A recent report of the Nepal Rastra Bank, the central bank of the country has said that the consumer price index has increased by 9.1 percent in the eleven months of the fiscal year as compared to same period of the last year.

Nepal Rastra Bank

Nepal Rastra Bank (File Photo)
In the previous year during the same month, consumer price index stood only at 6.2 percent.

However the report said that national salary and wage grew at the rate of mere 5.7 percent by mid-July 2006.

The higher growth in the price index is mainly attributable to the rise in the prices of petroleum products twice, as well as an increase in the prices of transportation services in February 2006 together with a sharp rise in the prices of grains and cereal products, pulses, housing goods and services, transportation and communication, vegetables and fruits, meat, fish and eggs, education, reading materials and recreation and beverages, according to NRB.

As per the central bank, the overall fiscal situation remained at a deficit of Rs 8.8 billion in the review period due to the high growth rate in government expenditure and very low growth rate in revenue mobilisation.

Fiscal balance, one of the main indicators of government budgetary operation remained at a deficit of 100.9 percent of the total government expenditure. However, last year, the ratio of fiscal deficit had remained at only 4.1 percent of the total government expenditure.

Net foreign assets (NFA), a main source of monetary expansion after adjusting foreign exchange valuation gain-loss, increased by Rs 21.9 billion (20.3 percent) in the review period compared to an increase of Rs 5.5 billion (5.1 percent) in 2004-05. NFA registered such a rise due to increased inflow of remittances.

According to the report, remittance inflow recorded a significant rise of 48.4 percent as compared to that of the same period last year. In the corresponding period of the previous year, workers’ remittances had registered a rise of only 10.1 percent.

“Increased inflow of remittance also contributed to the upsurge in time deposits, which pushed up growth in broad money to 12.6 percent,” the report said.

Government spending saw an accelerated growth of 19.3 percent in the first eleven months of 2005-06, compared to a growth of 8.2 percent in the corresponding period of the preceding year.

Of the total government expenditure, the share of recurrent expenditure, capital expenditure, principal repayments and freeze expenditure remained at 65.3 percent, 16.8 percent, 15.1 percent and 2.8 percent respectively in the review period. Such ratios were 70.4 percent, 14.5 percent, 13.1 percent and 2.0 percent respectively, in the corresponding period of the previous year.

In the first eleven months of 2005-06, foreign cash grants increased by a high rate of 65.7 percent compared to an increase of 7.5 percent in the preceding year.

The report says that Nepal’s total exports registered a total increase of 4.4 percent during the first 11 months of 2005-06. Of this, exports to India rose by 6.3 percent. Export to other countries also registered an increase of 0.6 percent.

The report says, the total imports expanded by 17.6 percent during the period. While imports from India went up by 23.4 percent, imports from other countries rose by 9.1 percent, the report says. During the period, trade deficit surged by 26.4 percent, according to the report.