The Economic Survey 2006 presented in the House of Representatives on Tuesday shows that the economic situation of the country is not satisfactory.

The economy of the country grew by a mere 2.4 percent this year due to drought which dragged down agriculture production while conflict and political stir squeezed industrial activity. The government was expecting a 4.5 percent growth rate in the fiscal year.

Less than expected performances of the agriculture and industrial sectors, sharp rise in inflation (7.6 percent) and increase in unemployment, among others, showed that the poverty situation worsened during the year.

This poor growth rate has been attributed to poor showing in agriculture, which is projected to grow by 1.7 percent. In the last fiscal year, it grew by 3.0 percent.

The non-agriculture sector shows an improvement. The forecast is it would grow by 2.8 percent against 2.1 percent last year.

Owing to squeezed industrial activities, the manufacturing sector grew by a mere 2.1 percent as against the 2.6 percent growth last year. Growth of transportation and communication sector and real estate sector slowed down to 2.2 percent each as compared to 5.1 percent and 4.6 percent growth of last year respectively.

The per capita GDP has improved by about 7 percent. The annual average income of a Nepali stands at $311, which is up by $14 from the fiscal 2004-05.

Only 18 kms of roads was built during the entire fiscal year. Not a single new hospital was added to the existing 87 hospitals throughout the country.

Preliminary estimates show the total production of food crops would go down by 1.43 percent (i.e. 111 thousand tons), limiting production to 7.65 million tons.

Production of paddy and wheat – two major food crops – is estimated to go down by 1.88 percent (to 4.20 million tons) and 3.35 percent (to 1.39 million tons) respectively, while production of maize is expected to rise by 1.07 percent to 1.73 million tons.

The survey also said that the total volume of exports grew by 14.7 percent to Rs 43.31 billion in 8 months, while imports soared by 27.9 percent to Rs 117.48 billion resulting in a trade deficit of Rs 74.17 billion.

Despite the stir and instability, foreign investment commitment during the nine months of 2005/06 increased to Rs 1.54 million and 81 joint venture industries were issued with operating licenses.

The government’s expenditure was met 68.4 percent from revenue mobilisation, 14 percent from foreign grants, 9 percent from foreign debt and 8.7 percent from domestic debt. Foreign debt went up by 21.5 percent and domestic debt by 59.4 percent resulting in a marginal surplus in cash balance.

The outstanding foreign debt to GDP stood at 41.2 percent in 2004-05. The total foreign debt stands at 219.64 billion.