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Business and Economy Bureau Chief The Himalayan Times, english daily Anam Nagar, Baidhyakhana Road GPO Box: 9500 Kathmandu, Nepal
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  • Nepal budget ends uncertainty, raises doubts

    KATHMANDU: Finally, with the finance minister of caretaker government Surendra Pandey presenting a Rs 337.9 billion budget for the current fiscal year through ordinance on November 20, shadow of uncertainty that loomed large over the Nepali economy has ended.

    The feel-good budget that focused on eduction, health and social service apart from export promotion, infrastructure, and agriculture has targtted a growth of 4.5 per cent and inflation at seven per cent for the fiscal year 2010-11.

    However, experts doubt the caretaker government's ability to contain nflation under the target and acheive growth rate. "The expansionary budget could not contain the inflation under seven per cent," said senior economist Prof Dr Bishwambher Pyakuryal. "As our informal economy is as big as formal economy, the government will find it difficult," he said, adding that as the inflation will go up, people will feel the heat.

    He also questioned government's capacity of spending on development activities as this government is caretaker and budget has also been delayed by four months.

    "The dealyed budget would find it difficult to achieve growth target as there is no supporting fiscal measures," Nepal Bankers Association president Sashin Joshi said.

    However, the incentivising the exports and investment on infrastructure specially road and power is acknowledged.

    Learning the lesson from last fiscal year's huge Balance of Payment (BoP) deficit, the budget has tried to boost the confidence of private sector and targetted to substitute imports providing concessional loans to the livestock raising farmers and cash crops like cardamom, ginger, tea, coffee and honey.

    Industrialists also find it encouraging that the budget has provided tax rebate to export that could boost domestic industries. "The government has for the first time recognised the importance of real sector," said industrialists Rajendra Khetan. But another industrialist Binod Chaudhary opined that the budget is reluctant to give facilities of Industrial Policy, however he hailed the government for providing security to industry.

    Though, its largely a continuity of the last fiscal year's budget, it has also aimed at huge infrastructure projects like 10 new modern cities; construction of six lane wide roads linking international trade routes like Birgunj-Pathlaiya, Belahiya-Butwal, Rani-Itahari and Surya Binayak-Dhulikhel; some half a dozen hydropower projects, the implementation of budget has been under scanner.

    "The cooperation from the sectoral ministries and implementation of budget has doubt due to less time with the government and traditional approach," said former finance minister Bharat Mohan Adhikari.

    The budget trying to be gender friendly and region-friendly has spread itself thin forgetting the government's reality and delay.

    Former finance minister finds budget a little beyond the understanding reached among them. "He must have compulsion to introduce some new policy, though we had an understanding of not including any new ones," he said.

    The political dead lock after the Prime Minister Madhav Kumar Nepal has delayed the full-fledged budget presentation forcing Pandey to bring Rs 110.21 billion special budget under special provision for the regular expenses.

    "As the full fledged budget for current fiscal year could not be presented before the Legislature- Parliament due to special circumstances," Pandey said, claiming that the ordinances and budget are in line with the consensus reached earlier among political parties.

    Since the attempt of the caretaker government to present the budget in the Legislature- Parliament yesterday was foiled by the UCPN-Maoists, the government prorogued the house and decided to bring the budget through the ordinance.






    Budget 2010-11

    GDP forecast 4.5 per cent

    Inflation projection at seven per cent

    Total budget outlay -- Rs 337.90 billion

    Recurrent expenditure -- Rs 190.32 billion

    Capital expenditure -- Rs 129.54 billion

    Principal Repayment -- Rs 18.42 billion




    Revenue target -- Rs 216.64 billion

    Foreign grants -- Rs 65. 34 billion

    Foreing loan – Rs 22.23 billion

    Domestic borrowings – Rs 33.68 billion

    Nov 21 9:13 AM | Link | Comment!
  • Pandey tables truncated budget
    13 Jul 2010

    Once again political agenda has put the country’s development and economic issues on the back burner.

    Instead of a full-fledged budget, Finance Minister Surendra Pandey of the caretaker government on July 13 presented Rs 110.2-billion ‘special budget’ that is meant for the regular government expenditure -- salaries to the government employees, policy and armies, and Constituent Assembly (NASDAQ:CA) members -- only

    “Due to ongoing political deadlock, the caretaker government could not present its regular budget for the fiscal year 2010-11,” said Pandey, adding, in the wake of ‘special’ situation, the Special Budget Bill ? that empowers government to withdraw money from Consolidated Fund to carry out regular services and activities in the coming fiscal year under Article 96 (a) of the interim constitution ? has been tabled.

    The revised total expenditure of the current fiscal 2009-10 is estimated to remain at Rs 265.63 billion ? 20.93 per cent higher compared to the last fiscal.

    The special budget allows the government to make spending ‘not exceeding one-third of the last year’s budget’. “The government has brought in the special budget as a temporary arrangement to allow itself to carry on with its routine expenses and revenue collections in the new financial year, starting from July 17,” said Pandey.

