Fiscal deficit to widen, says ADB

Kathmandu, September 11:

Fiscal deficit is going to widen by three per cent in 2006 and 3.5 per cent in 2007, states a report of Asian Development Bank. It has been a great concerns for the government, thanks to increased fiscal deficit in recent years. According to the report, government expenditures are projected to grow strongly in both years on the assumption that an improvement in the security will allow the government to undertake major construction work. The revenue GDP ratio forecast is to improve further over the fiscal year 2006-07, with better revenue management, efforts to check excise leakages, stronger collection of income tax arrears, and the increase in the VAT rate, states the report. “Monetary policy will stay geared to maintaining the peg with the Indian rupee and to be being acco-mmodative to aid econo-mic recovery. Beyond 2005, it will hinge on credible pr-ogress toward a lasting resolution of the insurgency.”

The ADO-2005 projections assumes that there will be no further deterioration of the insurgency and that progress will be made toward a lasting resolution in 2006. It has been projected that stro nger growth will be seen in both private and public sector investment in 2006-07. The global economic expansion will be maintained; the Indian economy will grow by about six per cent and weather conditions will be normal in 2006-07. Based on these assumptions, GDP is forecast to increase by three per cent in 2005, 3.7 per cent in the fiscal year 2006, and 4.3 per cent in 2007.