News Digest: Economy and Development (26 August – 01 September, 2021)

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Money and Business

According to the Public Debt Management Office (PDMO), public enterprises paid smaller dividends and profits to the government in the last fiscal year (FY) 2020/21 due to the ravaging effects of the COVID-19 pandemic on their operations. In terms of number, total dividend received by the government has reduced to NPR 6.75 billion in fiscal year (FY) 2020/21 from NPR 14.09 billion in fiscal year (FY) 2019/20. Much of the dividend collection from public institutions and enterprises reduced over the last year due to the provision laid out by the central bank which had allowed pandemic-hit businesses to delay payment on their loan installment and interest payment for up to a year. Due to this, many enterprises have deferred on their payments, ultimately affecting revenue collection by PDMO.

The highly anticipated ‘Business Credit Flow Work Procedure 2021’ announced in the national budget for fiscal year (FY) 2020/21 is yet to be implemented. Aimed at encouraging the start-up culture, the draft proposal for the procedure has been stuck at the Ministry of Finance (MoF), citing policy problems. The procedure which was expected to provide seed capital of NPR 2.5 million at 1 percent interest rate to support budding entrepreneurs has been affected by the change in government (which is yet to introduce its amended budget as opposed to the ordinance budget brought in by the previous Oli government).

Trade and Market

The US Customs and Border Protection (CBP) has amended a withhold release order on imports of Nepali origin carpets and hand-knotted products; allowing import from one company. CBP had previously issued an order to withhold import of carpets and hand-knotted products from seven industries in Nepal reasoning out that the products were manufactured using forced labor. However, after careful evaluation, CBP has decided to allow products from Annapurna Carpet to enter the US market, after it passed all 11 indicators of labor-used in its production of carpets and hand-knotted products.

Nepal recorded a Balance of Payments (BoP) surplus of only NPR 1.23 billion in fiscal year (FY) 2020/21, falling from a surplus of NPR 282.41 billion as compared to fiscal year (FY) 2019/20. Bloated import bill, fall in net inflow of foreign direct investment (FDI) and reduced remittance earnings/income has been cited for the fall in BoP surplus.

Consumer rights activists have demanding the government of intervention in consumer market due to the ever-increasing market prices for daily and essential commodities. As of late, manipulators and opportunist traders have been taking benefit of the free market situation across the nation by hiking prices when demand is at its peak. Considering this, foods have been costlier, eventually pinching the pockets of general consumers.

The Ministry of Industry, Commerce and Supplies (MoICS) has decided to provide subsidies ranging between 3 percent to 5 percent on the value of export transaction to boost up international trade. The ministry has decided to do so on the recommendation of a government audit report (presented by the office of Auditor General of Nepal) which had stated that the government provided export subsidy was too minimal to encourage export of domestic-made products in international markets. 

Infrastructure

Nepal Oil Corporation (NOC) has given priority to infrastructure development including construction of fuel storage and pipeline and upgradation of depots by allocating a separate fund of NPR 6 billion. NOC is currently planning of building a fuel storage facility which can store fuel for up to 3 months, alongside construction of two pipelines- Siliguri (India) to Jhapa (Nepal) and extension of the Motihari (India) to Amalekhgunj (Nepal) to Lothar, Chitwan (Nepal).

NOC has once again hiked its price for diesel, petrol, kerosene and aviation fuels by NPR 2 each. With the new price hike, these commodities now cost NPR 130 per litre, NPR 113 per litre, NPR 113 per litre and NPR 86 per litre. Similarly, price of cooking LPG gas too has increased from NPR 1,425 to NPR 1,450. The state-owned corporation has been hiking prices against the auto-pricing mechanism, deferring with the prices in the international market.

Share Market

Nepal Stock Exchange (NEPSE) has been on a downward spiral since the beginning of the week, falling by 49.18 points and 69.05 points during the first and third trading day of the week. The corresponding index for the said days was recorded at 3044.86 points and 2975.84 points, respectively. Similarly, a total of 47.98 million shares of 227 companies were traded resulting in a turnover of NPR 28.9 billion during the same period.

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