barometer of any financial institution. Apart from that, it has also opened the borders for domestic banks. They can now open branches outside the country.
"The policy is flexible and can be adjusted according to the situation anytime," governor Kshetry said. It has not changed any major rate like Cash Reserve Ratio (CRR), refinancing rates or the bank rate.
SLR versus CRR
KATHMANDU: What Statutory Liquidity Ratio (SLR) does is it restricts the bank's leverage in pumping more money into the economy. On the other hand, Cash Reserve Ratio (CRR) is the portion of deposits that the banks have to maintain with the central bank.The higher the ratio, the lower the amount that banks can use for lending and investment. The other difference is that to meet SLR, banks can use cash, gold or approved securities whereas with CRR it has to be only cash. CRR is maintained in cash form with NRB whereas SLR is maintained in liquid form with the banks themselves. SLR refers to the amount that all banks require to maintain in cash or in the form of gold or approved securities. However, the Monetary Policy has directed the banks to buy government bonds and securities. The objectives of SLR are to restrict the expansion of bank credit, augment the investment of banks in government securities and ensure solvency of banks. CRR is in the form offiat currency stored with the central bank. The reserve ratio is used as a tool in the Monetary Policy, influencing the country's economy, borrowing, and interest rates. It would cause immediate liquidity problems for banks with low excess reserves. It was increased from 5 per cent to 5.5 per cent in last fiscal year's Monetary Policy.
Thursday, July 23, 2009
Earlier today the board has chosen Narendra Basnyat as the chairman of the board.
The management committee appointed by NRB -- led by coordinator Laxmi Prapanna Niroula and members Ramesh Kumar Pokharel, Prem Prasad Pandey and Murari Basnet -- was mandated to hand over the management to the new BoK board after the bank's special AGM yesterday. BoK had yesterday elected four board directors from public shareholders -- Govinda Prasad Sharma Regmi, Bishnu Kumar Banjade, Narendra Basnyat and Dr Hem Raj Subedi -- and unnanimously selected three board directors Ramesh Nath Dhungel, Bijaya Krishna Shrestha and Satya Narayan Manandhar from among the promoters.
Aapart from the four public shareholders, a fifth -- former director Balaram Neupane -- had also filed his candidacy for board director as a majority of BoK's shares is with the public. The promoters are only 42 per cent stakeholders.
Earlier on May 19, NRB had taken over the bank's management after suspending its board and sent a four-member team led by NRB executive director Niroula to oversee BoK's running. This was after the BoK board's controversial decision to 'call back' Radhesh Pant from the post of managing director.
Meanwhile, Pant -- former managing director of Bank of Kathmandu (BoK) -- has joined Kumari Bank as chief executive officer (CEO) and the hunt for CEO for BoK begins.
Sounding a note of caution on the inflationary budget, the Monetary Policy Nepal Rastra Bank (NRB) to be announced tomorrow has offered a slew of suggestions to the government to control the price hike.
"The policy is flexible and can be adjusted according to the situation," said a source at the central bank. "It will take all possible measures to contain inflation and stabilise economy," the source said adding that inflationary pressure has been rising due to the food prices hike based on non-financial reasons.
The central bank has prepared the Monetary Policy for this fiscal year while aiming at keeping inflation -- hovering at 13 per cent -- at a manageable level of seven per cent and to achieve 5.5 per cent economic growth as envisioned by the budget for the fiscal year 2009-10. But, given the experience of last fiscal year when the country witnessed a historic price hike, the people doubt the present government's capability to bring the price hike under control.
One of the major tools to curb price hike is to squeeze liquidity from the market. However, it is bringing a flexible policy and will not adjust Cash Reserve Ratio (CRR) that was increased last fiscal year to 5.5 percentage points from five per cent in the hope of containing the price hike.
Instead, bankers have urged the central bank to reduce CRR as according to them they are facing liquidity crunch.
"There is no liquidity crunch in the market," scoffed Kishore Maharjan, CEO of Sunrise Bank, citing the example of latest 91-day Treaury Bills that sold like hot cakes.
The CRR is the portion of deposits that banks have to keep with the central bank.The last Monetary Policy failed to contain the price in the last fiscal year. In a mid-term review of the last fiscal year's Monetary Policy, NRB governor Deependra Bahadur Kshetry had accepted the failure of the Monetary Policy to curb the price hike.
Earlier this morning, an NRB board meeting passed the Monetary Policy. As an advisor to the government, the central bank brings the Monetary Policy annually after the budget.
During 2007-08, major loss-making ventures of the government were Udayapur Cement Industry and Janakpur Cigarette Factory (JCF) with losses amounting to Rs 266 million and 154.5 million respectively. "The net loss of seven PEs of the industrial sector doubled to Rs 435.9 million from Rs 272.7 million in 2006-07," said a report of the Finance Ministry.
The demand for cement is growing because of the construction boom but Udayapur Cement Industry posted loss. "Total sales of Udayapur Cement Industry has declined due to reduction in its production. Its loss increased due to its inability to minimize the cost of production proportionate to the decline in production," said the report.
The cumulative loss of Nepal Orind Magnesite Private has reached Rs 3.58 billion including this year's loss of Rs 86.1 million. Nepal Drugs Ltd has posted Rs 66.1 million profit -- basically due to sale of fixed assets to the tune of Rs 116.2 million.
Dairy Development Corporation (DDC) incurred net loss of Rs 89.8 million during the period despite a profit of Rs 14.7 million in 2006-07. "This was due to an increase in administrative expenses and provision of gratuity," the report said.
The total outstanding debt of all PEs in the industrial sector amounted to Rs 3.63 billion during 2007-08. However, net fixed assets also increased to Rs 4.67 billion from Rs 1.82 billion. The overall progress of the industrial sector does not seem to be satisfactory, said the government report. There is no improvement in the condition of Nepal Orind Magnesite and its financial burden has been increasing each year.
