Bankers agree to bring down deposit rate

Nepal Bankers’ Association (NBA) has decided to cap the interest rate on savings, individual fixed deposits and institutional fixed deposits, bowing down to strong pressure from the Finance Ministry and central bank.
The association today – during a meeting – agreed to provide maximum of 9.25 per cent interest to individual depositors, 8.5 per cent to institutional depositors, 6.5 per cent in saving deposits and 4.5 per cent on call deposits.
The decision will come into effect from tomorrow, though the unnatural decision to suppress the rates could bring side effects to the economy.
The banking sector has been competing to increase interest rate due to tight loanable fund. The tightening liquidity situation has created interest rate volatility as the commercial banks began waging an interest rate war by offering higher rates to the depositors by ditching their ‘gentlemen’s agreement’ on interest rates three weeks ago.
Three weeks ago, the association had agreed to limit interest rate on savings to seven per cent and 10 per cent each on individual fixed deposit and institutional fixed deposit. But some banks – news and established ones both – had started accepting fixed deposits at up to 13 per cent interest rate lately after the association let them fix interest rate, on their own.
Following such volatile interest rate regime, the central bank has directed commercial banks to bring down the interest rate on deposits, though it could have adverse impact to suppress the interest rates.
A study committee led by deputy governor of central bank Shivaraj Shrestha has also recommended the Finance Ministry to bar banks and financial institutions from adding premium of over two per cent to the base rate while setting lending rates for the priority sector as a few banks were found adding a premium of up to 12.5 per cent to the base rate, prompting lending rates to shoot up.
Likewise, the committee has also suggested introducing a measure mandating banks and financial institutions to tie up their savings deposit rate to inflation to ensure depositors do not lose out when parking money in the financial institutions.
The commercial banks had started competing in interest rate to attract deposits, breaching their earlier 'gentleman’s agreement'. If the banks suppress the interest rates or start unhealthy competition to hike rates to lure more deposits, either way the economy is getting hurt.
On December 7, the Finance Ministry had formed a panel under central bank deputy governor Shrestha to study the impact of soaring interest rate. The panel – in its report submitted yesterday – recommended the government to put a cap on the bank interest rate to address problems seen in the money and capital markets.
The panel has presented 58 points to address the shortage of loanable fund along with the slump in stock exchange market for short term, medium term and long term.
The panel has also asked the government to reduce the risk weight in shares to 100 per cent from previous 150 per cent. It has also suggested increasing the threshold of margin on loan against shares to 65 per cent from the existing 50 per cent and allowing banks to invest up to 40 per cent of their core capital in shares. At present, the central bank has restricted banks to issue loan in shares only up to 25 per cent of the core capital. 

Stroke claims 3,000 lives annually in Nepal: WHO

World Health Organisation (WHO) has estimated that around 3,000 people in Nepal die due to stroke annually.
The number could be higher in the rural areas than that of estimation as the rural population lack specialists and healthcare for their healthy heart, it said adding that those who have high blood pressure, diabetes, addiction to alcoholism are at risk of stroke.
A training themed ‘Stroke Thrombolysis 2018’ has concluded in Kathmandu where 30 stroke specialists deliberated on how to extend support in the treatment of stroke and how to render healthcare services to the stroke patients at the earliest.
The training organised by Synergy Corporation and Nepal Stroke Association also imparted knowledge about management of stroke and techniques of its cure as well as remedy, among others, according to executive director at the Upendra Devkota Memorial National Institute of Neurology and Applied Sciences Dr Madhu Devkota.
Stroke Specialist Dr JP Agrawal, on the occasion, said that it was challenging to extend city-oriented treatment to stroke patients in the rural areas. He was confident that the training would contribute toward extending this service to the rural population.
Likewise, Association’s president Prof Dr Lekhjung Thapa underscored the treatment from the skilled specialists to the stroke patients, stating that the effects of stroke would be immediately seen on the patient.
Of the total deaths across the world, stroke accounted for 86 per cent of deaths, according to the statics of the WHO.
Likewise, Nepal Medical Association president Dr Muktinath Shrestha pointed out the need to launch awareness drive in the rural areas about stroke. He also called for the government’s attention toward the attack on the health workers and vandalism on the health facilities.

