Senior government officials have said that unlike the report made by the Institute for Development Studies (IfDS), the economy is on the right track and that there is no possibility of the country going bankrupt over the next few some months.

State minister for Finance Roop Jyoti (File photo)

State minister for Finance Roop Jyoti (File photo)
Addressing a news conference at the Department of Information on Monday, state minister for Finance Dr. Roop Jyoti said, “The government refutes the validity of the study as it is not based on facts and figures; it is rather a product of political bias.”

A study of the IfDS — that was made public last week– said that given the present trends, the state would turn bankrupt within four months.

Talking to journalists on February 2, executive director of Institute for Development Studies (IfDS) Dr Raghab Dhoj Pant said, “The fiscal situation of His Majesty’s government is at a very alarming state. The supplementary budget has added fuel to the fire. In the current fiscal year, the authorities have not cared even to maintain simple consistency and coordination among revenue, expenditure, budget deficit and the source to finance the budget deficit,” he added.

However, Dr Jyoti maintained that the new Ordinance has all the policy initiatives announced by the budget for the current fiscal year which he said was very much in line with the Tenth Five Year Plan and its main goal of poverty alleviation.

The IfDS report said that the problem emerged due to the over estimation of revenue collection and under estimation of the government expenditure in the budget of the current fiscal year.

Dr Jyoti, however, said the total revenue generation during the first six months of the 2005/06 stood at Rs. 31.58 billion compared to Rs. 29.83 billion during the corresponding period last year. On the public expenditure front, Nepal Rastra Bank has so far released Rs. 47.86 billion with Rs. 40.30 already disbursed. “The public expenditure is within the limits and criteria set by the annual budget.”

With regard to foreign assistance, the government has so far received Rs. 7.88 billion compared to Rs. 4.93 billion during the corresponding period last year. “These figures indicate that the government will be able to achieve its set goals and ensure economic stability.”

Talking to Nepalnews, Keshav Acharya, chief of the research division at the Nepal Rastra Bank said there was no possibility of the country going bankrupt within June this year (as claimed by the IfDS) as the flow of remittance in the country was very encouraging and export of intermediary goods and raw materials was also good.

He said as there was no probability of drastic decline in the remittance, the economy will not spiral down. He, however, acknowledged that the economy was not in a comfortable position as the growth rate and revenue collection was not as per the target.

The growth of capital expenditure is very high and if the rate of revenue growth continues in the same pace and the country did not receive any foreign aid, the economy will be in a very difficult situation, he added.

When asked how sustainable remittance will be for the development of the country, Acharya said it was not a very reliable source of national income, but was very important for the time being as it was giving life to the ailing economy of the country.

Contrasting IfDS’s inflation projection of 27.7 percent with NRB’s prediction of 7.0 percent, Dr Jyoti termed the former calculation totally baseless.

He attributed inflation to external reasons like increasing cost of petroleum and rise of prices in Indian market rather than a tendency to hoard goods among the consumers as stated in the study.

When asked about the role of Nepal Rastra Bank to manage the growing inflation rate, Acharya added, “We are also facing pressure of inflation from India, as we have to largely depend on India for the import of goods. The central bank is monitoring the situation seriously and will adopt necessary measures in the appropriate time.”

Acharya also said that the government had capital reserves to cover imports of goods and services for the next ten months. He said the internal borrowing of the government so far had amounted to Rs 3.13 billion against a ceiling of Rs 11.85 billion set in the ordinace.

Dr Jyoti denied the IfDS stance that the inflow of remittance had recorded a downturn.