Both the broad and narrow money supply grew by lower rates during the first four months of the current fiscal year 2002/2003, compared with the corresponding period of the fiscal year 2001/02, Nepal Rastra Bank, the central bank of the country said Wednesday.
A sharp decline in the development expenditure checked the growth of the total government expenditure at 0.5 per cent, on cash basis, which, coupled with the 3.7 per cent rise in the total resources, narrowed down the budget deficit.
The rate of price rise, on point to point basis, remained lower. On the external front, increase in imports and decline in exports widened the trade deficit. Despite a rise in current account deficit, the balance of payments (BOP) remained favourable during the first two months though the monetary statistics for the first four months showed a BOP deficit.
Gross foreign exchange reserves of the banking system widened by 2.3 percent of Rs.105.8 billion in mid November, 2002. The reserve position remained sufficient to finance merchandise imports of eleven and a half months and goods and services imports of ten months, according to the central bank.
Due to the decline in the net foreign assets (NFA) of the banking system, the growth rate of broad money supply decelerated to 1.3 percent (Rs. 3.0 billion) from 1.8 per cent last year. Of the two components of the broad money, narrow money grew only by 0.7 per cent compared to a rise of 2.5 percent last year.
The second component, i.e. the time deposits, recorded a marginal growth of 1.6 per cent (Rs. 2.4 billion) compared to a similar rise of 1.5 per cent last year. The NFA of the banking system declined by 2.3 per cent to Rs. 87.5 billion following the decline by the same percentage last year.
Domestic credit of the banking system registered a growth of 5.0 percent (Rs. 10.3 billion) to Rs. 217.7 billion as compared to a rise of 3.1 percent last year. Credit to the private sector grew by 5.2 percent (Rs. 7.1 billion) to Rs. 143.4 billion compared to a growth of 2.7 percent last year.
The rise in the claims on the government and that on the private sector contributed to the growth in the domestic credit. The weighed average treasury bills rate stood at 4.03 percent in mid November, 2002 compared to 4.96 percent in mid-November last year. Major indicators of the stock market registered a decline during the review period.
The NEPSE index slumped by 79.4 points (26.5 per cent) to 220.73. Market capitalization of the listed companies also went down by 20.7 percent to Rs. 33.8 billion. Both the amount and the number of share transactions decreased during the period NRB said.
Based on the cash flow data, total government expenditure increased only by 0.5 percent to Rs. 18.9 billion as against a rise of 9.0 percent last year. Of this, regular expenditure increased by 13.5 percent to Rs. 15.6 billion in comparison to the growth of 6.9 percent last year.
The development expenditure however, declined sharply by 45.2 percent to Rs. 1.9 billion as against the rise of 5.9 percent last year. The difficulties in carrying out development activities due basically to
adverse law and order situation and weak resource position led to a decline in the development expenditure.
The freeze expenditure declined by 12.7 percent to Rs.1.3 billion in contrast to the rise of 45.8 percent last year. Total government resources increased by 3.7 percent to Rs.15.1 billion as against the growth of 7.0 percent last year. Of this, revenue collection, a major source of government resources, went up at a slower rate of 2.3 percent to Rs. 14.0 billion as against the growth of 8.9 percent last year.
The revenue collection decelerated due to the continued sluggishness in internal and external trade, industrial production, tourism as well as other economic activities. Foreign cash grants slumped by 74.2 percent to Rs. 94 million compared to the decline of 20.8 percent last year.
However non-budgetary receipts net increased by 63.4 percent to Rs.797 million. Relatively lower growth in the government expenditure compared to that of the resources resulted in a decline in budget deficit of 10.8 percent to Rs.3.8 billion compared to a rise of 16.5 percent last year.
In order to meet this deficit, HMG mobilized foreign cash loans amounting to Rs.1.3 billion, issued development bonds equivalent to Rs. 2 billion and used surplus of Rs.16 million in its other accounts. The remaining gap of Rs.397 million was met through an overdraft from the Nepal Rastra Bank.
