Inflation declines

The year on year inflation has declined to 5.8 per cent in mid-January 2008 from 7.6 per cent of the corresponding period of the last fiscal year.
The moderation in consumer price index was on account of lower pass-through effect of the hike in the prices of petroleum products in October 2007. "The appreciation of Nepali currency against the US dollar also helped contain the inflation rate at a moderate level," states the macro economic situation of the first six months of this fiscal year published by Nepal Rastra Bank.
"The price in Kathmandu Valley, Tarai and the Hills rose by 5.3 per cent, six per cent and 5.6 per cent respectively."
In the first six months of 2007-08, the government expenditure on a cash basis, increased by 30.2 per cent to Rs 58.28 billion compared to an increment of 11.9 per cent in the same period of
the previous year. The increase in government expenditure was on account of rise in all forms of government expenditures that recurrent, capital and principal repayments.
In the review period, the recurrent expenditure rose by 21.8 per cent to Rs 38.24 billion compared to an increase of 10 per cent in the corresponding period of the previous year. "The higher growth of recurrent expenditure was on account of increased expenditure on relief-related activities, the salary hike of government employees, rise in peace-related expenditure and additional expenditure relating to the preparation of constituent assembly elections," according to the central bank.
For modulating short-term liquidity, the NRB undertook reverse repo auction of Rs 5.57 billion and outright sale auction of Rs 1.24 billion. Both of the instruments were used to absorb liquidity.
In the first six months, the revenue mobilisation also rose by 25.4 per cent to Rs 47.39 billion compared to an increase of 19.7 per cent in the corresponding period of the previous year.

However, in the first six months of 2007-08, total exports fell by 5.8 per cent in comparison to a decline of 2.7 per cent in the corresponding period of the previous year. Of the total exports, export to India fell by 7.6 per cent in 2007-08 compared to a decline of three per cent in the same period of 2006-07. Exports to other countries also registered a decline by 1.7 per cent in comparison to a decline of 1.9 per cent in the comparable period of the previous year.
similarly, total imports rose by 6.2 per cent compared to a rise of 7.7 per cent in the corresponding period of the previous year. While imports from India went up by 6.5 per cent in the review period compared to its higher growth of 10.1 per cent in the corresponding period of 2006-07, imports from other countries rose by 5.7 per cent in the review period in comparison to a lower growth of four per cent in the previous year.
The overall BoP recorded a deficit of Rs 1.93 billion. It had posted a surplus of Rs 5.49 billion in the corresponding period of the previous year. Despite the increase in travel receipts and workers' remittance by 65.3 per cent and 18.2 per cent respectively in the review period, the current account registered a deficit of Rs 1.21
billion due to the increase in trade deficit and the decline in grants.
The gross foreign exchange reserves aggregated Rs 164.95 billion in mid-January 2008, declining by 0.1 per cent from the level of Rs 165.11 billion in mid-July 2007. Such reserves had gone up by 2.5 per cent in the corresponding period of the preceding year