Share investors start hunger strike at Nepse

Two share investors have started a hunger strike on the premises of Nepal Stock Exchange (Nepse) – against the governmental from today – citing that the secondary market has not been serious in addressing their demands.
The share investors’ pressure group has demanded the resignation of finance minister Dr Yubaraj Khatiwada, governor of the central bank Dr Chiranjibi Nepal, chairman of Securities Board of Nepal (Sebon) Dr Rewat Bahadur Karki, chairman of Nepal Stock Exchange (Nepse) Laxman Neupane and chairman of Insurance Board (IB) Chiranjibi Chapagain.
Tilak Koirala and Hari Dhakal – representatives of the pressure group – have started a hunger strike stating that the government authorities – especially finance minister Dr Yubaraj Khatiwada – are solely responsible for the current situation in the stock market.
The share investors’ pressure group has also unveiled a series of protest programmes putting forth various demands including reforms in the capital market, protection of investment and creating an environment conducive for investment.
"We have started a hunger strike for the betterment of the stock market," the pressure group’s coordinator Hari Dhakal said, adding that they strongly demand the resignation of the finance minister, who is not share market friendly. "If the they do not resign they will not end the hunger strike."
They have already been staging a relay-strike since the past eight days. "We have been compelled to launch protest programmes as the government has failed to address our demands," Dhakal added.
Earlier, the Finance Ministry had formed a committee led by deputy governor of Nepal Rastra Bank (NRB) Shivaraj Shrestha comprising share investors to identify the problems in the share market and recommend necessary suggestions. "The committee was supposed to submit its report today but officials at the Finance Ministry refused to accept the report citing that more discussions need to be held regarding the issue,” according to Nepal Investors’ Association.
Asking the government to introduce necessary act, regulations and laws for greater interest of capital market, the protesters have also accused the government-formed committee of ignoring their demands.

Government fails to improve budget spending capacity

The stable and strongest government – ever since decades – of Prime Minister KP Sharma Oli failed to boost development works across the country like earlier unstable governments. The Oli government has not only failed to invest in capital formation but also improve its spending capacity by the end of five months of the current fiscal year 2018-19.
According to Financial Comptroller General Office (FCGO), the government has managed to spend merely 12.59 per cent of the total budget allocated under capital expenditure in the first five months of the current fiscal year. "Of the Rs 313.998 billion allocated for capital expenditure for the current fiscal year 2018-19, capital spending stands at only Rs 39.51 billion as of yesterday."
The government has spent Rs 250.5 billion as recurrent expenditure during the five months. The recurrent expenditure is basically spending of the government on non-capital formation programmes like salaries of government staffers, social security and other expenses. "The recurrent expenditure in the first five months of fiscal 2018-19 stands at 29.63 per cent of the total allocated budget worth Rs 845.4 billion," the FCGO report reads, adding that the government has been able to spend only 13.98 per cent or Rs 21.7 billion on financing till mid-December out of the total allocated budget of Rs 155.7 billion.
Of the total Rs 1.31 trillion budget for the fiscal year 2018-19, the government’s total expenditure stands at Rs 311.8 billion or 23.71 per cent.
Inefficient system, various expenditure controlling mechanisms and the failure of the government to introduce effective policies to expedite development works led to low capital expenditure. Low budget spending will pull the economic growth not only for this year but also for the years to come as the capital expenditure in development works will help capital formation in future that will lead to the economic growth and employment creation.
On one hand the government has failed to spend, but on the other, it has been able to mobilise Rs 352 billion in the first five months of the current fiscal year 2018-19, which is 37.25 per cent of the total revenue mobilisation target of Rs 945 billion for the entire fiscal year. The low spending and high revenue mobilisation will help bulge the government coffer, which is not a good sign for the economy like Nepal that needs billion of doller in spending in infrastructure to graduate to middle income country by 2030.

Sutlej offers to sell 10 per cent power to Nepal

The Indian power developer Sutlej is proprosing to sell 10 per cent of the energy – available for export from mush-awaited Arun III Hydropower Project – to Nepal.
SJVN Arun III Power Development Company wrote – last week – to Investment Board Nepal (IBN) asking if the Nepal government would be willing to buy 10 per cent of the total energy available for export.
According to the project development agreement (PDA) signed between SJVN and the board, Nepal will receive 21.9 per cent of the total energy generated by the project free of cost while the developer has rights over the rest of the output. The agreement also requires the developer to offer 10 per cent of the electricity from its share to Nepal on commercial terms.
"As we have secured a market for 90 per cent of our share of the energy, we have sent a proposal to board asking if the Nepal government would be interested in buying the rest of the electricity as provisioned in the PDA,” said resident representative of SJVN in Nepal Hari Ram Subedi.
The board has forwarded Sutlej proposal to Nepal Electricity Authority (NEA), the sole buyer of electricity in the country.
The NEA – confirming that the government power utility has received the proposal – said that it will ask Sutlej to clearly mention the terms and conditions and the tariff rate. "If Sutlej quotes a reasonable rate, the NEA will purchase the electricity from Arun III," informed the NEA.
The Indian developer of the export-oriented 900 MW plant located in eastern Nepal is carrying out work on the construction site of the Arun III plant on a war footing after Nepali and Indian Prime Ministers jointly laid the foundation stone for the project remotely this May during Indian Prime Minister Narendra Modi’s Nepal visit.
According to the board, Nepal will receive Rs 348 billion over 25 years from the project. The project developer will also provide 21.9 per cent of the energy free of cost, which is worth Rs 155 billion, plus another Rs 107 billion in royalties.

