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The half-yearly review of the current fiscal year 2080-81 BS (2-23-24), showed the Gross foreign exchange reserves stood at NPR 1816.57 billion (USD 13.69 billion), with a 18-percent rise in the past six months.

According to the current macroeconomic and financial situation of Nepal based on the six months data ending in mid-January assessed by the central bank, the current size of the foreign exchange reserves is bigger than the country's annual budget and this is the highest forex reserves so far. 

The report states gross foreign exchange reserves increased 18.0 percent to Rs 1816.57 billion in mid-January 2024 from Rs 1539.36 billion in mid-July 2023. In the US dollar terms, the gross foreign exchange reserves increased 16.9 percent to 13.69 billion in mid-January 2024 from 11.71 billion in mid-July 2023.

Of the total foreign exchange reserves, reserves held by NRB increased 18.9 percent to Rs 1600.23 billion in mid-January 2024 from Rs 1345.78 billion in mid-July 2023.

Reserves held by banks and financial institutions (except NRB) increased 11.8 percent to Rs 216.35 billion in mid-January 2024 from Rs 193.59 billion in mid-July 2023. The share of Indian currency in total reserves stood at 22.5 percent in mid- January 2024. Based on the imports of six months of 2023/24, the foreign exchange reserves of the banking sector are sufficient to cover the prospective merchandise imports of 14.5 months, and merchandise and services imports of 12.1 months. The ratio of reserves-to-GDP, reserves-to-imports and reserves to-M2 stood at 33.8 percent, 100.9 percent and 27.7 percent respectively in mid-January 2024.

Such ratios were 28.6 percent, 83 percent and 25 percent respectively in mid-July 2023.

The current account remained at a surplus of Rs 161.62 billion in the review period against a deficit of Rs 35.57 billion in the same period of the previous year. In US Dollar terms, the current account registered a surplus of 1.21 billion in the review period against a deficit of 279.6 million since the same period last year.

Capital expenditure is not gaining momentum this year as well. Only 19 percent of the capital budget has been spent even though six months of the fiscal year have already passed.

Amid this backdrop, the government has begun preparations for the budget for the fiscal year 2024/25. Experts say unless a systemic change is made in budget implementation, all these lengthy preparations for the budget will yield no result.

Out of the Rs 302.07bn allocated for capital expenditure in the current fiscal year, only Rs 57.74bn have been spent so far. Slow capital spending has affected the overall economic cycle in the country. Cash flow to the market has been affected. As a result, manufacturers of cement, steel, and other construction materials, as well as laborers, have been affected. Banks are awash with loanable funds. Interest rates too have come down. But new demands for loans are not coming.

On the other hand, the government hasn’t been able to meet revenue targets. The government has set a target of raising Rs 1,422.54bn in fiscal year 2023/24, which ends in mid-July. But it has mobilized only Rs 549bn till the end of January.

Although the external sector of the Nepali economy has improved of late, the economy continues to see pressure on internal sectors, economists say. The share of exportable goods to total trade has come down as factories are running below capacity. The share of imports, as a result, has reached 91.11 percent in Nepal’s total trade. Since imports have also come down due to a fall in demand, the government’s revenue has been hit.

The National Planning Commission (NPC) recently completed discussions with ministries on their priorities and programs for the fiscal year 2024/25. “The ministries have been told to bring programs based on the 16th National Plan document. Since it will be the first fiscal year of the 16th Plan, the ministries should make a policy departure to incorporate basic tenets of the plan,” Ramesh Paudel, a member of the NPC, said.

According to Paudel, the NPC would provide a budget ceiling for ministries after studying their proposals. “We will also get the idea of resources by holding discussions with the Revenue Advisory Committee. We will take resources available to us into consideration while setting a budget ceiling for ministries,” he added.

Economic expert Dilli Raj Khanal said the NPC should set up a division to analyze allocations made to ministries, actual budget spent, and the income and expenditure pattern. “The budget-ceiling process looks like mere ritual. This is because the actual budget is entirely different from what the NPC estimates,” he added. “The credibility of the overall budget is losing due to the tendency of spending the budget in the last month of the fiscal year. This is happening because of haphazard budget allocation and the tendency of powerful people selecting programs without rationale.”

Another economic expert, Chandra Mani Adhikari, said since ministries select programs and priorities based on the ceiling provided by the NPC; NPC should set the ceiling at the earliest. “Since capital spending is not picking up, there is a need to change the budget system and working style, and hold the people responsible for this accountable,” Adhikari said. He also said NPC should discourage ministries from entering unfeasible projects in its project bank. “Only the projects ready for implementation and for which resources are guaranteed should get priority in the budget,” he said. “Also, NPC should clearly state that implementing agencies will be held responsible if projects are not implemented as per the schedule.”

Dhaniram Sharma, the spokesperson for the finance ministry, said he was confident that the capital budget would be spent in the remaining months of the fiscal year. “Slow spending is due to shortcomings in prioritizing projects. That is why the ministry has prepared a standard for the classification of the budget based on their priorities,” he added. “It controls small projects. We will strictly enforce the standards in the coming fiscal year.”

Since ministries can’t propose programs having a budget of less than Rs 30m, Sharma said the number of small projects will go down considerably. “This will, in turn, increase public spending,” he added.

The ministry has also prepared standards for tendering for multi-year projects. As per the standards, such projects should be tendered by mid-October. The standards will also come into operation from the next fiscal year.

The finance ministry has already held the first round of discussions with the ministries on the upcoming budget. “We will hold the next round of meetings after the NPC sets the budget ceiling,” Sharma added.

The Nepal Stock Exchange (NEPSE) gained 9. 44 points to close at 2,085.71 points on Tuesday.

The sensitive index, however, dropped by -1. 45 points to close at 377. 83 points.

A total of 7,624,376-unit shares of 315 companies were traded for Rs 2. 59 billion.

Meanwhile, Samaj Laghubittya Bittiya Sanstha Limited (SAMAJ) was the top gainer today, with its price surging by 9. 99 percent. Likewise, Samling Power Company Limited (SPC)was the top loser as its price fell by -10. 00 percent.

At the end of the day, total market capitalization stood at Rs 3. 27 trillion.

The price of gold has dropped by Rs 500 per tola in the domestic market on Tuesday.

According to the Federation of Nepal Gold and Silver Dealers’ Association, the yellow metal is being traded at Rs 118, 000 per tola today. It was traded at Rs 118, 500 per tola on Monday.

Meanwhile, tejabi gold is being traded at Rs 117, 450 per tola. It was traded at Rs 117, 950 per tola.

Similarly, the silver is being traded at Rs 1,390 per tola today.