Weekly Economic Bulletin: 1st January 2023 to 07th January 2023

The Central Bank finally bows down!?

And relaxes some of the provisions of the Working Capital Loan Guidelines it had implemented since Kartik 1 this year. Nepal Rastra Bank (NRB) had prescribed a limit on working capital loan after finding that some borrowers were taking more than the required working capital loans to use such loans for other purposes (e.g. investing in real estate, stock market etc.)

With this, banks were following up with the borrowers seeking instant repayment of excess loan ( i.e. over the prescribed limit).

Now with the amended guidelines, the borrower can repay the excess credit in five installments by the end of Ashad 2082 B.S.

Moreover, NRB has also relaxed the provisions for small borrowers. The guidelines for ? working capital loan will not apply to loans of less than Rs.1 crore. Before the change, the limit was specified at Rs.50 lakh.

Earlier the central bank was not willing to negotiate any of the terms and now with the change of guard in the Government, the Governor seems to have bowed down to the intense lobbying esp. after the formation of the Government supported by CPN-UML. So, all the events that ensued between the then Finance Minister and the Governor was nothing more than a political stunt at best???

Government spending more than it is collecting.?

The report of the Financial Comptroller General Office reveals? that government receipts as of Poush 23 amounts to a total of Rs.4.06 billion whereas the government recurrent expenditure itself stands at 4.23 billion.

This means that the government is in deficit of Rs.0.17 billion even to fund its day-to-day operations. The report shows that the government has only collected 27.83% of the targeted revenue for the current fiscal year. Revenue collection has declined? largely due to a ban imposed on import of certain goods by NRB for maintaining foreign exchange reserves? as a result of which revenue from taxes has decreased significantly.?

Many experts have advised that the government should consider issuing the supplementary budget to address the current deficit.?

Nepal implements its first trade logistics policy.?

Trade Logistics Policy 2079, aimed at improving the competitiveness of trade by minimizing the costs through the implementation of a modern and integrated logistics system, came into effect after it was approved by the cabinet recently. This policy is believed? to enhance the efficiency of the supply chain, reduce bottlenecks and improve the speed of delivery. Nepal’s position in the trade logistics sector is comparatively weak.

However, the policy has been receiving some criticism since the government endorsed it. Traders and freight forwarders have criticized the government for floating vague ideas and for its failure to address the underlying real problems in the country’s domestic and international trade.?

And rightly so, because the policy has failed to properly assess the current situation other than quoting Nepal’s poor ranking of 108 out of 140 countries in the 2019 Global Competitive Index by World Economic Forum and the World Bank’s Logistics Performance Index from 2012 to 2018 where it ranked 121 out of 167 countries.

The policy does not state the current cost of logistics and does not also quantify what its goals are unlike the recently announced National Logistics Policy by India where it clearly stated its first goal to lower the cost of logistics from its current 14% of GDP to less than 10% in the next five years.

Nepal’s current logistics cost is estimated to be as high as 25% of the GDP where the world average is at 13%! Yes, that's almost double the global average. No wonder why our products remain uncompetitive in the international market. On an average, the traders have to bear around 28-32 percent more costs on top of the purchase price of the goods. And all this because of the poor logistics facility resulting in exorbitant costs for transit, transport, delivery, storage and official procedures.?

Nepal imports 2500 tonnes of fertilizers through G2G agreement.?

Nepal has imported 2500 tonnes of Urea fertilizers as per the Government to Government (G2G) agreement with India. Nepal? had signed a MoU with India on the supply of a total of 9,35,000 tonnes? urea and DAP fertilizers for 5 years under G2G agreement in 2022. According to the agreement, Nepal will receive 1,00,000 tonnes urea & 50,00 tonnes DAP fertilizers this year. But when? That’s the real question because farmers have been struggling to get a timely supply of fertilizers that directly affect the output. Though the government has no proper forecast of the actual demand of fertilizers, officials believe the estimated requirement of over 11 lakh tonnes annually while the supply stands only at around 4 lakh tonnes and that too is not available when the farmers need it.?

Are you paying the correct prices while eating out??

The Kathmandu District Court recently ruled that the prices included in the menu of restaurants should be inclusive of VAT & service charge meaning the customer need not pay anything on top of the menu price. But is it actually so??

If not, then you can lodge your complaint by calling toll-free number 1137 or by visiting the official website of the Department of Commerce, Supplies and Consumer Protection.

Majority of hotels & restaurants add 10% compulsory service charge, 13% VAT and 1.3% service tax on the menu price in Nepal. Following the landmark ruling by the Kathmandu District Court, many restaurants and hotels have accordingly adjusted their menu price. Overcharging customers i.e. anything more than the menu price may result in fines from Rs.2,00,000 to Rs.3,00,000 under the Consumer Protection Act 2075.

Gold price nears record high!

As on Sunday, the price of fine gold has reached Rs. 1,03,300 nearing the record high price of Rs.1,05,500. With only one instance of decline on Friday, the precious yellow metal gained Rs.1600 during the week. With the wedding season all but over, it is interesting to see the surge in gold prices.