Rs 596 billion: Budget Ceiling for Next FY The National Planning Commission (NPC) has fixed the budget ceiling of Rs 596 billion for the next fiscal year. The proposed annual expenditure for the next fiscal is around Rs 80 billion higher than the current budget of Rs 517.24 billion.
As is customary, the largest chunk amounting to Rs 85 billion has been allocated to the Education Ministry, followed by that of the Ministry of Local Development at Rs 50 billion.
The Home Ministry stands third with Rs 49 billion, while the Ministry of Physical Planning and Works has Rs 40 billion. The Home Ministry has received the highest raise, thanks to a decision of the Khil Raj Regmi government to recruit a new batch of personnel both in Nepal Police and Armed Police Force. The Defence Ministry has also received a boost, with its budget ceiling for the next fiscal being scaled up to Rs 30 billion against Rs 27 billion allocated this year.
The ministries of Health, Defense, Energy and Agriculture Development are others to command larger budget. Allocations for most of the ministries that would otherwise get a higher size of budget, has witnessed a rise between Rs 1-5 billion. For example, budget for the education sector has been increased by around Rs 4 billion, while the local development and health will be getting Rs 4.56 billion and Rs 3 billion more. The allocation to the Ministry of Energy has also been raised by Rs 2 billion on its current budget of Rs 30 billion.
The NPC has raised revenue collection target by 23 percent to Rs 424 billion to fund the proposed expenditures. The NPC has expected Rs 124 billion in foreign assistance—another major source of funding. The shortfall of Rs 48 billion will be met through internal loans.
No Major Change in Monetary Policy
Nepal Rastra Bank (NRB) released the mid-term review of the Monetary Policy for FY 2013/14 on March 3 without making any major change. The NRB has revised the inflation target by a marginal 0.5 per cent to the average of 8.5 percent in the mid-term review of the Policy. Other than this, the central bank has not made any major changes in the policy.
Releasing the mid-term review report of the policy, NRB Governor Yubaraj Khatiwada claimed that there was a satisfactory growth in economic activities during the review period after implementation of the policy. “There is balance of payment (BOP) surplus as well as high liquidity in the banking system leading to decline in short-term interest rate,” said Khatiwada. “Though the local currency weakened against US dollar in the first few months of the current fiscal year, there is now stability in the exchange rate.”
The central bank said that there was not any anticipated improvement toward containing inflation. Similarly, merchandise trade deficit observed an imbalance during the review period.
According to NRB, inflation reached 9.7 per cent in the six-month period. Likewise, merchandise trade deficit increased by 23.1 per cent to Rs 333.9 billion. Khatiwada said the economic growth of 5.5 percent in the fiscal year as projected in the Monetary Policy is achievable. “The agriculture productivity will increase this year due to sufficient rainfall. Also, capital expenditure can be expected to increase with the formation of new government,” Khatiwada said, adding, “As this will increase industrial and economic activities, the projected growth rate of 5.5 per cent can be achieved.”
NRB has not changed cash reserve ratio (CR Ratio), bank rate and Statutory Liquidity Ratio (SLR) requirement for the banking and financial institutions (BFIs). Stating that the loan flow of BFIs toward private sector was in line with the targeted limit despite liquidity surplus, NRB has justified the move to keep the requirement intact to support economic growth and to not let increase the cost of fund.
Khatiwada also shared the central bank's plan to review the current provision on margin lending. “We have carefully weighed the provision of margin lending to prevent any bubbles in the share market. The provision will be changed by taking the fluctuations of the share market into consideration,” Khatiwada added.
Keeping in view the growing number of troubled BFIs, the central bank is planning to form a separate Problem Institution Resolution Division in the NRB. “The process of forming the division is moving ahead after the preparation of Problem Bank Resolution Framework,” he added. Likewise, NRB has already prepared Acquisition Bylaw 2014 to pave the way for financial institutions interested to acquire another BFI.
