'Local level can raise internal loan not exceeding 12% of internal resources'

By TRN Online, Kathmandu, May 9: National Natural Resources and Fiscal Commission has recommended the limit of internal loan the federal, provincial and local levels can raise in the upcoming fiscal year (FY).  

The federal government can raise an internal loan not exceeding 5.5 per cent of gross domestic product (GDP) while the provincial and local level governments can mobilise internal loans not exceeding the 12 per cent of their internal sources, according to the limit determined by the Commission.

The Commission has said that the ceiling is fixed on the basis of consultation with the Ministry of Finance, Nepal Rastra Bank, Public Debt Management Office, provincial and local level governments.

The commission informed that a rigorous analysis of the current economic condition, quantity of internal loan mobilization from the province and local levels, and market condition was made before forwarding the recommendation for raising the internal loan.

According to the commission, lack of economic indicators, and legal, structural and procedural management remained the constraints for the provinces and local levels to mobilise internal loans.

The spokesperson of the commission, Krishna Bahadur Bohora, said that internal loan is not being mobilized in the provinces and local levels due to the absence of required laws.

The federal government has the target to raise Rs. 239 billion internal loans in the current FY.

Provincial governments are not able to raise internal loans yet despite their efforts to do so.

In the FY 2018/19, Madesh Province had estimated to mobilize Rs. 1 billion, Gandaki Province Rs. 800 million, Karnali Province Rs. 1 billion internal loans in their annual budgets.

In their annual budgets for FY, 2019/20, Madesh  Province had estimated to raise Rs. 1.3 billion, Gandaki Province Rs. 988.3 million and Karnali Province Rs. 750 million of internal loan.

In the FY 2020/21, Province 1 had estimated to mobilize Rs. 5 billion, Lumbini Province Rs. 2,07 billion and Gandaki Province Rs. 2 billion from the internal loan in their annual budgets.  

Commission clearly suggested that internal loans must be mobilized for high and sustainable economic growth, creation of employment and increase productivity and strictly prohibited in the unproductive sectors.

The Commission has suggested for mobilization of internal loans focusing on the capital formation and productive sector providing long term benefit, employment generation, and internal income-generating sector, repayment of principal and its interest from the return of the loan mobilized in the project.

There is a provision that the internal loan cannot be used for administrative expenses and in the unproductive sector.

The provision stipulates that the internal loan should be mobilised in coordination among all three tiers of governments for helping to increase participation and partnership of public, private and other sectors and for the improvement of the economy to achieve the national development goals.