Inflation inches down to 9.8pc from 10pc
KATHMANDU, FEB 21 -
Inflation has come down to single digits for the first time in the sixth month of the current fiscal year after remaining above 10 percent in the previous five months. According to the macro economic situation report published by Nepal Rastra Bank (NRB), inflation was recorded at 9.8 percent in the sixth month.
As inflation is measured by comparing the price level during the same period in the last fiscal, it is still higher compared to the inflation level in the sixth month of the last fiscal when it was 6.8 percent. With the monetary policy for the current fiscal year targeting to keep inflation at 7.5 percent, it has not come down to the targeted level yet. The central bank does not see any possibility of bringing down the targeted level this year. That’s why it has made an upward revision of the inflation target by keeping it at 9.5 percent.
“As growth of internal production has come down and India is also witnessing high inflation, Nepal’s inflation level has been projected at 9.5 percent,” said NRB governor Yubaraj Khatiwada while making a presentation of the review of the monetary policy on Wednesday.
Other economic indicators are not as rosy as per NRB’s macro economic report. The government’s failure to spend the development budget has resulted in savings of Rs 44.65 billion in the government treasury. The entire expenditure of the government has decreased by 5.4 percent during the review period compared to a 40.1 percent rise during the same period in the last fiscal.
There is concern about huge resources being stuck in the government’s treasury as it has contributed to a tightening of liquidity in the banking system. On the other hand, revenue collection has remained impressive at Rs 134.57 billion, a rise of 21.2 percent due to increased imports, the central bank said.
Merchandise imports have risen 25.2 percent to Rs 271.35 billion during the review period while exports grew just 9.3 percent to Rs 39.25 billion. This resulted in a trade deficit of Rs 232.1 billion, a rise of 28.4 percent during the review period. In fact, merchandise exports dipped 0.7 percent in the sixth month compared to the fifth month.
Exports to India slowed while they grew to other countries in a reverse of the last fiscal year’s export trend. Imports from third countries other than India slowed relatively compared to the same period in the last fiscal.
The rising imports also affected the country’s balance of payments (BoP). The BoP showed a surplus of Rs 6.1 billion, a far cry from the Rs 66.72 billion recorded during the review period in the last fiscal.
The foreign exchange reserve grew 2.6 percent to Rs 450.80 billion as of mid-January. The reserve is sufficient for importing goods and services for 8.7 months, according to the report. During the review period, deposits grew 5.3 percent (Rs 54.13 billion) while credit increased 11.2 percent (Rs 108.17 billion) affecting the liquidity situation of banks and financial institutions. Deposit growth during the first six months of the last fiscal year was Rs 85.68 billion.
Source: The Kathmandu Post
