Inflation enters double digit zone

Inflation based on consumer price index (CPI) stood at 11 percent in mid-June 2008, creating deeper holes in pockets of households with fixed and moderate incomes. The inflation was just 4.5 percent in the same time a year ago.

Still, the wholesale price index (WPI) jumped to 12.9 percent in mid-June 2008, while it was 5.6 percent a year ago, the Nepal Rastra Bank (NRB) said, releasing the data of the first 11 months of the 2007/08 fiscal year that ended last week.

On the fiscal front, the government experienced a budget deficit of Rs 9.30 billion in the 11 month period, up from Rs 6.93 billion in the corresponding period in 2006/07.

The central bank said higher government spending had widened the deficit. Government expenditures, on a cash basis, increased by 19.2 percent to Rs 117.35 billion due to expenses on peace related activities and the Constituent Assembly elections. During the period, recurrent expenditures rose by 19.1 percent to Rs 73 billion compared to an increase of 15.4 percent in the corresponding period in 2006/07.

Likewise, capital expenses went up by 35.8 percent to Rs 28.2 billion, as the government shelled out more money on public enterprises. It invested Rs 8.85 billion in these institutions, which included a Rs 5.60 billion loan to cash-strapped Nepal Oil Corporation (NOC).

The central bank said that disbursement of funds to local authorities for rural infrastructure development activities like expansion of transformer lines, small hydroelectricity projects, and alternative energy development contributed to an increase in capital expenditures.

Driven by rising imports fuelled by increase in remittance inflow, the government collected 25.5 percent more revenue in the period. It said Rs 90.17 billion was collected as revenue in the first 11 months of the 2007/08 fiscal year.

Of the total revenue, collection of value added tax (VAT) grew by 18.8 percent to Rs 28.7 billion. Customs revenue rose by 21.2 percent to Rs 18 billion. Similarly, the country collected Rs 14.54 billion as income tax, a 29.8 percent rise.

On the trading front, the picture continued to remain gloomy. Exports rose by just 0.4 percent. The country is fast losing its market in its giant southern neighbour. Total exports to India, a major importer of Nepali goods, went down by 8.1 percent as vegetable ghee, textiles, chemicals, rosin and readymade garments were getting replaced in the Indian market.

Total imports soared by 16.5 percent, as people consumed more on the strength of rising remittance inflow.

Foreign exchange reserves went up by 25 percent to touch Rs 206.47 billion. The current level of reserves is adequate for financing merchandise imports for 11.1 months and merchandise and service imports of nine months.

On the balance of payment, the country recorded a surplus of Rs 24.25 billion, as earnings from Nepalis working abroad, and foreign tourists went up. It had a surplus of Rs 6.34 billion in the same period in the 11 months of the 2006/07 fiscal year.
Source: eKantipur