Low govt spending led to Rs 27.88b cash reserve

THE government’s failure to spend well in the last fiscal year 2012-13 resulted in cash reserve of Rs 27.88 billion at Nepal Rastra Bank. The government maintains its account in the central bank. The government expenditure remained poor due to the delay in budget presentation last fiscal year, which ultimately hit the economy hard. Reviewing the economic situation of the country, the central bank mentioned in its monetary policy document that the government expenditure last fiscal year grew by 4.2 percent to Rs 333.37 billion. Revenue collection, too, saw a growth of 21.1 percent to Rs 295.91 billion. As far as the external sector of the economy is concerned, despite poor results in initial months of the fiscal, the balance of payment (BoP) surplus is expected to remain at a higher level. NRB Governor Yubaraj Khatiwada said it Rs 27.88b is estimated to remain at a surplus of over Rs 70 billion. Though the government incurred heavy losses in the goods business, it became successful in saving Rs 41.56 billion in the first 11 months of the FY 2012-13 due to savings made through the service and transfer business. Balance of Payment (BoP) surplus in the same time frame stood at Rs 52.69 billion. “The BoP is estimated to exceed Rs 70 billion at the end of the last fiscal year,” said NRB Governor Yuva Raj Khatiwada. The BoP surplus in the previous fiscal year was Rs 127.7 billion. On the development in the banking sector, the credit to deposit ratio of commercial banks remained healthy at 71.7 percent. The average spread rate of interest in the last fiscal year remained at 7.1 percent, which the central bank thinks is higher than the required. This is the reason the monetary policy unveiled on Sunday announced keeping the spread rate at 5 percent. There has also been a significant progress in the consolidation process in the banking sector, according to the NRB. After the implementation of merger guidelines on April 2011, as many as 43 banks and financial institutions have so far merged to form 18 entities. Also, 13 BFIs principally agreed to form five new institutions last FY. Likewise, two commercial banks—NIC Bank and Bank of Asia Nepal— merged in the first of its kind of successful mergers last FY.