Of the total number of PEs established in the 60s, currently 36 are operating under full or majority ownership of the government. Of these 36 enterprises, seven are in the industrial sector, six in the trading sector, seven in the service sector, five in the social sector, three in the public utility sector and eight in the financial sector.
JCF neckdeep in trouble
JANAKPURDHAM: Janakpur Cigarette Factory (JCF) is facing a serious financial crisis and the factory is operating by using overdraft for operational costs. The company is currently at a loss of over Rs 530 million, including Rs 500 million overdrafts and Rs 30 million interests. The crunch in operational capital occurred due to high maintenance costs and high wastage due to the old rotary filter cigarette producing machine, AC plant and other equipment. The factory was set up 45 years ago with Russian support. Most of the machinery dates back to inception time. It will cost Rs 440 million to change the machines. Technicians said the factory is in a dilapidated condition and it would require Rs 1 billion immediately to keep the factory operating smoothly. They added that the factory is suffering a monthly loss of over Rs 12.5 million due to old machinery. The factory management has urged the government to arrange funds for the factory by selling its fixedassets like land. The factory owns land worth Rs 2.75 billion. Meanwhile, the factory is facing problems in arranging over Rs 260 million funds to be paid in gratuity funds to over 240 staffers who retired recently. Production in the factory has also been declining due to lack of modern equipment. Last year, the factory produced 1.15 billion sticks of cigarettes against the target of 2.36 billion sticks.
The move will strengthen bilateral friendship and promote Nepal in Myanmar, sources quoted officials at the Nepali embassy in Myanmar as saying.
Myanmar and Nepal had established direct air link in 1970 but due to the internal affairs of Nepal, direct flight between the two countries was halted in 1988. In February 2001, the then foreign minister Chakra Prasad Bastola visited Myanmar and had discussions with his then counterpart U Win Aung on maintaining friendly relations and mutual cooperation. There was nearly no economic and trade activities between the two countries except for cultural exchange.
Resumption of direct air link will help increase the flow of Myanmarese Buddhist tourists to Nepal -- especially Lumbini, the birth-place of Lord Buddha.
Nepal, along with Bhutan, joined the seven-member Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) in 2004 as the last two members of the grouping -- the five original members being Bangladesh, India, Myanmar, Sri Lanka and Thailand sharing BIMSTEC. BIMSTEC, first founded in 1997, aims at promoting multi-sectoral cooperation for economic and social progress of the region.
Wednesday, July 22, 2009
"The present management committee appointed by NRB for using the authority of BoD -- led by Laxmi Prapanna Niroula as co-ordinator and Ramesh Kumar Pokharel, Prem Prasad Pandey, Murari Basnet as members -- will hand over the management to the new BoK board tomorrow," said a source at NRB. "The NRB board meeting tomorrow will ask the Niroula-led NRB team to handover the management and come back," the source said adding that the NRB team is mandated to hand over the management to the new board members after BoK's special AGM.
BoK today elected four directors from public shareholders -- Govinda Regmi, Bishnu Banjade, Narendra Basnyat and Dr Hem Subedi -- and unnanimously selected three directors Ramesh Nath Dhungel, Bijaya Krishna Shrestha and Satya Narayan Manandhar from the promoters.
Five contestants from the public -- along with former director Balaram Neupane -- had filed their candidacy for the four positions as a majority of BoK's shares is with the public. The promoters are only 42 per cent stakeholders.
Earlier on May 19, NRB had taken over the bank's management suspending its board and had sent a four-member team led by NRB executive director Niroula. This was after the BoK board's controversial decision to 'call back' Radhesh Pant from the post of managing director.
The crisis precipitated after the 313th board meeting of BoK on March 22, which decided to recall Pant from the post of MD. Though the decision was taken by a majority of the board members, Pant was not given a chance to furnish his explanation. Four directors voted against him while two -- Sitaram Thapaliya and Sudarshan Poudel -- supported him.
NRB took over the bank's management to safeguard the investors' and promoters' interests due to dispute among board members and also to send a strong signal that the regulatory authority of the monetary market was keeping a hawk's eye on financial institutions. It is empowered to take over the management of any financial institution under NRB Act 2063 (Section 54) after giving it a seven-day chance to furnish an explanation.
However, NRB revoked its earlier decision to suspend the directors on June 25 and allowed them to contest in the special AGM after the suspended board realised its mistake and agreed to work together for the betterment of the bank, investors and promoters.The suspended board members, who had moved the Supreme Court against 'NRB intervention' -- in their own words -- also withdrew the case.
NRB published a Due Deligence Audit report on June 27 and called the special AGM of the bank -- established on March 3, 1995, as the 10th commercial bank -- for today.
Monday, July 20, 2009
Nepal Rastra Bank (NRB) has revoked the action against Nepal CSI Development Bank -- from July 15 -- after it increased its Cash Reserve Ratio (CRR) and injected fresh capital according to the directives of the NRB.
The central bank has imposed ban to collect deposits from August 20, 2006 and issued a slew of directives to improve its financial health. "The central bank has revoked its action against it after the financial health of the CSI Development Bank has improves," said the central bank.
The NRB had directed it to take Prompt Corrective Action on October 17, 2008.Similarly, the NRB has also revoked the action against Arun Finance and Saving after it also increased the minimum capital requirement. The NRB on October 17, 2008 banned it to take deposit and declared a problematic bank under the NRB Act.Similarly, the NRB has also allowed the suspended directors of the Bank of Kathmandu (BoK) to take part in the special annual general meeting (AGM) and file for candidacy for the directors. The special AGM is going to take place on July 22.Earlier, the NRB has suspended the BoK board after the controversial decision of its board to 'call back' Radhesh Pant from the post of managing director.
