Kathmandu, Feb. 29:The government expenditure went up due to a significant growth in development and freeze expenditure during the first half of the current fiscal year, Nepal Rastra Bank said in a press statement today.

“The growth of narrow money has accelerated while that of broad money has decelerated,” the press release said.

Higher budgetary deficit has been observed as a consequence of low resources mobilisation in relation to expenditure. The rate of inflation on point to point basis has come down to a single digit from two digits because of improvement in the prices of food and beverages group. In the external front, although growth rate of export has outpaced that of import, trade deficit has widened substantially due to high volume of imports as compared to exports. The foreign exchange holding of the banking system has recorded a rise due to a surplus in balance of payments emanating from flows of official capital and miscellaneous capital net. The foreign exchange reserve is sufficient to cover merchandise imports of 10 months. The NEPSE share price index has improved in comparison to last month, NRB said.

During the first six months of the fiscal year 1999/00 the broad money has registered a decelerating growth of 6.9 per cent (Rs. 10,546.7 million) amounting to Rs. 163,442.3 million from 11.2 per cent (Rs. 14,172.3 million) during the same period last year. This is mainly due to the decline in the growth of net domestic assets of the banking sector during the review period. Narrow money has, however, accelerated significantly by 9.5 per cent (Rs. 4,862.7 million) as compared to the growth of 4.6 per cent (Rs. 2,065.1 million) last year.  The growth rate of time deposit in the review period has slowed down to 5.6 per cent (Rs. 5,684.0 million) from 14.9 per cent (Rs. 12,107.2 million) in the previous year. A downward revision in the interest rate ranging from 1.50 to 2.0 percentage points as compared to mid-January 1998 is attributed to the low growth of time deposit in the review period.

During the review period, bank credit to the private sector has increasec by 7.6 per cent (Rs. 6918.9 million) amounting to Rs. 97710.8 million. Last year, such a credit had increased by 9.7 per cent (Rs. 7423.6 million). Although there has been a growth in import credit, the total credit flow to private sector from the banking system has remained low as compared to that of last year due to slow pick up of credit to industrial and other sectors.

On the fiscal front, government expenditure has increased by 22.6 per cent amounting to Rs. 23,251.2 million as compared to a growth of 8.4 per cent last year. The rise in such an expenditure is mainly due to the significant rise in regular expenditure by 15.1 per cent, development expenditure by 45.7 per cent and freeze expenditure by 28.1 per cent. Expansion of development programmes in the public sector this year has contributed for the significant growth of development expenditure. During the review period, the growth of resource mobilisation stood at 15.7 per cent amounting to Rs. 19,654.6 million as compared to the growth of 17.6 per cent  last year. Revenue collection, a major source of resources mobilisation, stood at Rs. 18,119.3 million marking a 13.7 per cent growth as compared to 14.6 per cent growth last year. Another source of resource mibilisation viz., foreign cash grant has increased by 7.8 per cent to Rs. 1,198.4 million. Resources mobilisation has remained lower than the expenditure during the review period resulting in budget deficit of Rs. 3,596.6 million. The government has overdrawn Rs. 346.2 million fron Nepal Rastra Bank along with issuing treasury bills worth Rs. 1,550.0 million to meet the resources gap created by the declining receipts of foreign cash loan.

National urban consumer price index on point to point basis has been recorded at 2.3 per cent during the review period compared to 13.4 per cent last year. The decelerating trend in the price of food and beverages helped to lower down the national price index to a single digit. The price index of the food and beverages group increased slightly by 0.3 per cent in the review period as compared to an increase of 18.5 per cent last year. Despite a pressure in the price of foodgrains, the declining prices of oil and ghee, vegetable, pulses, sugar and sugar product as well as spices has been accountable for the lower growth in the price index of food and beverages. The prices of non-food and services has surged up by 6.1 per cent this year as compared to 4.5 per cent last year. The higher price rise in the non-food and services sub-group is mainly due to upward revision in the prices of petroleum products and electricity. Regionwise, prices in Hills has recorded the highest growth of 3.1 per cent followed by respective growth of 2.4 per cent and 1.8 per cent in Terai and Kathmandu.

On the external front, exports have increased by 41.9 per cent to Rs. 23,517.8 million and imports also have gone up by 35.5 per cent to Rs. 51,783.2 million. In the export side, export of readymade garments, carpet and jewellary followed by Pasmina has shown a growing tendency. During the review period, Rs. 2,710.0 million worth of Pasmina has been exported. However, exports of pulses, tanned skin, and nigerseed have declined during the review period. Export-import ratio, which was 43.5 per cent last year, has increased slightly to 45.5 per cent during the review period. Surge in total import is atributed to higher imports of foodgrains, medicine, cement, textile, thread, glass and transportation goods from India and gold, raw wool, cotton, transportation goods and spare parts, construction materials and steel sheet from third countries. As a result of growth in both exports and imports, total trade has increased by 37.5 per cent in contrast to a decline of 5.8 per cent last year. Share of India in total trade, has increased from 34.9 per cent last year to 39 per cent in the review period.

Based on the available statistics for the first four months of this fiscal year, the balance of payments has remained favourable by Rs. 1,130.9 million. In the review period, the growth in trade deficit outpacing the increase in net service as well as transfer income has resulted in the current acount deficit of Rs. 1,682.1 million.However, a substantial inflow of official capital and miscellaneous capital item net have helped balance of payments to register a sizable surplus. Based on the monetary statistics for the first six months of the current fiscal year, overall balance of payment has recorded a surplus of Rs. 5,793.4 million. As a result, foreign exchange holdings of the banking system has increased by 14.6 per cent to Rs. 8,361.9 million as at mid-January 1999. Of the total reserve, 90.2 per cent accounted for convertible currency and 9.8 per cent for non-convertible currency.