Government lowers growth forecast, fails to curb price hike

Government has lowered its highly ambitious growth forecast of 5.5 per cent to around four per cent.
"Due to low yield in the agriculture -- especially the major crops like maize and paddy -- and non-agriculture sector's low output than expected, the growth is going to be lower than the forecast," said finance minister Surendras Pandey during a mid-term evaluation of the budget for the fiscal year 2009-10.
The finance minister had projected an ambitious growth of 5.5 per cent in his budget speech hoping for the good agriculture output. Nepal's growth is dependent on the agriculture output that is largely out of government control and depends on good moonsoon.
"The growth is expetced to be around four per cent," said Dr Yubraj Khatiwada, vice-chairman, National Planning Commission (NPC) -- the government think tank.
"Though manufacturing sector has improved a little, the growth of agriculture sector did not meet our target pulling the total growth," he said adding that the projected growth was on the basis of normal agriculture growth.
The government has also failed to bring the rate of price hike. "In the fiscal policy and monetary policy -- both -- the inflation was projected at seven per cent," the finance minister said adding that "but the average of the first six months comes to around 10.1 per cent."
He also accepted that there is liquidity cruch in the market. "There has been liquidity crunch in the market since the begining of this fiscal year," Pandey said adding that "the central bank has brought some provisions recently that have helped ease the liquidity crunch.
The government has also failed in promoting the exports. "the trade deficit has increased due to increase in imports and decreased in exports," he accepted. "Due to balloning trade deficit and declining remittance, during the first six months of the current fiscal year, the Balance of Payment (BoP) has also registered plunged."
The forex reserve has also depleted due to gold imports. "The central bank was forced to ban gold imports to control it," acting governor of the central bank Krishna Bahadur Manandhar said. There are more challenges but less time for the government to fulfill its promises made in the budget," said finance secretary Rameshwor Khanal. This fiscal year has only 5 months and 21 days to end.