Himalayan News Service

Kathmandu, May 4:

Real economic growth, based on real domestic product (GDP) at producers prices, is projected to be 3.6 per cent in the fiscal year 2004-05.

According to a press statement issued by the Nepal Rastra Bank (NRB) today, as per the review conducted for the first eight eight months of the current fiscal year, the projected growth is marginally higher than a growth of 3.5 per cent in fiscal year 2003-04.

During the first eight months of the current fiscal year, NRB said, foreign cash loans have fallen significantly.

However, foreign cash grants have increased substantially, according to the central bank.

However, the GDP growth is lower than the initial projection for fiscal year 2004-05. Increased private sector construction, mining and quarrying, and real estate activities are contributory factors to such a projected growth.

On the demand side, despite weak external demand, increased transfer receipts and bank credit are the fueling factors for the projected growth, said the NRB statement.

On a point to point basis, consumer price index (CPI) based on inflation has increased to 5.7 per cent compared to 4.4 per cent in the last fiscal during the same period.

The hike in prices of petroleum products has contributed to the rise in prices in recent months. However, average inflation has remained at 3.7 per cent which was 5.1 per cent during last year.

The statement said that the budget deficit has fallen significantly. Notwithstanding a slight slowdown in the growth rate of revenue relative to last year, the pace of increase in resource mobilisation relative to government expenditure has contributed to the fall in budget deficit.

The broad money (M2) growth has remained subdued. So has been the growth of time deposits. Lower growth of net foreign assets (NFA) due to absolute drop in foreign loans and slowdown in remittances has been the factors behind the subdued expansion in M2.

The bank credit to the private sector has accelerated due mainly to the expansion in consumer loans.

Hence, short-term interest rates have increased in recent months owing to decline in excess liquidity in the banking system, said the statement.

The surplus in the balance of payments is lower than that of last year.

During last year, BoP stood at Rs 10.96 billion, while in this fiscal year it stands at Rs 4.36 billion.

Total international reserves stand at Rs 129.90 billion. The reserve level, as claimed by central bank, is sufficient to meet the demand of merchandise imports for more than a year.