Nepal Rastra Bank (NRB) has made public the macroeconomic and financial report of the first six months of the current fiscal year. The report has revealed that the economy is on the road to recovery. For one thing, the balance of payment (BoP) has soared to healthy levels, hovering at a surplus of Rs. 97.10 billion in the review period compared to a deficit of Rs. 241.23 billion in the same period of the year before. Similarly, foreign exchange reserves have recovered to Rs. 1,337.29 billion in mid-January, 2023 from Rs. 1,215.80 billion in mid-July 2022 – an increase of 10 per cent. For another, the current account deficit has dramatically narrowed to Rs. 29.47 billion in the review period from Rs. 353.16 billion in the same period last year.
This comes months after the government lifted the ban on import of goods deemed non-essential. In the same period, remittance inflows shot up by 24.3 per cent, to Rs. 585.08 billion. What catches one's attention is the solid growth in BoP despite lifting of the lid on the import of luxury goods, considered the drain on BoP. The ban had dealt a severe blow to the businesses of importing and selling luxury goods, including vehicles, forcing many employees out of their jobs and pushing the sector on the edge of collapse. As many as one million employees were reported to be impacted. Not to mention their dependents who turn to them when in need. Sometimes we need to swallow bitter pills to deal with some intractable crisis, and we took the ban as a rigorous step for the greater good of the national economy.
But things have changed now for the better. How are the employees faring now is the question we should be asking. Doing the needful to soften the blow and help them recuperate is the need of the hour, for we cannot discount the population that number in millions. However, we have to admit that all is not still well. Elevated levels of inflation continue to gnaw and worry us. If consumer price inflation (CPI) remains at a high level, it upends the gain made in growth in income, hitting the purchasing power of people. The CPI has increased significantly over that period, rising to as high as 8.50 per cent in mid-December of 2022 from 5.65 per cent from the year before.
Another worry is the deficit in revenue mobilisation in this fiscal year. The revenue collection of the government stood at Rs. 488.49 billion while recurrent expenditure stood at Rs. 505.87 billion by February 5, 2023. In the seven months, Rs. 488.49 billion in revenue was collected against the target of Rs. 1,403.14, amounting to a meagre 34.81 per cent of the target. If this scenario persists, it may bring grave challenges to the economy. Likewise, the pace of spending capital budget has trickled with the government able to spend only 16.5 per cent of the earmarked amount by that time – Rs. 62.75 billion of the allocated Rs. 380.3 billion. This has left the development sector starved of much-needed fund. Importantly, the government needs to cash in on the surplus and use it to build the fortress around the economy so that it can insulate itself from the future crisis.