The Central Depository Company of Nepal will have 50 per cent shares of Nepse, 10 per cent share of CIB, 15 per cent of CIT and 25 per cent of a group of six commercial banks -- Standard Chartered Bank, Nabil Bank, Nepal SBI Bank, Bank of Kathmandu, Nepal Investment Bank and NIC Bank -- as promoters. "They have signed Promoters Agreement," said a source at the Securities Board of Nepal (Sebon).According to the draft regulation of the Central Depository System (CDS) -- sent to the finance ministry for its nod -- the company should have over Rs 100 million capital.
The increase in volume and number of share transactions after the automation of Nepse has created demand for the establishment of CDS that offers safety and convenience compared to holding securities in physical form, enhances liquidity by instantaneous transfers and delays, thefts, interceptions and subsequent misuse of certificates eliminated."After the CDS comes into operation, paper certificates would be converted into digital form and the ownership transformation will be completed within a lesser period of time that will provide more opportunities to investors for immediate exploitation of information and it will help control fraud as well," Shanker Man Singh, managing director of nepse said at an interaction on 'Establishing Central Depository System in Nepal'.
During the interaction, Cyrus Khambata and officials from Central Depositary Services (India) presented papers on the various facets of the CDS with particular relevance to Nepal.
However, Rewat Bahadur Karki, former MD of the Nepse said that Clearing and Central Depository System (CCDS) should be set up as the clearing is yet another key aspect and problem.
Finance Secretary Rameshwor Khanal, deputy governor Krishna Bahadur Manandhar, chairman of the Sebon Sur Bir Poudel, Pramod Bhattarai from Nepse, Ram Kumar K, C D Deshpande of CNC and Vinay Apsongikar of CMC took active part in the interaction.
"We still have traditional system of dealing with share certificates with enormous paperwork which is time consuming and involves various problems," Singh saidThe main functions of the CDS are centralised database and accounting for setting up the depository is to accelerate growth of scripless trading, with major thrust of individual participation and creating competitive environment, responsible to the user's interest and demands to enhance liquidity.In the Budget speech, Finance Minister Surendra Pandey claimed that CDS will start operating by October 17
"Time bound commitment is needed to boost the confidence of private sector," the entrepreneurs said at an interaction organised by Federation of Nepalese Chambers of commerce and Industry (FNCCI). They also complained the finance minister Surendra Pandey for not giving level playing field to the agro-based industries like sugar, flour, ghee and oil. "Without proper homework the finance minister imposed tax," said Gopal Chhetri, advisor of the FNCCI.
The budget has crushed the Crusher Industry, said Krishna Sharma, president of Crusher Industry that has been paying over Rs 1000 million to the local bodies as various taxes.The budget is not at all encouraging to the export-oriented industries, Prashant Pokharel, president of Garment Association of Nepal (GAN) said adding that the government has to lobby for duty-free quota of Nepali products in the US market as it would benefit domestic products.
Kush Kumar Joshi, president of umbrella organisation of Nepali private sector welcomed the budget but urged for an effective mechanism for the budget implementation. "Government has to clarify the reason of the price hike and cannot always blame private sector," he said. The government has failed to curb price hike that is hovering around 13 per cent.
Sunday, July 19, 2009
The trend of gender difference between male and female has vanished in the last five years as an equal number of women are attracted to foreign employment unlike five years ago, states the report on Women Migrant Workers (WMWs) in foreign employment and financial aspects conducted by Society of Economic Journalists (Sejon) in assistance of UNIFEM.
Due to financial crisis, women go for foreign employment and Isreal is the most preferred destination for them as it is more lucrative in terms of money and comparatively safer than other destinations, the report stated.
Community and caste has nothing to do with foreign employment as women from different castes and communities and different economic status are opting for foreign employment.
However, the cost of foreign employment is high due to the manpower agencies. "If financial institutions were to lend them money, the cost might come down," suggested the report.However, the financial institutions want a payback assurance. "We have the bitter experience of lending to foreign employment aspirants," said Sashin Joshi, president of Nepal Bankers' Association (NBA) and CEO of NIC Bank. "The rate of loan default is 96 per cent in the previously floated loans to foreign employment aspirants," he said adding that banks will lend if there is a guarantee that their money would be returned.
"A mechanism has to be set up -- like a tripartite agreement -- to float loans to foreign employment seekers," he added. Joshi also blamed the government for not doing enough homework before bringing the Rs 7 billion bond scheme for migrant workers. "Without homework, the government has brought the scheme and it may be just another deficit financing tool," he opined. "Apart from that, it cannot be sold through embassies.
"Financial Companies' Association president Ram Shanta Shrestha supported Joshi. "The tendency of borrowers not repaying the loan is dangerous," he said. Social scientist Ganesh Gurung said the bond would not be sold as migrant workers' primary intention will be to repay their loan followed by spending on their children's education.
"The government should announce some incentives, if it wants to sell the bonds," Gurung said. "There is no compatibility between the government's Act and Regulations and their implementation," he added.
Nepal Foreign Employment Agencies' Association president Tilak Rana Bhat complained of the government's apathy towards the sector. The government has opened 107 countries for Nepalis as foreign work destinations. "The remittance that keeps the economy afloat is not government's achievement," he said adding that before blaming the manpower agencies, the government should stop the women going via India as they would be more vulnerable in that case.
Nepal Remitters' Association (NRA) president Chandra Dhakal said the government should bring those sending migrant workers through illegal channels within the legal frame to minimise vulnerability.
