Himalayan News Service

Kathmandu, July 14:

Due to sharp rise in the prices of grains and cereal products along with housing goods and services, transport and communication, the national price index in point-to-point basis, increased by 6.4 per cent during the first 10 months of the current fiscal year. Nepal Rastra Bank (NRB) today in a report on current macro-economic situation reveled that the National Urban Consumer Price Index (CPI) registered a sharp increment as of mid-May 2005, compared to an increase of 1.3 per cent last year. The central bank attributed the price hike in petorleum products resulted in the increase of prices of commodities and services during the period. The government hiked the prices of petroleum products four times during the current fiscal year, which resulted in increase of the prices by an average of 35 per cent.

As a result, the annual inflation rate is likely to cross 4.5 per cent mark this fiscal year, which

is again up against the central bank’s previous forecast of 4.2 per cent.

Likewise, the index of food and beverages group moved up by 5.8 per cent compared to an increase of 0.6 per cent last year. The rise in the prices of vegetables and fruits; meat, fish and eggs, restaurant meals, grains and cereals products, and sugar and related products pushed up this index of this group. Based on customs data of the first 10 months, total exports

increased by 5.3 per cent to Rs 47.5 billion while total imports declined by four per cent to

Rs 106.1 billion resulting in the corresponding decline in trade deficit by 10.4 per cent to Rs 58.6 billion. Despite the increase in exports, total trade declined by 1.3 per cent because of the decline in the large import base. In the same period last year, exports had risen by 7.2 per cent and imports by 7.8 per cent leading to 8.2 per cent increment in trade deficit.

The government’s budgetary operations show yet another bleak economic picture of the country’s development activities. According to the NRB figures, out of the total government expenditure — about 87 per cent has been spent under regular expenditures, whereas the development activities received 13 per cent.

Based on the cash flow data of first 10 months, the total expenditure increased by 11.1 per cent to Rs 61.0 billion in comparison to a rise of 8.3 per cent last year. Out of the total expenditure, recurrent expenditure stood at Rs 43.2 billion (70.7 per cent), whereas the capital expenditure at Rs 8.2 billion (13.4 per cent) and principal repayment at Rs 8.3 billion (13.6 per cent). On the basis of the balance of payment (BoP) statistics, the overall BoP posted a lower surplus of Rs 5.6 billion in comparison to a higher surplus of Rs 13.7 billion last year. The lower surplus in the BoP, this year, is mainly attributable to the lower in flow of net government loans. The gross foreign exchange reserves rose by 5.2 per cent to Rs 131.7 billion as of mid-May 2005. The current reserve has a comfortable position to finance merchandise imports of 12.4 months and merchandise and service imports of 10.4 months.

NRB governor Bijaya Nath Bhattarai, commenting on the report, said that pace of overall economic activities has been sluggish in recent time. “Inflation has gone up but in contrary development and economic activities are sluggish. Despite increase in exports, the rate is very slow and BoP surplus is low,” he added.