Kathmandu, March 30:

Economists have said that Nepal’s fiscal budget has been adversely affected in 2005 despite growth in government revenue, thanks to increased current expenditure and low capital spending, at a launching ceremony of a book entitled Economic and Social Survey of Asia and The Pacific-2006.

Dr Jyoti Lohani, director of Centre for Policy Research and Analysis, while presenting Nepal’s situation quoting the book entitled Economic and Social Survey of Asia and Pacific 2006 by United Nations Economic and Social Commission for Asia and the Pacific, said that poverty remains pervasive in most least developed countries. The report, according to Dr Lohani, focused on giving priority to promoting rapid and sustained economic growth. It suggests doubling the average household living standards as quickly as possible, since the average level of private consumption per capita is so low.

The programme was organised jointly by United Nations Information Centre (UNIC) and Centre for Policy Research and Analysis (CEPRA). Speaking at a gathering, Dr Lohani said that security spending has increased in Nepal during 2005 as law and order deteriorated. He said that the continuing conflict and economic slowdown suggest that attaining revenue mobilisation and capital spending targets would be difficult.

Industrial and commercial sectors accounted for three-quarters of the private sector credit in Nepal in 2005 and the restructuring of the two largest banks — Nepal Bank Ltd and Rastriya Banijya Bank slowed credit expansion, says the UNESCAP report that was launched today by Dr Nirmal Pandey, director of CEPRA.

Nepal’s imports declined in 2005 which has resulted in a trade deficit equivalent to 14 per cent of the GDP, says the report. More than two thirds of exports from Nepal were to India. According to Dr Lohani, the balance of payment surplus, however, declined in 2005 because of a fall in the capital account surplus. What is worrisome is that despite the increase in remittances and official grants, current account is expected to weaken with drop in income from services, says Dr Lohani. The overall BoP is expected to decline, he said.

Nepal’s outstanding external debt stood at 44.5 per cent of GDP in 2005 compared to 47 per cent during the previous year, according to the report. “LDC such as Nepal faces significant vulnerabilities as a result of rising oil prices. LDCs have little access to alternative sources of financing to cushion a temporary increase in BoP deficit caused by the high oil prices.”