"Remittance has almost 18 per cent contribution to the GDP but it is neglected by the government," Dhakal complained. "However, nearly 30 to 40 per cent of the remittance does not come through banking channels.
"For the past five consecutive years, remittance remains the top contributor to foreign exchange earnings. Remittance has contributed to 26 per cent growth in convertible currency reserves by playing a crucial role in savings, investment, growth, consumption and poverty and income distribution. "Women migrant workers contribute 11 per cent in the total 18 per cent," said UNIFEM Regional Programme manager Sharu Joshi Shrestha. Finance Ministry senior advisor Keshav Acharya said women have 100 per cent contribution in remittance, because the men work in foreign land and it is their wives who look after the home and bear all family responsibility.
The impact of remittance is not only economic, but also social, cultural and political. Remittance's high social returns manifest in the form of increased household investments in education, entrepreneurship and health.
Remittance augments the income of the recipient households. Increased income has impact on consumption and livelihood. Remittance also increases household expenditure on health and education.
Nepal Rastra Bank (NRB) research department executive director Trilochan Pageni assured of further research on the topic. "Remittance could also have negative impacts," he said adding that large and sustained remittance inflow could cause an appreciation of the real exchange rate and Nepal is slowly losing relative export competitiveness due to easy inflow of remittance.
Saturday, July 18, 2009
However, the shareholders of seven sub-groups -- except manufacturing and trading -- commercial banks, development banks, hydropower, finance companies, insurance, others and hotels gained this week.
As expected the budget brought capital gain tax down to 10 per cent from the earlier 15 per cent but the Nepse could not perform better than last week. Last week too, the Nepse had surged more than this week as last week it had gained by 35.45 points to 702.88 points after a long spell of bearish trend. This week Nepse gained only 32.99 points to 735.87 points. The selling pressure has pulled the Nepse down by 13.24 points to 735.87 points on the last day of the weekly trading -- on Thursday. Except for the last day, other days the Nepse ended in the green zone.Similarly, the contribution of Group-A companies -- the blue-chip shares in the domestic market -- also increased to 53.78 per cent against last week's 44.36 per cent. The 78-scrip sensitive index also flared by 7.09 points to 195.18 points from last week's 188.09 points. Last week sensitive index had surged by 10.73 points.
Similarly, the float index -- calculated on the basis of real transactions -- gained 2.61 points to close at 70.08 points from last week's closing of 67.47 points.This week Nepal Bangladesh Bank (with Rs 64.77 million) topped the chart in terms trading amount followed by National Hydropower Company (with Rs 50.55 million), Standard Chartered Bank Nepal (with Rs 49.15 million), Bank of Kathmandu (with Rs 27.55 million) and Nabil Bank (with Rs 19.06 million). Both -- Nepal Bangladesh Bank and National Hydropower Company -- is promoted by NB Group.
In terms of number of share units traded National Hydropower Company topped the chart with 5,44,000-unit shares changing hands, in terms of number of transactions Bank of Asia topped the chart with 296 transactions.
The new provision
KATHMANDU: According to the new provision on Capital Gain Tax announced in the budget for 2009-10, as per the, section 1, subsection 2 of the Aarthik Bidhayak Act 2066 the provision of section 1,2,3,4,5 and 10 will be executed immediately and the rest of the provisions are executed from Shrawan 1, 2066 (July 16). The section 52 of the said act specifies that the capital gain tax on listed securities are as follows:-
Capital Gain Tax for Individuals -- 10 per cent of the gainOther than individuals -- 15 pe rcent of the gain
In Case fo Non-Listed Securities
Capital Gain Tax for Individuals -- 10 per cent of the gain
Other than individuals -- 15 per cent of the gain
Thursday, July 16, 2009
The government cannot contain the price hike as claimed in the budget speech, said Dr Shanker Sharma, former vice-chairman of the National Planning Commission (NPC) -- the national think-tank -- launching the Least Developed Countries Report 2009 here today.
Inspite of spending on popular programmes, it should build its spending capacity, he suggested. "Capital formation is very low and has not increased," he said adding that it was 21 per cent of gross domestic product (GDP) in 1992 and the rate has not increased.
The country might suffer from 'Dutch Desease' as the government has not focused on economic reforms and development. "The money is coming anyway as remmittance and foreign exchange reserve is swelling," he said adding that the government is in comfortable situation and has not increased spending on agriculture and infrastructure to fuel the growth. "The spending on infrastructure is at 12.8 per cent and on agriculture the government spending has gone down to 50 per cent from 1992.
"The donors have also shifted their focus to health and education from infrastructure and agriculture due to the government's inability."
Massive irrigation to ioncrease the productivity and promoting the domestic industries based on local raw materials that has comparitive advantages are the solutions," Sharma prescribed. Agriculture has 32.9 per cent contribution in the total GDP.
Despite being a agricultural country, Nepal is also a food importing countries like other Least Developed Countries (LDCs) as the investment on agriculture has gone down in comparison to the global investment.
"Assembling Industries are the new global phenomenon," the former vice-chairman of the national think-tank said adding that Nepal can take advantage of being in the middle of two growing economic powers and start accessories industries -- that manufactures parts and components -- for their industries instead of focusing on final products.
Currently, there are 49 LDCs, according to this March's revised list of UNCTAD. Every three years the UNCTAD revises the list of the LDCs, which has three criterion; low income criteria, human weakness criteria and economic vulnerability criteria.
Wednesday, July 15, 2009
It noted the priority given by the government to fund the payment of allowances to the Maoists in cantonments and emphasized the importance of continuing these payments.
A Bank today concluded a periodic review of the Project. The team also held discussions with senior government officials, high ranking leaders of the UCPN-Maoist, development partners supporting the peace process, and representatives of Nepali civil society. At these meetings the World Bank reiterated its commitment to continue supporting Nepal's peace process through the Project. The Bank will also continue to support peace-building through the development programmes it finances in Nepal.