    With only a special budget in place, economic policy of the last budget will remain intact until a full-fledged budget is presented by a new government.

    Since the Constituent Assembly elections in 2008, it’s second time that the government has failed to come up with a full-fledged budget. Earlier, former finance minister. Ram Sharan Mahat had presented a similar ‘special budget’ in July 2008, two years ago. Dr Baburam Bhattarai brought the budget in September that year unlike the practise of bringing the budget within July 15. Though the budget came on time last year, it took four months to be passed from the parliament hurting the development activities in the countries. 

    Pandey has not announced any new tax policy as per the interim constitution that bars a caretaker government from enforcing changes in tax structure or introducing new taxes. Entrepreneurs say such ‘temporary arrangements’ by the government will not only mar the development activities but also hurt investors’ sentiments.

    “We are in wait and watch mode,” said Federation of Nepalese Chambers of Commerce and Industry President Kush Kumar Joshi. “There won’t be new investments, as investors will wait for the new government’s policy and programmes,” said Joshi, adding, neither will such arrangements address the business fraternity’s problems.

    “Once again political agenda has put the economic agenda on the back burner,” said Binod Chaudhary, CA member and President of Confederation of Nepalese Industries. “Economic indicators are nose-diving and expenditures are going up in an uncontrolled manner. Many Acts that could have given fillip to investors’ confidence are gathering dust in parliament.”

    Another CA member and industrialist Rajendra Khetan was of the view that neither a full-fledged budget nor such ‘temporary’ arrangement had encouraged development activities. “However, had the budget come on time, it could have addressed rising trade deficit and negative Balance of Payment (BoP),” said Khetan.

    Instead of outlining new development programmes and plan, the ‘advance budget’ aims to enable the government function till a full-fledged budget by a new government is tabled.

    The next finance minister will have to chalk out a scheme to address several issues like taming inflation, checking intimidation and threat against the business community, creating investor-friendly environment, providing security for the investment and shoring up the plummeting exports to bridge the widening trade gap and BoP position.


    Aug 10 8:11 AM | Link | 1 Comment
  • Monetary Policy fails to cheer investors, bankers

    The much-awaited monetary policy launched on July 18 could not boost the confidence of investors, leave alone the bankers. “Due to dwindling exports and rising bank interest rates, we had high hopes from the monetary policy,” said Kush Kumar Joshi, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI).

    “But the policy that was brought without waiting for the full-fledged budget as a quick fix solution to the economy distortions has failed to lift the morale of the investors,” he said, adding that the entrepreneurs hope that the budget will to come to their rescue. They were hoping for the bank rates to go down, though the policy has brought down the refinancing rate to seven per cent from 7.5 per cent.
    "The Monetary Policy seems to concentrate more on inflation than fixing economy."
    Nepal Bankers’ Association (NBA) president Sashin Joshi also echoed similar concern. “Controlling price hike is a challenge without complimentary fiscal policy,” he added.
    The ‘cautious’ monetary policy, based broadly on Three-Year Interim Plan (2010-2013), has projected the inflation rate at seven per cent, GDP growth rate at 5.5 per cent, broad money supply at 15 per cent, balance of payment at Rs 9 billion surplus and forex reserve that could be enough for six-month goods and services import.
    It has, as expected, relaxed the lending on housing and margin loan against the shares, import of gold and silver. But it has put 10 per cent cap on realty sector lending. “Those financial institutions that have already lent more have to bring it under 10 per cent within two years,” the policy adds.
    Similarly, the policy has tried to ease the Indian currency supply. “Nepal Rastra Bank (NYSEMKT:NRB) can permit financial institutions that have licence to transact in Indian currency to open Nostro Account in Indian banks,” said governor of the central bank Dr Yubraj Khatiwada launching the Monetary Policy for the fiscal year 2010-11.
    It has, however, revived the old rule of taking permission to open bank branches. “The policy of taking permission from NRB to open new branches is regressive,” NBA president said, adding, “But moratorium on new bank licence is a welcome move.”
    Though the policy ensures no licence for new banks, it is still in favour of huge infrastructure banks and upgradation. “However, upgradation will not be based only on paid up capital as was the practice till now,” Khatiwada said. The policy plans ‘stress-test’ to strengthen the financial institutions. “They also have to prepare contingency plans,” it said.
    The policy has not changed cash reserve ratio (NYSE:CRR) that has been 5.5 per cent for last two years. However, it has revised upward the Statutory Liquidity Ratio (SLR) to maintain financial stability and liquidity.


    • Inflation — seven per cent
    • GDP growth — 5.5 per cent
    • Balance of payment — Rs 9 billion surplus
    • Braad Money Supply — 15 per cent

    Disclosure: Journalist -- The Himalayan Times, english daily
    Aug 10 7:40 AM | Link | Comment!
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