Kathmandu, August 11:

The consumer price index has increased by 9.1 per cent in the mid-June 2006, as per the eleven month’s report of the Nepal Rastra Bank (NRB) for 2005-06, released today.

In the previous year during the same month, consumer price index stood only at 6.2 per cent.

The higher growth in the price index is mainly attributable to the rise in the prices of petroleum products twice, as well as an increase in the prices of transportation services in February 2006 together with a sharp rise in the prices of grains and cereal products, pulses, housing goods and services, transportation and communication, vegetables and

fruits, meat, fish and eggs, education, reading materials and recreation and beverages, according to NRB.

The average growth rate of the price index from mid-July 2005 to mid-June 2006 stood at 7.8 per cent. This growth rate was 4.2 per cent in the same period of the previous year.

As per the central bank, the overall fiscal situation remained at a deficit of Rs 8.8 billion in the review period due to the high growth rate in government expenditure and very low growth rate in revenue mobilisation.

Fiscal balance, one of the main indicators of government budgetary operation remained at a deficit of 100.9 per cent of the total government expenditure. However, last year, the ratio of fiscal deficit had remained at only 4.1 per cent of the total government expenditure.

Net foreign assets, a main source of monetary expansion after adjusting foreign exchange valuation gain-loss, increased by Rs 21.9 billion (20.3 per cent) in the review period compared to an increase of Rs 5.5 billion (5.1 per cent) in 2004-05.

NFA registered such a rise due to increased inflow of remittances.

Lack of investment friendly environment and cautious steps taken by commercial banks in credit extension resulted in a lower credit off-take in the review period, says the central bank.

In the review period, the index of food and beverages group rose up by 9.1 per cent compared to an increase of 5.3 per cent during the same period of preceding year. Government spending saw an accelerated growth of 19.3 per cent in the first eleven months of 2005-06, compared to a growth of 8.2 per cent in the corresponding period of the preceding year.

Of the total government expenditure, the share of recurrent expenditure, capital expenditure, principal repayments and freeze expenditure remained at 65.3 per cent, 16.8 per cent, 15.1 per cent and 2.8 per cent respectively in the review period. Such ratios were 70.4 per cent, 14.5 per cent, 13.1 per cent and 2.0 per cent respectively, in the corresponding period of the previous year.

In the first eleven months of 2005-06, foreign cash grants increased by a high rate of 65.7 per cent compared to an increase of 7.5 per cent in the preceding year.

In the first eleven months of 2005-06, the foreign trade sector depicted a mixed performance. Exports grew by 4.4 per cent compared to an increase of 7.5 per cent in 2004-05. Of the total exports, export to India rose by 6.3 per cent in 2005-06 in comparison to a growth of 25.2 per cent in the same period of 2004-05.

Additional customs tariff of four per cent imposed by India on Nepali exports to India since the end of February 2006 slowed the growth of Nepali exports to India.

Total imports expanded by 17.6 per cent in 2005-06 in the first eleven months of 2005-06 as compared to an increase of 9.1 per cent in the corresponding period of the previous year.

While imports from India went up by 23.4 per cent in the review period compared to a growth of 13.6 per cent in the corresponding period of 2004-05, imports from other countries rose by 9.1 per cent compared to a growth of just 3.3 per cent a year earlier.