Friday, January 25, 2013

Government fails to crack whip on inflation

The government has failed to crack the whip on rising prices besides its inability to increase spending on development activities in the first half of the current fiscal year 2012-13, according to the mid-term budgetary evaluation.
The government has brought an interim public expenditure arrangement twice, in the absence of a parliament and consensus among political parties, and had promised to keep inflation within 7.5 per cent, which is looking up to 10.5 per cent by mid-January, according to the Finance Ministry that has reiterated to continue market monitoring to check the price hike. In the same period of last fiscal year 2011-12, the inflation stood at 6.8 per cent.
Likewise, the ministry has accepted that the lack of a full-fledged budget has contributed to the slowdown in the economy, hitting not only development activities but also regular expenses. "The government has been able to spend Rs 81.33 billion under recurrent expenditure, Rs 7.04 billion under capital expenditure and Rs 6.70 billion under Financial Accounts, amounting to a total expenditure of Rs 95.09 billion by the first half of the current fiscal year 2012-13," the ministry added. "The ministry released Rs 95.83 billion in the period."
The government has, however, been able to exceed its revenue mobilisation target, it said, adding that the government has been able to mobilise Rs 134.56 billion revenue, though it had a target to mobilise Rs 131.88 billion revenue in the first half of the current fiscal year 2012-13. "Revenue mobilisation is some 21.20 per cent more when compared to the same period last fiscal year, and 102.04 per cent of its target."
Foreign aid commitment has, however, dropped from last fiscal year’s same period’s Rs 44 billion. "The government has received a commitment of Rs 14.04 billion in grants and Rs 1.71 billion in loans, making it a total of Rs 15.76 billion in foreign aid commitment by mid-January." 

In the same period of the last fiscal year, the government had spend Rs 9.56 billion in capital expenditure. The low capital expenditure might create liquidity crisis in the market, though the 32 commercial banks had Rs 20 billion liquidity by the end of the six months of the current fiscal year.
The Balance of Payments (BoP) accounts — an accounting record of all monetary transactions between the country and the rest of the world — has also witnessed  a dismal performance. "The Monetary Policy had a target of Rs 30 billion surplus BoP by the end of six months but the country has only Rs 1.60 billion surplus BoP by mid-January," it said, hoping that import substitution and export promotion will help meet the target by the end of the fiscal year.
Likewise, the foreign currency reserve can finance imports of goods and services for 8.6 months, which is comfortable.
The Finance Ministry said that arrears clearance is also too slow as the ministry could complete only 17 per cent arrears clearance against a target of 45 per cent. "Similarly, the ministry has also completed 401 Post Clearance Audits (PCA)."
"Besides expanding the tax net, the ministry has expedited the Permanent Account Number distribution in the period, has investigated 1,363 tax payers and fixed Rs 4.86 billion tax for them, which is encouraging," it said, adding that in the first half of the current fiscal year, some 8,304 have also been registered at VAT.

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