Transport committees get more time to register as company

Citing the necessity to amend a few provisions in the existing Company Act to bring the large transport associations and committees under the company format, the government has today extended the deadline for the transport bodies – for the second time – to register themselves as a company till mid-March.
Though the government has decided – a few months ago – to end transport cartel, it has failed to implement the decision, presumably under pressure from transport entrepreneurs, and extended the deadline.
The three-month extension allows them to continue operating as committees, which means the public transport operators will run its cartel until then, though the government has promised an amendment in the Companies Act to insert a special provision for the existing bus operator committees to register as companies even if a committee is run by more than 101 individuals.
However retired secretary at the Ministry of Physical Infrastructure and Transport Tulasi Prasad Sitaula claimed that both the changes in the law were unnecessary. "This raises questions as to why should they be allowed to run a company with so many members," he said, adding, "No company requires that many number."
A joint meeting of three ministers – transport minister Raghuvir Mahaseth, industry minister Matrika Prasad Yadav and home minister Ram Bahadur Thapa – decided to allow them to run as bus operator committees for more three months on Thursday, only two days before the Dec 16 deadline.
According to director general at Department of Transport Management, the deadline has been extended for the final time. "The extension is basically intended to address a few concerns raised by the transport entrepreneurs," he said, adding that transport entrepreneurs had last week ‘officially’ agreed to switch to the company model but had set a few preconditions that include transferring transport bodies’ movable and immovable properties, including their vehicles and staffs to the new company.
By scrapping the registration of transport bodies including transport committees and associations earlier in April, the government had claimed that it would not renew their registration from mid-July, if they failed to transform into the company modal. But the  the government’s recent decision – for the second time – to extend the deadline for transport bodies to register themselves as company reflects government’s unwillingness to illegalise transport cartel.
The government move was, however, intended not only to end the monopoly of transporters in the public transportation sector and ensure its growth, but also to bring public transport sector, which makes billions worth transactions annually, under the income tax net of the government. The company model was also introduced to bring the transport operators into tax net, formalise the transport service sector, stop them from manipulating the services, and make public transport a properly organised system.
Publishing a notice a week ago, the department has informed that public vehicles that have not been registered with the department under the company model will not be allowed to ply the roads from December 16. However, going against its own decision to end transport cartel, the department has once again extended the deadline to register themselves into company till mid-March.
According to the department, only around 10,000 public vehicles – of the total 1,500 transport bodies – out of more than 200,000 public vehicles across the country have registered with the department under the company model so far.
The government’s move earlier this year was resisted by the bus operators, who defied the government’s announcement to convert them into companies. They called strikes and the public transport services came to a grinding halt.
Home Minister Ram Bahadur Thapa had led a move to arrest the operators for obstructing essential public service, and ordered seizing bank accounts of the transport committees, though tye resisted to the government move. But the committees surrendered to the government and promised to convert themselves into companies when their bank accounts were frozen. They were given a deadline of doing so until mid-July, but the government later extended it to December 16. 

Nepal can increase exports to South Asia by four-fold: World Bank

Nepal has the potential to increase exports to South Asian countries four-fold, according to a report.
Man-made trade barriers have held back intraregional trade in South Asia, reads the report, ‘A Glass Half Full: The Promise of Regional Trade in South Asia’, Launched here in the capital today. "If these barriers were reduced, intraregional trade could grow from its current value of $23 billion to $67 billion."
Intraregional trade in South Asia remains one of the lowest in the world and accounts for about 5 per cent of the region’s total trade, compared with 50 per cent in East Asia and the Pacific, highlights the report launched at a discussion programme hosted by the World Bank in partnership with the South Asia Watch on Trade, Economics and Environment (SAWTEE). "Nepal mostly exports to South Asia and has a trade deficit of $10.8 billion which is equivalent to 37 per cent of its GDP."
The report also assesses the gap between current and potential trade in South Asia and provides a roadmap for deepening regional trade. It identifies four critical barriers to regional trade: tariffs and para tariffs, real and perceived non-tariff barriers, connectivity costs, and a broader trust deficit.
“Situated in the world’s fastest growing region, Nepal’s potential to expand trade in goods and services is promising,” said World Bank country manager for Nepal Faris Hadad-Zervos. "Addressing its own protectionist policies will help Nepal significantly increase its exports not only to South Asia, but also to the rest of the world."
South Asian countries impose greater trade barriers for imports from within the region than from the rest of the world. More than one-third of intraregional trade falls under sensitive lists, which are goods that are not offered concessional tariffs under the South Asian Free Trade Area (SAFTA). More than 36 per cent of Nepal’s imports from South Asia are under sensitive lists, more than any other country in the region.
The report recommends targeting sensitive lists and para tariffs to enable real progress on SAFTA and calls for a multi-pronged effort to address non-tariff barriers, focusing on information flows, procedures, and infrastructure.
Likewise, connectivity is a key enabler for robust regional cooperation in South Asia. Though repeatedly discussed on increasing connectivity, poor land and air connectivity prevent South Asian countries from reaping the benefits of shared borders, the report adds.
"There are no flights between Nepal and Sri Lanka, the Maldives, or Afghanistan," World Bank Lead Economist and lead author of the report Sanjay Kathuria said, adding that there is only one flight per week between Nepal and Pakistan. "Lack of connectivity is a key contributor to the high cost of trade between Nepal and South Asia and improving connectivity will take Nepal a long way."
The report also suggests that policy makers in South Asia may draw lessons from the India-Sri Lanka air services liberalisation experience, where liberalisation was gradual and incremental, but policy persistence paid off.