Indicators show grim picture of economy

RUDRA PANGENI KATHMANDU, Feb 24: Despite timely budget and improving investment environment, the government is missing expectations on almost all economic indicators. The mid-term review of fiscal policy unveiled on Monday says economic growth will hover above 5 percent. The budget had targeted economic growth of 6 percent. In the last fiscal year, national economy had grown by 5.2 percent. Trade deficit is widening at an alarming rate, and there has not been expected growth on capital spending. The government is sitting on cash pile of more than Rs 90 million allocated for development spending. The government has managed to spend only 12 percent of the allocated fund so far, according to the report. The mid-term review report says growth rate in industry and service industry is improving, but untimely monsoon and floods have affected agriculture production. Inflation currently stands at 7.3 percent, compared to 10 percent recorded in the last fiscal year. Similarly, revenue collection stands at a little above the target of Rs 185 billion set for the period. "Authorization for spending was issued on the first day of the fiscal year," Minister for Finance Ram Sharan Mahat said, unveiling the report on Monday. "But the tendency to wait for budget approval from the parliament and lack of serious planning and budgeting as well as lack of zeal in designing programs and spending affected developing spending in the first half of the current fiscal year." Mahat, however, said the government was cautiously monitoring budget spending and added that ministries have been told to sign multi-year contract for projects approved by National Planning Commission (NPC). "The finance ministry has clearly stated that such projects will not face any resource crunch," he added. Vice chairman of NPC Govind Raj Pokhrel said ministries were not serious about seeking timely approval of budget programs. "That is why we have introduced a fast-track mode for approval of development programs," he added. From left, Finance Secretary Suman Prasad Sharma, Minister for Finance Ram Sharan Mahat and National Planning Commission Vice-chairman Govind Raj Pokhrel at the unveiling of the mid-term review of the government’s fiscal policy held at the Ministry of Finance in Singha Durbar, Kathmandu on Monday.(Dipesh Shrestha/Republica) Spending progress of 21 priority projects stands very low except the Pushpalal Rajmarg (Mid-Hills Highway) and Upper Tamakoshi Hydropower projects. Commenting on slow capital spending, Pradip Jung Pandey, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) said even the government seems to be in need of investment environment. "Government spending of, say Rs 5, induces investment of R 10 from the private sector," he said. "Rise in revenue collection shows private sector is doing its bit. Demand for bank loans is on the rise and private sector investment in hydropower and other sectors is growing." The mid-term review report, however, estimates that capital spending will increasing in the second half of the fiscal year. It has projected that capital spending will stand at 92 percent (Rs 558 billion) of the allocated Rs 618 billion. Minister Mahat said reducing the alarmingly widening trade deficit, which is expected to reach Rs 700 billion by the end of the current fiscal year, would be a big challenge. Nepal imported goods worth Rs 378.22 billion in the first six months of 2014/15 ending mid-January. Export income in the review period stood at Rs 43.39 billion. After assuming office a year ago, Minister Mahat had told media persons that he would initiate second-tier economic reforms. But on Monday, he did not speak about any such reforms. He simply said half a dozen financial laws, including amendments to Nepal Rastra Bank Bill, Industrial Enterprise Bill, Banking Offence and Punishment Bill, Public Procurement Bill, were in the process of getting cabinet nod. The government had announced plan to enact half a dozen new laws and amend existing laws to give a boost to economy. But no such law has been tabled in the parliament. Minister Mahat, however, boasted of rise in foreign assistance commitments in his term. "The country as received a record high foreign aid commitment of Rs 217 billion in the review period which was only Rs 55 billion in the corresponding period of last fiscal yea”," he added.