"Implementing peace accords is not always easy but the Bank stands by its commitment to supporting Nepal in the implementation of its Comprehensive Peace Agreement (CPA)," said Susan Goldmark, the World Bank's country director for Nepal. "As part of our new assistance strategy, we will support projects that aim to contribute to the maintenance of peace and minimize the potential for future conflict. This reflects the centrality of peace to development and the Bank's commitment to it.
"The team welcomed progress in a number of areas, including initiation of payments to families of those killed as a result of the conflict, improved payment procedures for allowances to Maoists in cantonments, and the recent clear commitment to the discharge of minors and other ineligible former combatants from cantonments.
They also noted the funding gaps for implementing the peace accords and the need for ongoing support from the international community in addressing the needs of other conflict-affected groups, as well as reconstruction priorities, as reflected in the Nepal Peace Trust Fund needs assessment.
Yesterday finance minister Surendra Pandey has clarified that the WOrld Bank is not willing to provide monetary assistance to the PLA fighters who are in Cantonment.
"We do not recognise this puppet government and its budget," he said bitterly adding that the budget that Pandey claims to be 'socialist' has failed the people. "It could not address the rising price hike and the employees' pay scale."
"The budget has announced cheap and popular programmes that can neither fuel growth nor generate employment," he added. Dr Bhattarai opined that the government has tried to impress by aping some programmes of the Maoists.
To match Dr Bhattarai's claim in the last budget of generating 10,000 MW of electricity in 10 years Maoists, Pandey has in his bag a programme which he claims will generate 25,000 MW of electricity in 20 years.
"The budget is full of ridiculous claims and plans. It has also reduced the allocations to agriculture and social security and increased the deficit," Dr Bhattarai added.
The Maoists opened the House to let the CPN-UML-led government present the programmes and policies after a 40-day disruption. They have been not taking part in the budget discussions also to protest what they call President Dr Ram Baran Yadav's 'unconstitutional' reinstatement of Army chief General Rukmangad Katuwal.
Food price inflation remains a serious concern across Nepal. According to figures recently released by Nepal Rastra Bank (NRB), the year-on year inflation for food and beverage was 16.5 per cent for May. A poor food availability situation in remote hill and mountain markets, caused largely by the recent winter drought, has resulted in significant price increase during June, said a report Market Watch jointly prepared by World Food Programme (WFP), Food Security Monitoring and Analysis System the Ministry of Agriculture and Cooperatives (MoAC), Department of Agriculture, Agribusiness Promotion and Marketing Development Directorate of the the Federation of Nepalese Chamber of Commerce and Industries (FNCCI) and Consumer Interest Protection Forum (CIPF).
"This is particularly so in Mugu, where reduced local food stocks and insufficient external supply, has resulted in a five per cent increase in the price of cooking oil, a 30 per cent increase in the price of rice and a 50 per cent increase in the price of beans between May and June," the report said adding that due to a poor winter crop harvest, the price of potato continues to increase across much of the country, on average up by 10 per cent compared to last month, and up by over 58 per cent compared to last year.
Even Kathmandu Valley is under serious threat of price rise. There has been a strong increase in vegetable prices in the past one month, and the comparison of prices a month back and the prices today shows a very noticeable difference.
The price of carrot in the last one month has shown a major difference. Then priced at Rs 36.80 per kg it is now at a high at Rs 67.50, a difference of 155 per cent.
The widely consumed cauliflower has shown a difference of 104.74 per cent, priced at Rs 23 per kg a month back it is selling for Rs 47 per kg.
"The vegetable and grain yield this year has been very dissatisfactory due to meagre rainfall and various other factors. The price hike is due to lack of supply," said Binay Shrestha, Planning Officer of the Kalimati Fruit and Vegetable Market Development Department.
Broccoli shows a difference of 141.33 per cent, priced at Rs 38 per kg it a month ago it has now gone up to Rs 92 per kg.
The price of watermelon in the peak season has touched Rs 47.50 per kg. It was at Rs 13.67 exactly a month back, showing a difference of 247.48 per cent.With the implementation of the proposed budget, the government has estimated the Gross Domestic Product at 5.5 per cent by the end of the coming fiscal year. The growth rate in agriculture sector is expected to be at 3.3 per cent and non-agriculture sector at 6.6 per cent. The projection is based on the surmise that the price level will gradually drop and inflation will be around seven per cent. Looking at comparative data for only a month, the estimated rate of inflation does not seem to be a realistic or practical approach to curbing the price hike.
Monday, July 13, 2009
"The budget is little oversized," said former finance minister Dr Ram Sharan Mahat, who was cautious in his praise. It has the following broad contours -- Rs 160.63 billion has been set aside for recurrent expenditure, Rs 106.285 billion for capital expenditure and Rs 19.12 billion for principal repayment.
However, denizens, suffering from double digit price hike, will not get respite as the oversized budget could fuel the price hike. It seems that the government has completely surrendered to the rising price as it projects 13 per cent price hike in 2008-09 but has no contengency plan to contain the price rise.
Prof Dr Bishwambher Pyakuryal, a senior economist, too endorsed that overriding perception. The all-important fiscal document has, though, aims to contain the price hike at seven per cent and targets growth at 5.5 per cent.
"It seems that the government wants to give something to the people. But, unfortunately it lacks focus," said Dr Shanker Sharma, ex-vice-chairman, National Planning Commission (NPC). "If there is a good monsoon, the growth target could be achieved since it is primarily powered by agriculture, which is dependant on the vagaries of nature,” he added.
Pandey also has a lot of hard work in store to live up to his promise.
