Kathmandu, Jan. 4: The first quarter of the current fiscal year has witnessed widening trade and budgetary deficit, but the exports and imports have increased significantly, Nepal Rastra Bank said today.
The foreign exchange reserve is sufficient to cover merchandise import of about 10 months, an NRB press release stated. The NEPSE share price index has improved compared to last month, it said.
The foreign exchange holding of the banking system recorded a rise due to a surplus in the balance of payment emanating in monetary front, narrow money increased by 6.8 per cent to Rs. 56618.4 million during the review period in contrast to a decline of 2.1 per cent last year. Broad money also recorded a growth of 2.1 per cent to Rs. 156081.4 million as compared to 4.5 per cent growth last year. But, time deposits which increased by 8.1 per cent last year, registered a decline of 0.3 per cent during the review period reflecting the effect of the downward revision of interest rates on time deposits. The share of time deposits in the broad money marginally declined to 65.0 per cent.
Net foreign asset of the banking system which had increased by 1.1 per cent (Rs. 624.1 million) last year, surged up by 1.3 per cent (Rs. 839.8 million) during the review period. At the same time, domestic credit increased only by 2.5 per cent as compared to 2.6 per cent growth in the previous year. Of the total domestic credit, share of credit to the private sector increased slightly to 67.7 per cent, the press release stated.
On the fiscal sector, government expenditure registered a significant growth as compared to that during the last year. Total expenditure increased by 18.2 per cent to Rs. 12881.7 million during the review period as compared to 7.6 per cent growth in the previous year. The rise in such expenditure, according to the press release, is mainly due to a significant rise in development expenditure by 42.1 per cent, freeze expenditure by 52.9 per cent and regular expenditure by 10.2 per cent.
During the review period, revenue collection increased by 8.6 per cent to Rs. 10325.3 million as compared to 15.8 per cent last year. A low growth of revenue collection and decline in foreign cash grant receipts lowered the growth rate of total resource mobilisation to 5.8 per cent as compared to last year’s 20.2 per cent. Low resource mobilisation as compared to total expenditure growth resulted in a budget deficit of Rs. 2517.6 million. During the review period, the government overdrew amounting to Rs. 1132.1 million along with issuing treasury bills worth Rs. 310 million to meet the resource gap created by the declining receipts of foreign cash loan.
On the external sector, both exports and imports registered a growth of 33.5 per cent and 30.4 per cent to Rs. 13798.8 million and Rs. 30919.6 million respectively. Surge in total imports is attributed to higher imports of food-grains, industrial raw materials, medicine and gold.
Due to a higher volume of imports, the merchandise trade deficit rose by 27.9 per cent to Rs. 17120.8 million. The present export, according to the release, can cover about 44.6 per cent of total import value. During the review period, export of readymade garment and woollen carpet increased by 77.8 per cent and 8.6 per cent respectively. The export of readymade garments, (Rs. 4036.8 million) occupied the front position by outpacing the export of woollen carpet (3277.8 million). In addition, a remarkable growth in the export of pasmina shawl (Rs. 1150 million) registered itself to the third position during the review period.
On the price front, rate of inflation on point to point basis was recorded at 2.0 per cent during the review period compared to 18.5 per cent last year. The decelerating trend in the prices of food and beverages helped to lower down national price index to a single digit. The price index of food and beverages group increased slightly by 0.7 per cent in the review period as compered to an increase of 26.3 per cent in the previous year. The declining trend in the prices of oil and ghee, vegetable and fruit, as well as sugar products are attributed for the lower growth in the price index of food and beverages. The prices for non-food and services moved up by 4.6 per cent as compared to 4.4 per cent last year. Region-wise, prices in the Hills recorded the highest growth of 3.3 per cent followed by respective growth of 1.9 per cent and 1.6 per cent in Terai and Kathmandu, the release said.
Based on the available statistics for the first two months of this fiscal year, the balance of payment remained favourable by Rs. 543.0 million. In the review period, a noteworthy increase in net services income followed by a marginal increase in net transfer income off set by a significant trade deficit caused a deficit of Rs. 1923.0 million in the current account. However, substantial increase in official capital inflow and miscellaneous capital items net helped balance of payments to record sizeable surplus. Based on the monetary statistics for the first four months of current fiscal year, overall balance of payment recorded a surplus of Rs. 839.0 million.
As a result of continued balance of payments surplus, the foreign exchange holdings of the banking system increased by 16.2 per cent to Rs. 7896.4 million as at mid-November 1999. Of the total reserve, 91.8 per cent accounted for convertible currency and 8.2 per cent non-convertible currency. A sharp increase in the convertible currency reserve is attributed, among others, to the higher growth in export to countries other than India.