IMF says Nepal economic growth worsened after November
KATHMANDU, FEB 09 -
Nepal’s economic growth performance has weakened further since last November due to low capital spending, bad weather and India’s slowed economy, said an International Monetary Fund ( IMF ) mission that is currently in the country to assess its macro-economic development.
Based on the evaluation of the Article IV mission that arrived in November 2012, the IMF had forecasted in December 2012 that Nepal’s economic growth would drop to 3.8 percent from 4.6 percent of the last fiscal year 2011-12. The government has projected a 5.1 percent growth rate for the current fiscal.
“The lack of clarity about the legal status of spending appropriations in the current year’s budget means the government is likely to register a significant surplus (budget) in 2012-13,” said the IMF in a press release. “This tight fiscal stance is unfortunate as it will depress an already slowing economy.”
The IMF said that the uncertainty related to the budget contributed to significant under-execution of spending plans thus far this fiscal. It also suggested that a slowing Indian economy would also affect the performance of the Nepali economy. A weakened agriculture output this year due to a delayed monsoon would also affect the country’s economy, said the IMF .
The IMF mission led by Todd Schneider reached this conclusion about Nepal’s economy after holding meetings with Finance Minister Barsha Man Pun, Nepal Rastra Bank governor Yubaraj Khatiwada, Nepal Planning Commission vice-chairman Dipendra Bahadur Kshetry, finance secretary Shanta Raj Subedi and other government officials. The current mission is a follow-up to the Article IV mission.
“The mission urged the authorities to take steps to accelerate high quality spending, both for poverty alleviation and public capital investment,” stated the press release.
The IMF also suggested that adoption of a full year budget ordinance for the current fiscal year would be welcome even at this late stage of the fiscal year. It has also recommended early approval of the budget ordinance for the next fiscal year 2013-14 to facilitate planning by line ministries and avoid another year of budget delay.
The mission also concluded that inflation in Nepal has remained stubbornly high. According to NRB statistics, the price rise was 10.4 percent as of the first five months of the current fiscal.
Meanwhile, the IMF said that the current account surplus had diminished. The current account, that embodies components like income from remittance and exports, was affected due to an increased trade deficit and slowed growth of remittance.
According to the IMF , rising imports and declining exports (in dollar terms) contributed to the high trade deficit. As of the first five months of the current fiscal, the country’s trade deficit reached Rs 192.52 billion.
Commenting on remittance, the IMF said that its flow had bolstered household incomes, but also served to finance imports of nondurable consumer goods. The mission added that another Article IV consultation mission is expected to take place during the second half of 2013.
Source: The Kathmandu Post
