Weekly Economic Bulletin from Nepal for 1st July to 7th July, 2022

Finance Minister finally quits under pressure

Finance Minister Janardan Sharma resigned from his post on July 6 after coming under pressure from various prominent groups for manipulating the budget to serve the vested interests of certain business groups along with purportedly deleting related evidence that could prove him guilty.

Besides being criticized for failing to improve the country’s economic health, Minister Sharma had been accused of illegally disclosing confidential tax information to two unauthorized individuals on the Budget announcement night of May 28, and making some last moment changes in taxation with a view of benefitting certain business groups. After coming under pressure to reveal CCTV footage of that fateful night, Minister Sharma had refused on the pretext that the system is capable of maintaining storage of data only till 13 days of the recording, even while the law mandates government agencies to maintain the CCTV footage for at least three months.

In this regard, the House of Representative has decided to form a 11-member parliamentary probe committee to investigate this matter.

NRB Governor Adhikari hints at introducing a contractionary monetary policy for FY 2022/23

A contractionary monetary policy is to be implemented, as the Central Bank is anticipated to roll back the many privileges and relaxations that were given to various sectors in order to help them overcome the Covid-19 recession over the previous two years.

The NRB had provided various privileges and relaxations such as loan repayment deferral option for businesses at low interest rate, refinancing to export oriented-businesses and sick industries, targeted lending from commercial banks to vulnerable sectors, allowing credit expansion etc. However, in light of the soaring consumer prices, excessive imports resulting in depleting reserves, and a liquidity crunch the NRB Governor has stated such flexibilities will be gradually lifted.

Will the Governor get a free hand now that the Finance Minister who got him suspended is no more in power?

NOC hikes prices of petroleum products again

After coming under public pressure for hiking petroleum prices by unprecedented levels, the Government had directed NOC to cut prices by Rs.20 per liter in petrol and Rs.29 per liter in diesel. As a result of the huge price cuts, prices of petrol had been reduced to Rs.172, and diesel to Rs.170.

Now the state-owned oil monopoly has again hiked prices of petroleum products by Rs 9 per liter, diesel/ kerosene by Rs 2 per liter, and aviation fuel by Rs.5 with effect from July 4. With the latest price hike, the retail price of petrol has gone up to Rs 181 per liter and diesel/ kerosene to Rs 172 per liter. While the price of cooking LP gas remains unchanged, the price of aviation fuel has increased to Rs 190.

Over 200,000 foreign tourists visit Nepal in six months

Tourism Industry, the hardest hit sector by the Covid-19 pandemic, seems to be getting back on its feet following the lifting of movement restrictions by almost all countries.

According to the statistics shared by Nepal Tourism Board, a total of 237,813 foreign tourists visited Nepal in the last six months.?It is a 69.3 percent recovery in comparison to the arrival of foreign tourists during the pre-pandemic levels in June 2019.

Visa application volumes see a steep rise

While foreigners are visiting Nepal, an increasing number of Nepali citizens are travelling abroad. With the decline in Covid cases and the resultant opening of international border restrictions, the high-pent up demand for foreign travel, particularly for studies, seems to have been released. As a result, Visa application have seen a steep rise in Nepal

According to VFS Global, which provides visa outsourcing and technology services for governments and diplomatic missions worldwide, the visa application volume in Nepal increased more than 600 percent in the period between January-May 2022 compared to the same period in 2021 and by 130 percent over the same period in 2019.

Overhead electricity lines in the valley to go underground

Kathmandu Valley’s overhead electricity cables might be a thing of the past if Nepal Electricity Authority (NEA)’s plan to shift it underground materializes.

The state-owned power utility, on July 1, announced that it would be removing electric poles from Kathmandu Valley and creating an underground cable network beginning next year as part of its efforts to modernize its decades-old ailing infrastructure.

Installing the electricity cables underground, if materialized, would not only remove the hanging cables and jumbled up wires that have been an eyesore, but would also cause smaller voltage drops and reduce chances of electricity theft. Also, such an underground cable network would address safety hazards caused by storms and lightning strikes.

Report reveals credit issued to private sector as the key contributor to the widening trade deficit.

A study revealed by the Confederation of Banks and Financial Institutions Nepal (CBFIN) on July 7 revealed how private sector credit has been a major cause of the widening trade deficit of the country.

The report shockingly revealed that the 100 rupees increase in bank credit to the private sector causes an increase in the trade deficit by almost 50 rupees in the long run. And how? It’s because most credit disbursed to the private sector is not utilized for productive activities like manufacturing or agriculture but mostly for imports.?

The report also revealed that 20 percent of the loans issued by banks have gone to fund wholesale and retail trading. Loans to the agriculture sector stood at 7.8 percent. And around 15 percent of the credit issue has gone into production, which is on the decline every year.

Supreme Court overturns Government’s decision to suspend NAC chairperson

From overturning the Government’s unwarranted decision to fire NRB governor, to putting a hold on the its decision to construct the environmental nightmare Nijgadh International Airport, the apex court lately has had to step on various occasions to check the Government’s unwarranted flexing of its muscles.

After the Government suspended Yubaraj Adhikari as Nepal Airlines Corporation’s (NAC) Executive Chairperson, the Supreme court has this time as well stepped in to overturn the Government’s suspension that was made on the behest of the erstwhile Minister of Tourism Ale, who had a personal grudge against the Chairperson and had even hurled obscenities at him.??

Himalayan Bank to acquire Civil Bank

Following the last hour failed merger between Nepal Investment Bank Limited (NIBL) and Himalayan Bank (HBL), the latter is now set to acquire Civil Bank.

In this regard, both banks are set to sign a memorandum of understanding for the acquisition on June 8. If the acquisition goes as planned, the merged entity will be carrying out joint transactions in the name of Himalayan Bank.?According to sources, HBL is considering acquiring CBL at the swap ratio of 100:81. However, the decision is yet to be finalized.

Sajha electric buses come into operation?

The Government seems to be making headway in achieving its 2030 electricity mobility target of 90% private and 60% public vehicle sales to be electric.?

Echoing the Government’s 2018 decision to buy 300 electric buses, Sajha Yatayat, the cooperative owned leading public transportation bus system, has brought three electric buses into operation in Kathmandu from July 7, with 37 electric buses to arrive soon after.

These electric buses, manufactured by the China based CHTCHO Company, have the capacity of 25 seats and also have features like WiFi, TV display, CCTV etc. There is also a facility with a ramp for differently-abled people to get on the bus.