Budget deficit widens by over 32 per cent

Kathmandu, October 6:

Budget deficit of the government, excluding local authorities’ accounts widened, by 32.9 per cent in 2005-06 compared to a growth of only 12.9 per cent in the previous fiscal.

The higher rate of growth in budget deficit was due to sluggish growth in government revenue as indirect tax revenue of the government in 2005-06 declined by over 50 per cent, according to Nepal Rastra Bank statistics.

However, government expenditure increased by 11.8 per cent to Rs 101 billion. In the review year, the revenue to GDP ratio decreased to 12.4 per cent from the previous year’s 13.1 per cent.

During the fiscal year 2005-06, the share of recurrent expenditure stood at 63.5 per cent. However, capital (development) expenditure stood only at 20.1 per cent as per the annual survey of Nepal Rastra Bank. Of the total cash budget deficit of Rs 19.2 billion (excluding bank balances of local authorities), the government mobilised Rs 15.2 billion through internal

loans and the remaining Rs 3.8 billion through foreign loans, according to the central bank. In the previous year, the government had mobilised Rs 12.1 billion through internal borrowings and Rs 2.2 billion through foreign loans.

The government also mobilized Rs 10.8 billion through the issuance of treasury bills. In the same period, the government mobilised Rs 750 million through development bonds and Rs 250 million through Citizen Savings Certificates.

In the fiscal year 2005-06, the indirect tax revenue of the government increased by 5.9 per cent.

However, in the fiscal year 2004-05, indirect tax revenue increased by 13.1 per cent. The weak revenue collection in fiscal year 2005-06 is attributed to the decrease in the customs revenue.

The revenue had decreased only by 0.9 per cent in 2004-05 but in 2005-06, it declined by 2.3 per cent. VAT revenue collection increased by only 14.4 per cent in 2005-06 as against the growth of 30.3 per cent in 2004-05.

In the review year 2005-06, the excise revenue increased by only 0.9 per cent compared to previous year’s growth of 3.6 per cent. As against the growth of 9.7 per cent, the direct tax revenue increased by 6.6 per cent in the review year.

Income tax, the major component of the direct tax revenue, increased by 4.4 per cent compared to 10 per cent in the previous fiscal 2004-05.

In the review year, the non-tax revenue decreased by 7.1 per cent as against the growth of 13.2 per cent in the previous year.