Kathmandu, September 18:

To cover the mounting budget deficit, the government has borrowed over two billion rupees draft from Nepal Rastra Bank (NRB) during the fiscal year 2004-05. Based on cash flow data, the budget deficit grew by about 12 per cent to Rs 14.2 billion in comparison to the previous year mainly due to an increased level of recurrent expenditure, states annual macro-economic report released by the NRB today. During the period, the government also mobilised Rs 2.2 billion through foreign cash loans to finance the deficit budget, whereas the internal borrowing stood at Rs 8.9 billion. In contrary, the government had maintained a cash balance of Rs 753 million in the previous year. According to the report, the total expenditure of the government increased by 11.1 per cent to Rs 90.2 till mid-July of 2005. Of the total expenditure, the recurrent expenditure stood at Rs 58.1 billion (65.3 per cent), whereas the capital expenditure comprised only Rs 16.4 billion (18.2 per cent) and principal repayment was Rs 13.5 billion.

Total non-debt resources have increased by 11 per cent to Rs 76.1 billion compared to a rise of 13.3 per cent in the previous year. Revenue, which is the major source of government income, grew by 12.5 per cent to Rs 70.1 billion. ommenting on the report, Bijaya Nath Bhattarai, NRB governor, said that the declining exports, particularly the garment exports, could affect external trade. “Though the total exports increased by eight per cent, the share of the third country exports has declined sharply,” he said. The third country exports decreased by 18.8 per cent during the period.

Bhattarai also urged that concerned stakeholders to take immediate measures to compensate consequences after multi-fibre arrangement (MFA) phased out. “Since the garments constitute a huge portion of the third country exports, there is an urgent need to address the issue immediately,” he added. Based on customs data, the total exports posted a growth of eight per cent to Rs 58.2 billion, but in contrast the total imports fell by three per cent during the period. The total imports had increased by 9.6 per cent last year.

Due to the decline in imports, trade deficit fell by 10.2 per cent to Rs 74 billion, which had registered an increment of 10.7 per cent in the previous year. Exports to India increased significantly in 2004-05, which in fact influenced the growth of total exports. It registered a growth of 28.2 per cent to Rs 39.4 billion. The trend, however, has revealed that singly country concentration of exports has increased, particularly to India. The share of trade with India stood at 65.8 per cent, while the share with the third country trade declined to 34.2 per cent during the period.