Dr Sharma opined that delivery mechanism needed to be improved at least 10 times to make it a resounding success.
In a bid to be as accommodative as the ground reality allowed him to, the Finance Minister has not only added new programmes but also opted for continuity of his predecessor Dr Baburam Bhattarai.
Pandey said that the budget would focus on job creation, boosting law and order, creating a better investment climate and implementing power projects to end a crippling shortage of electricity that has stunted economic growth but he has totally lost the focus.
Dr Mahat, too, agreed that the budget lacked a sustained focus. The budget is a throwback to Bharat Mohan Adhikari of his own party -- CPN-UML -- and Maoist Dr Bhattarai's budgets.
Entrepreneurs, however, felt that it neglected private sector. But, in theory Pandey worked towards an inclusive budget, where the public-private partnership (PPP) has been bandied as a guiding force.
Binod Chaudhary, CA member and a leading industrialist, agreed that the private sector was overshadowed. "Though, it's also true that the budget is infrastructure-driven,” he added.
"But the budgetary allocation for infrastructure is not enough," said Dr Sharma. He cited the example of a showpiece project National Pride -- a Kathmandu-Tarai Fast Track road. Though the estimated cost of the project is pegged at Rs 60 billion, Pandey has allocated only Rs 250 million in his budget.
The Finance Minister has also let the government employees down since he did not hike their salaries and only hiked their allowance. His projection of foreign assistance -- at Rs 56.95 billion - and foreign grant -- at Rs 21.56 billion -- too is ambitious.
The new Finance Minister clearly seems to be inspired by his predecessor. For instance, despite the pressure from the bureaucracy, he increased the revenue target to Rs 161.73 billion.In reality, even if he could meet the revenue target, his ability to spend -- like Dr Bhattarai -- is very much in doubt in absence of local bodies and political instability.
“Pandey has lost sight of the fact that our economy cannot absorb expansionary fiscal policy at this moment," added Dr Pyakuryal.
Total budget outlay -- Rs 285.93 billion
Recurrent expenditure -- Rs 160.63 billion
Capital expenditure -- Rs 106.285 billion
Principal Repayment -- Rs 19.12 billion
Revenue target -- Rs 161.73 billion + Rs 15 billion = Rs 176.73 billion
Foreign assistance -- Rs 78.51 billion
Foreign grant -- Rs 56.95 billion
Foreign loan -- Rs 21.56 billion
Deficit -- Rs 46.34 billion
Major highlights of annual budget 2009-10
* Inflation rate -- seven per cent
* Gross Domestic Product target -- 5.5 per cent
* Agriculture sector growth target -- 3.3 per cent
* Non-agriculture sector growth taget -- 6.6 per cent
The tax exemption limit has been increased to Rs 1,60,000 for unmarried and Rs 2,00,000 for married.
* The prevailing highest rate of customs duty of 40 per cent has been reduced to 30 per cent.
* Foreign currency declaration limit by foreigners at the arrival point has been fixed at $5000 from earlier limit of $2000.
* Local Development Tax and Kawadi Tax scrapped.
* Tribhuvan International Airport duty free shops can seel goods in Indian Currency.
* Industreis exempted 10 per cent tax on special industries and information technology industry that directly emploes 300 or more Nepalis the year round.
* Industries that directly employes 1,200 or more Nepali nationals round the year round or which provides direct employment to more than 100 Nepali nationals including 33 per cent women, dalits (the downtrodden) or the handicapped will have to pay only 80 per cent tax on their income of that particular year.
* Tax Compliance Year has been declared for developing taxpaying habit.
* All income earners and advance tax payers (TDS payers) will have to get PAN members compulsorily.
* Income earners involved in different employments, occupations or investments without PAN numbers, who have not paid or only partially paid taxes like consultants, doctors, engineers, lawyers, auditors, artists, commission agents will, if they get PAN numbers within the last day of Magh 2066 (mid Feb 2010) and submit the tax returns of the fiscal years 2007-08 and 2008-09 and pay the tax, will be exempt from submitting the tax returns of the previous year and enjoy exemption on payment of tax, charge, interest and penalty on it.
* Projects of National Pride: The government has announced three project -- Kathmandu-Nijgadh fast track road, Upper Seti Hydropower project and the Hulaki Sadak in the eastern Tarai. These are high priority projects that depend on investment from the private sector and donors. However the government wants to use the unspent budget to initiate these projects.
* Rs 1,00,000 grants for intercaste marriage.
* Rs 50,000 grants for widow marriage.
* Generation of 25000 MW of electricity in 20 years.
Top 5 Ministries (in terms of budget allocation)
Ministry of Education Rs 42.24 billion
Ministry of Home Affairs Rs 15.38 billion
Ministry of Defence Rs 14. 62 billion
Ministry of Health and Population Rs 14.13 billion
Ministry of Local Development Rs 13.83 billion
Budget Allocation for Constitutional Bodies
President Rs 160.68 million
Vice President Rs 22.17 million
Constituent Assembly-Legislative Parliament Rs 770.30 million
Court Rs 1.41 billion
CIAA Rs 89.21 million
Office of the Auditor General Rs 142.16 million
Public Service Commission Rs 145.06 million
Election Commission Rs 185.68 million
Office of the Attorney General Rs 217.66 million
Council of Justice Rs 8.97 million
National Human Rights Commission Rs 70.53 million
Prime Minister and Council of Minister's Office Rs 3.49 million
Sunday, July 12, 2009
The GDP at the base price is expected to expanded by only 4.7 per cent -- far below than the encouraging figures during last fiscal that was at 5.3 per cent. Favourable monsoon and judicious policies had soared the growth rates in both agriculture and non- agriculture sectors in the last fiscla year but delayed monsoon coupled with acute power crisis, frequent political disruptions have taken a huge toll on the agriculture that accounted for only 2.1 per cent growth, states the Survey. The agriculture contributes 32.4 per cent to the total GDP.
