Govt sitting on cash pile while banks feel liquidity pinch

KATHMANDU, MAY 25 -

Money remains piled up in the government’s treasury as it has not been able to expedite capital expenditure. As of mid-May, the government’s cash reserves stood at Rs 56.62 billion, slightly down from the Rs 57 billion in mid-April, said the Finance Ministry.

With capital expenditure remaining sluggish, the banking sector has been experiencing tightness in liquidity in the recent days. Although banks usually see higher liquidity during the last quarter of the fiscal year, they have been facing a cash crunch in recent days. Bankers said the government’s failure to spend money faster has resulted in tight liquidity . According to the ministry, capital expenditure stood at Rs 22.49 billion, or 34 percent of the annual budget allocation, with just two months to go before the fiscal year ends. Meanwhile, total expenditure amounted to Rs 205 billion as of mid-May, which is lower than the total revenue collection of Rs 234.45billion till that date. The annual budget for the current fiscal year amounts to Rs 404 billion.

However, Finance Ministry spokesperson Janma Jaya Regmi said that expenditure would surge after government agencies start making payment to project contractors. “The last three months are when government expenditure starts flowing fast,” he added. In the last fiscal year, the government’s capital expenditure came to Rs 52 billion out of the budget allocation of Rs 70 billion. Regmi said this year’s expenditure would come to about the same level.

According to the ministry, current expenditure stood at Rs 165.5 billion as of mid-May, which is 59.32 percent of the allocated amount. Similarly, expenditure under financing stood at Rs 17.01 billion, or 28.51 percent of the allocated amount.

Meanwhile, revenue collection has remained impressive throughout the first 10 months of this fiscal. Total revenue collection reached Rs 231.18 billion as of mid-May, up 21.62 percent year on year.

The revenue collection target for the period ending mid-May was Rs 226.36 billion, which means collection exceeded the goal by 2 percent.

Source: The Kathmandu Post