The National Urban Consumer Price Index, on point-to-point basis, has been contained at 1.6 percent compared to a rise of 2.5 percent last year. Of this, the price index of food and beverages group increased by 1.1 percent against an increase of 4.7 percent last year.
Despite an increase in the prices of oil and ghee, beverages, grains and cereals products, pulses meat, fish and eggs and restaurant meals, the sharp decline in prices of spices, vegetables and fruits as well as sugar and related products resulted in the lower rate of price rise in the food and beverages group.
The price index of non-food and services group also went up moderately by 2.1 percent compared to the growth of 0.1 percent last year. In the non-food and services group, the price of cloths declined by 1.3 percent.
Regionwise, the price indices of Terai, Kathmandu Valley and Hills increased by 2.2 percent, 1.2 percent and 0.5 percent respectively. Low aggregate demand and better supply situation resulted in the lower rate of price rise. The wholesale price index increased marginally by 0.4 percent compared to a sharp rise of 8.3 percent last year.
On the external front, total exports declined by 18.5 per cent to Rs. 14.3 billion compared to the decline of 6.0 percent last year. Exports to India witnessed a reversal as they declined by 28.5 percent to Rs. 7.7 billion compared with the marked growth of 30.6 percent last year.
Export to the third countries, which had declined by 34.6 percent last year, decelerated by 2.7 percent to Rs. 6.7 billion this year. Exports of readymade garments and jewellery to the third countries went up by 34.2 percent and 30.0 percent respectively whereas that of the woolen carpets, Pashmina and tanned skin declined sharply by 31.3 percent, 25.6 percent and 55.6 percent respectively.
Exports to third countries went up by 34.2 percent and 30.0 percent respectively whereas that of the woolen carpets, Pashmina and tanned skin declined sharply by 31.3 percent , 25.6 percent and 55.6 percent respectively.
Exports to the third countries could not improve due mainly to the sluggishness that prevailed in the world economy and the reduced competitiveness of the Nepalese exports. Exports to India declined due to the quantitative restrictions imposed as per the renewed Nepal-India trade treaty.
Total imports increased by 7.3 percent to Rs. 36.9 billion in contrast to the decline of 5.4 percent last year. Imports from India increased by 10.7 percent compared to a rise of 2.5 percent last year. Imports from the third countries increased by 4.8 percent in contrast to the decline of 10.4 percent last year.
The imports of thread, rice, agricultural equipments and parts, cement, electrical equipments, petroleum products, M.S. wire, rod, tire, tube, M.S. billet, steel sheet, industrial chemicals, cold and hot rolled sheet as well as other machinery and parts from India, petroleum products, cloths, video, T.V. computer parts, cloves, medical equipment, raw wool and telecommunications equipments and parts form the third countries went up during the year.
Due to the decline in exports and an increase in imports, the trade gap widened by 34.3 percent to Rs. 22.6 billion as against the decline of 4.7 percent last year. The export/import ratio, which was 51.1 percent in the previous year, went down to 38.9 percent.
Based on the available BOP statistics for the first two months of FY 2002/03, the services, net, deteriorated further as they declined by 58.5 percent to Rs. 569 million following the decline of 51.8 percent last year. The transfers, net, which had risen by 38.3 percent last year went up by only 5.3 percent to Rs. 4.4 billion.
Consequently, the current account deficit widened sharply by 133.6 percent to Rs. 6 billion in contrast to the decline of 16.2 percent to Rs 2.6 billion last year. The BOP remained favourable at Rs. 326 million in comparison to a deficit of Rs.1.4 billion last year.
However, the monetary statistics for the first four months portrayed of BOP deficit of Rs 2 billion, the same as that in the last year. The foreign exchange reserves of the banking system (including exchange valuation) increased by 2.3 percent to Rs. 105.8 billion in mid-November, 2002.
Of the total reserves, the share of convertible currencies rose to 79.1 percent from 74.4 percent last year. Similarly, the share of non-convertible currencies came down to 20.9 percent from 25.6 percent last year.