The survey -- based on eight months' data of the current fiscal year -- portrays a gloomy economic picture. The manufacturing industry posted a negative growth of 0.5 per cent against 0.2 per cent last year. Ditto for electricity, gas and water. This time around, education, health and construction, in non-agro sector, have powered the growth. While, financial intermediary has nosedived to 3.3 per cent from last year's high of 13.8 per cent. The Survey maintained that double digit price hike and slower growth have had an adverse effect on the consumers' purchasing power, posing a serious threat to the financial management.
The government's spending on the corporation has also gone up by 17.5 per cent in 2007-08 in comparison to 2006-07, states the survey, which was tabled in the House late this evening by finance minister Surendra Pandey, who will present the budget for the fiscal year 2009-10 on Monday.
On the basis of the US dollar, gross foreign exchange reserves rose by 15.4 per cent to $3.6 billion in mid-May 2009. "Such reserves had gone up by 15.5 per cent in the same period of the previous year," the report based on ten months' data said.
The current level of reserves is adequate for financing merchandise imports over 12.4 months and merchandise and service imports over 10.1 months.
A major contributor to the increase in foreign reserve is remittance. "Under transfers, workers' remittances soared by 55.5 per cent in the review period compared to a growth of 35.5 per cent in the same period of the last fiscal year," the central bank said.
In the first ten months of the current fiscal year, NRB mopped up net liquidity of Rs 11.7 billion through open market operations. Of the total liquidity of Rs 20.7 billion mopped up in the review period, Rs 7.5 billion was mopped up from outright sale auctions and Rs 13.3 billion from reverse repo auctions.
"Despite a substantial injection of liquidity through foreign exchange intervention in the review period, a liquidity of Rs 9.0 billion has been injected through repo auctions in the seventh and eighth months of the review period on account of a shortfall in liquidity -- particularly due to a higher cash balance of the government with NRB and a higher expansion of currency in circulation in the review period," it said.
Net liquidity of Rs 4 billion was mopped up in the corresponding period of the previous year through open market operation including Rs 6.5 billion through outright sale auctions, Rs 6.6 billion through reverse repo auctions and Rs 9.0 billion through repo auctions.
In the review period, NRB injected net liquidity of Rs 121.5 billion by net purchase of $1.6 billion from commercial banks through foreign exchange intervention. "A net liquidity of Rs 76.6 billion had been injected through a net purchase of $1.2 billion from commercial banks in the corresponding period of the previous year," NRB added.
An elevated inflow of remittances necessitated such a substantial amount of intervention in the foreign exchange market in the review period.
NRB purchased Indian currency (IC) worth 59.9 billion through the sale of $1.3 billion in the review period. Indian currency of 48.3 billion had been purchased through the sale of $1.2 billion in the corresponding period a year ago. A depreciation of Nepali currency vis-à-vis the US dollar encouraged the import from India against the payment of Indian currency and, therefore, a higher amount of IC purchase was made as against a sale of the US dollar in the review period.
Saturday, July 11, 2009
Dr Baburam Bhattarai, in his budget speech for the fiscal 2008-09, had projected seven per cent growth but his projection failed as a result of regular power cuts, frequent nationwide protest programmes and labour disputes.
Dr Shanker Sharma, former vice-chairman of the National Planning Commission, said peace was the first necessary requirement for growth. Dr Sharma said boosting private sector confidence was a must for the growth. “The private sector must feel that it is safe to invest. There must also be clarity in policies,” he added. If the budget can take the private sector into confidence and encourage investment by providing more incentives, growth could be accelerated. “Otherwise, the growth rate may not pick up in the next fiscal too,” said Dr Sharma.
The Central Bureau of Statistics’ report — based on the first six months’ data — has revised its projection to 3.8 per cent. Similarly, Asian Development Bank (ADB) has also slashed the growth forecast to three per cent for the year 2009 due to poor winter crop, deceleration in remittance inflow and slower growth of the industrial sector.
Finance Minister Surendra Pandey will present the budget for the fiscal year 2009-10 this week. However, it is likely to be a Herculean task for him to fuel growth and keep a tight leash on the runaway price hike horse. The price hike still stands at 12.9 per cent. Both NRB and the government have failed to contain it.
Though accelerated growth would have cushioned the impact of price hike, possibility of growth almost remained a chimera. According to the Forbes’ annual list of Doing Business, Nepal further plunged to the 121st position against 96th position last year as a result of unfavourable investment climate. Nepal has never witnessed double-digit growth in the past. The highest growth rate ever was 9.6 per cent in1984.
The shareholders of commercial banks and development banks sub-groups posted a whopping gain as they gained 51.54 points to 736.57 points and 44.31 points 744.66 points in five day trading this week.
Similarly, the contribution of Group-A companies -- the blue-chip shares in the domestic market -- also increased to 44.36 per cent against week's 24.69 per cent. However, the transaction has decrease by 17.36 per cent to Rs 382.31 million against last week's increase of 103.88 per cent to Rs 462.61 million.
The 78-scrip sensitive index also flared by 10.73 points to 188.09 points from last week's closing of 177.36 points. The float index -- calculated on the basis of real transactions -- also gained 3.38 points to close at 67.47 7points from last week's closing of 64.09 points.
This week Nepal Bangladesh Bank (with Rs 62.37 million) topped the chart in terms trading amount followed by Bank of Kathmandu (with Rs 36.86 million), NIC Bank (with Rs 36.85 million), IME Finance (with Rs 19.59 million) and National Hydropower company (with Rs 18.92 million).
