NRB report on macro-economic situation: Double-digit inflation continues

Inflation has been raging in double digits in Nepal while prices are on a downward trend in neighbouring India. Despite the country's heavy dependence on Indian goods, reduced prices there had no effect on prices here.
According to the latest statistics of Nepal Rastra Bank (NRB), inflation rose by 12.9 percent in mid-May this year. The price rise was 13.1 percent in the first month of the current fiscal year which continued to remain in the double digits till mid-May. Nepal's balance of trade with India is negative by Rs. 94.4 billion.
The higher inflation was caused mainly by price rises in food and beverages which grew by 16.5 percent during the first 10 months of the current fiscal year. Sugar prices were up 66.9 percent while vegetables and fruits rose 33.5 percent.
Now the good news. The inflow of remittances to Nepal continued to rise despite the worldwide recession which has resulted in huge job losses.
According to the latest NRB report on the country's macro-economic situation, remittances grew by 55.5 percent to Rs. 169 billion in the first 10 months of the fiscal year against Rs. 108 billion during the same period last year.
The country's exports also saw a significant growth of 19.8 percent during the review period although they had declined by 2.4 percent last year. Imports too surged by 25.4 percent.
Exports to India rose 10.5 percent to Rs. 35 billion this year against a 7.4 percent decline last year. Exports to third countries posted a spectacular surge of 38.8 percent compared to a growth of 9.8 percent last year.
A rise in the export of readymade garments, textiles, GI pipes, catechu and tooth paste was mainly responsible for the increase in exports to India.
Third-country exports swelled as a result of an increase in the export of pulses, pashmina, woollen carpets, readymade garments and handicraft.
Meanwhile, imports from India went up by 11.5 percent in the review period compared to a growth of 25.7 percent in the corresponding period last year. Imports from third countries also soared by 50.4 percent to Rs. 98 billion. The growth rate last year was 3.7 percent with imports amounting to Rs. 65 billion.
Credit issued to the private sector by commercial banks expanded by 24.2 percent this year against a growth of 24.9 percent last year. Credit growth in production, construction, metal production, machinery and electrical tools, transportation, communication, public services, trading and the service sector remained low during the review period. Credit issued to transportation equipment production and the fitting and consumable sectors saw a good increase during the period.The government performed poorly in spending the development budget during the review period. Capital expenditure increased by just 11.4 percent to Rs. 26 billion in contrast to an increase of 55.6 percent in the same period last year. As a result of the government's failure to spend the development budget, it has a cash surplus of Rs. 21.6 billion with NRB.
The incredibly higher revenue growth and low expenditure caused the budget surplus of Rs. 6 billion in the review period this year against a deficit of equal amount in the corresponding period last year.
Source: Ekantipur