Nepal's Economy In The Doldrums

Ghanashyam Ojha - AHN South Asia Correspondent
Kathmandu, Nepal (AHN)- Nepal's economic growth has slipped to 2.29 percent, the lowest since 2001/02, the year the economy recorded negative growth, news reports said. A news report, carried by the Kathmandu Post, said almost all the vital sectors of economy are now in a sorry state. The agriculture sector, which contributes nearly 33 percent to the national economy, is estimated to grow by 0.62 percent - the lowest in 12 years. The agriculture growth rate is less than the annual population growth, a reflection of how food availability is shrinking. The industrial sector, though estimated to grow by 2.16 percent, is sure to drop due to continuous violence in southern Nepal.
"The growth rate will significantly go down, once the annual data is computed," said Narendra K Basnet, vice president of Confederation of Nepalese Industries. The trade deficit has hit foreign trade hard. The continuous shrinking of major exports like carpets, garments and pashmina scarves, as well as double digit growth in imports has widened the trade deficit to over $ 1.5 billion. The remittance, which was a major source to sustain Nepal's economy, has also shrunk to 3.1 percent against last year's whopping 47 percent growth.

The budgetary operation has also affected the Nepalese economy. Like the previous years, the budget has missed expenditure targets. It had a target of expending $ 2. 78 billion, but the actual expenditure is likely to remain at around $ 2 .76 billion - almost 94 percent. The capital expenditure, which mainly finances development activities, is likely to remain around $ 55.3 million, 80 percent of the yearly allocation. Like past years, the low development spending is mainly due to slow progress made at major development projects like Marsyangdi Hydropower Project, Melamchi Water Project, among others.

Likewise, the recurrent expenditure is likely to cross $ 1.2 billion, almost 19 percent more than last year's similar expenditure. The government had allocated $ 1.2 billion for the recurrent expenditure but it was raised to $ 1.3 billion during the midterm review to manage huge expenditures for Constituent Assembly (CA) poll. Despite all the grim news, revenue mobilization has remained historically strong this year. The total revenue is likely to hit the target thanks to strong growth seen in excise duty, income tax and VAT.