In terms of number of share units traded and transaction amount Nepal Bangladesh Bank topped the chart with Rs 62.37 million transaction of 2,49,000-unit shares changing hands, while Pashupati Development Bank topped the chart in terms of number of transactions with 895 transactions.
Friday, July 10, 2009
The decline of rental and food prices in Dublin, coupled with the fall in the value of the euro against the US dollar, has caused Dublin to drop down in the rankings. Noel O'Connor, Senior Consultant at Mercer, commented, "As a direct impact of the economic downturn over the last year many currencies, including the Euro and British pound, have weakened considerably against a strong US dollar causing a number of European cities to plummet in the rankings."
Tokyo has knocked Moscow off the top spot to become the world's most expensive city for expatriates according to the Mercer survey. Osaka is in second position, up nine places since last year, followed by Moscow in third place. Geneva climbs to fourth position and Hong Kong moves up to fifth. Johannesburg in South Africa is the least expensive city in the ranking. The survey covers 143 cities across six continents and measures the comparative cost of over 200 items in each location, including housing, transport, food, clothing, household goods and entertainment. For example, a large fast food hamburger meal can cost up to €7.15 in Dublin compared to €2.68 in Beijing.
The data is used to help multinational companies and governments determine compensation allowance for their expatriate employees. O'Connor also noted, "With significant exposure to multiple economies and currencies, multinational companies continue to be greatly affected by the financial crisis. The cost of expatriate programmes is heavily influenced by currency fluctuations and inflation rates. It is important for multinational companies to continuously review their compensation packages and ensure they are in line with the rest of the market." Tokyo moves up one place in the ranking to become the most expensive city for expatriates both in Asia and globally. The Japanese yen has strengthened considerably against the US dollar which also lifts Osaka into second place from 11th in 2008. Hong Kong follows in fifth place and Singapore has moved up three places to reach 10th. In 140th place, Karachi continues to be the least costly city in this region -- up one place from last year.
Moscow remains the most expensive city in Europe for expatriates in third place. However, a dramatic depreciation of the rouble against the US dollar has led to a sharp fall in the city's index score compared to 2008 (115.4 in 2009 V's 142.4 in 2008). The next European cities in the ranking are Geneva and Zurich in fourth and sixth place, up from eighth and ninth respectively. European cities have experienced some of this year's steepest falls in the ranking, with Warsaw plummeting from 35th to 113th and Glasgow (129th place) and Birmingham (125th place) in the UK falling 60 and 59 places respectively. German and Spanish cities all fell between eight and 11 places, whereas cities in Sweden, Ukraine, Czech Republic, Romania and Hungary all fell between 36 and 48 places. "As most European currencies have weakened against the dollar it has become more costly for companies based in this region to send expatriates and their families to US cities," said O'Connor.
Oslo and London, both previously in the top 10, are now in 14th and 16th place respectively. "The decline of rental prices in both London and Oslo, coupled with the fall in the value of British pound and Norwegian krone against the US dollar, have caused these cities to plummet in the ranking," said O'Connor.
New York remains the highest ranking city in the region and has also joined the global top 10 list this year, jumping from 22nd to 8th place. Los Angeles is up 32 places to 23rd and Washington is up 41 places to 66th. Winston Salem is the cheapest US city surveyed, ranked at 126. All cities in the US have experienced a rise in this year's ranking due to the strengthening of the US dollar.
Canadian cities have slipped down the index with its highest ranking city Toronto down 31 places to 85th. Ottawa drops 36 places to 121st and Montreal is now in 103rd place, down from 72nd in 2008. In 15th place and up 74 places from 2008, Caracas in Venezuela is the top ranking city in South America. Sao Paolo and Rio de Janeiro have experienced a reverse move, plummeting from 25th to 72nd and 31st to 73rd respectively. Buenos Aires has climbed 26 to reach 112th place. "Although the Argentine peso has lost value against the US dollar, the high inflation rate observed on goods and services have caused Buenos Aires to rise in the rankings," said O'Connor.
Thursday, July 9, 2009
All of them have been accused of fraud, financial embezzlement and misuse amounting to a massive Rs 1.08 billion. The NRB has also sought for the Finance Ministry’s coordination in the investigation process.
“The troubled NDB board of directors, chief executive officers, advisors and managing directors — serving at different times — have not been abiding at all by directives of the central bank, risking the depositors and shareholders’ money, but benefitting themselves,” the central bank’s Supervision Department said in the letter to Police Headquarters written on Thursday. Similarly, the department also wrote to the RID and IRD to probe the source of income and banking transactions of Pun, Gurung and all other directors. The NRB Board had decided to take the help of police, RID and IRD on July 6.
The central bank also sought the Appellate Court’s approval to appoint liquidator to begin the liquidation process as the bank could not be revived and deserved to be sent to liquidation under Section 77 of the Bank and Financial Institution Act 2007. Before moving the Appellate Court, the central bank had also sought NDB’s clarification on why it should not be sent for liquidation. In response, the first development bank in the country could not furnish satisfactory clarification.
According to the NRB’s findings, the NDB has a huge loss of Rs 670.87 million, though it possesses a paid-up capital of Rs 320 million. It has total assets of Rs 730.13 million but its non-performing assets stand at 55.09 per cent and capital adequacy ratio is a whopping 48.31 per cent: that is almost five times more than the permissible limit of 11 per cent.
The NDB had Rs 720 million deposit of 32,000 depositors till mid-March. Of the total deposit, the bank has not been able to return Rs 330 million worth of institutional deposits of Employment Provident Fund and Nepal Army´s Welfare Fund even after expiry of maturity date. The EPF and Army’s deposit constitute around 45 per cent and 27 per cent of the total deposit, respectively.