Kathmandu, April 30:

Nepal’s total debt in 2005 increased to Rs 19.8 billion posting a heavy fiscal burden, states a latest report of the Asian Development Bank (ADB).

Burgeoning debt servicing has been a serious concerns given a sharp fall in recent years in foreign loan financing. “Security outlays has also increased to Rs 17.5 billion, accounting for about one fifth of total government spending,” the ADB report stated.

However, hike in domestic credit was found robust, encouraged by commercial banks’ efforts to expand consumer loan volumes through attractive packages and heavy marketing.

Commercial banks’ liquidity tightened slightly in 2005, but remained ample, and their deposits rates showed no upward movement, staying well below inflation.

The hike in the prices of petroleum products and daily consumer goods, the VAT rate, as well as civil servants’ salaries contributed to increase inflationary pressures that registered at about seven per cent.

In the meantime, revenue has increased by 0.75 percentage points to 13.1 percentage of gross domestic product (GDP) buoyed by an increased in the value added tax (VAT) rate from 10 per cent to 13 per cent and significant collection of dividends from Nepal Telecom (NT), a state-owned corporation.

However, as of today, according to the Nepal Rastra Bank (NRB) report, revenue growth stands only at 0.1 per cent which is very negligible, due to 19-day long strike.

“If the same situation lingers for a few more months, the government will not be in a position to meet revenue target,” said a NRB official on condition anonymity.

According to the ADB, report, overseas remittances rose by 17.6 per cent to $1.1 billion in 2005, and contributed to offset the pronounced (41.1 per cent) decline in tourism receipts as well as the traditional trade deficit.

Meanwhile, the ADB has set low GDP growth at two per cent for 2006 and 3.4 per cent for 2007.