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An international aircraft landed for the first time at Pokhara International Airport today since its operation on January 1, 2023. A direct chartered flight of the Sichuan Airlines from Chengdu Tianfu International Airport, China landed at the airport at 9:06 am, according to TIA information officer Bishnu Adhikari. The A-391 airbus of the Sichuan Airlines arrived in Pokhara carrying a Nepali delegation led by National Assembly Chair Ganesh Prasad Timilsina who returned home following the completion of China visit and Chinese athletes and tourists. The squad of Chinese athletes arrived in course of taking part in the Nepal-China Friendship Dragon Boat Festival to take place on Friday and Saturday at Fewa Lake. Gandaki Province Chief Prithvi Man Gurung, Chief Minister Surendra Raj Pandey, Federal Minister for Culture, Tourism and Civil Aviation, Sudan Kirati and Pokhara Metropolis mayor Dhanraj Acharya were there at the airport to receive the passengers. The airport said it is yet to be updated about a probable next flight of the airlines for Pokhara.  

With just one month left for the current fiscal year to end, the government’s capital expenditure has stood at a mere 40 percent of the total allocation. According to the Financial Comptroller General Office (FCGO), the government’s capital expenditure as of mid-June reached Rs 151.43bn which is 39.81 percent of the allocated budget for the current fiscal year 2022/23. The government had initially set a capital expenditure target of Rs 380.38bn which was slashed to Rs 313.85 percent in the half-yearly review of the federal budget. The poor state of capital expenditure is not a new problem. Official statistics show that the government has managed to spend only 72 percent of the capital budget on average every year. The majority of capital spending takes place in the last month of the fiscal year i.e., Asar (mid-June to mid-July). The report of the Office of the Auditor General (OAG) also shows that 40 percent of the total capital expenditure takes place in Asar. Experts say that there is a dire need to boost capital expenditure to take the country’s economy out of the current downturn. According to them, with the private sector investment in the economy contracting sharply this year, government expenditure is a must to revive the economy. The government expects capital expenditure of 67.91 percent of the allocated amount, according to the budget document. Overall, government expenditure is expected to remain at 83.90 percent of the allocation. A report from the Prime Minister’s Office (PMO) shows implementation problems of the budgetary programs. According to the report, PMO had set 1,270 activities and 2,795 milestones, besides 339 result indicators for 21 ministries to determine the implementation status of the policies and programs for the current fiscal year. As of the end of the third quarter of the current fiscal year 2022/23, only 10.39 percent of the activities have been completed, while 20.57 percent of the milestones have been achieved. Of the 356 activities in the infrastructure sector, 28 were completed, 296 are under construction and 32 have made no progress, according to the report. “One of the reasons why the government's capital expenditure has been poor this fiscal year is due to lack of resource availability,” said a government official. “Citing the lack of the resources, the government has been delaying making payment to the contractors.” During a press meet last week, the president of the Federation of Contractors’ Association of Nepal (FCAN) said that the government’s failure to make timely payments hindered the contractors’ ability to intensify the construction activities which resulted in poor capital expenditure. “The government paid as much as Rs 25bn in the past two months,” said FCAN President Rabi Singh. “The government still owes us around Rs 70bn.” The government resources were badly affected by the imposition of an import ban in April 2022 which lasted nearly eight months. A customs department official said that the customs offices could only raise as much as just over half of the targeted revenue as of mid-May. With the government failing to spend and the private sector no longer interested in taking loans from the banks citing the shrinking demands in the market, the economy is suffering badly. The government has estimated the country’s economic growth at just 2.16 percent in the current fiscal year, much lower than the projections of the World Bank and the Asian Development Bank. Both international agencies have forecasted Nepal’s economic growth to be at 4.1 percent in the current fiscal year. Economists say that when the private sector investment dries up, it is the government that has to boost its spending. But, the government itself is facing a resource crunch and has little ability to accelerate the implementation of the development projects. But the government hasn’t yet come up with any stimulus package to boost the economy every government does when the economy is slowing. In fact, the government brought down the budget for the next fiscal year by 2.37 percent compared to the budgetary size for the current fiscal year. Even the Nepal Rastra Bank (NRB) also time and again hinted that the central bank alone could not be relied on to revive the economy. “Primary job of the monetary policy is to control inflation and there is not much room for the NRB to introduce loose monetary policy as inflation has continued to remain at a high level,” said a senior NRB official. According to NRB, the inflation rate stood at 7.41 percent as of mid-May. “The government should itself focus on how to accelerate the capital budget and create a conducive environment for the private sector to make investments,” the NRB official said.

The Parliamentary Finance Committee has decided to allow the Securities Board of Nepal (Sebon) to move ahead with the license issuance process of new stock brokerage firms. After a discussion with the representatives of Sebon on Tuesday, the committee has given its nod to the licensing process. Seeking clarification over the issuance of licenses, the committee on June 12 instructed Sebon to suspend the process. In a meeting on June 12, the lawmakers demanded that a sub-committee should be formed to investigate the alleged irregularities in the issue of license issuance for a new stock exchange, brokerage firms, and commodity exchanges. With Tuesday’s decision, the deck has been cleared for Sebon to proceed with license issuance for new brokerage firms. The board has already issued the letter of intent (LoI) to 43 brokerage firms. The regulator had already issued licenses to 18 brokerage firms before the finance committee's June 12 instruction. The June 12 decision of the committee came under criticism as Sebon had started the licensing process following the Supreme Court’s decision. A group of new stock brokers who'd received the LoIs also strongly lobbied with the government and the political parties to break the deadlock. The lawmakers during Tuesday’s meeting appeared conciliatory with almost all of them agreeing for resuming the stalled licensing process. UML lawmaker Padam Giri who'd earlier taken a stance against the new license issuance, on Tuesday said that firms that have met the criteria should be given licenses to make the market competitive. Lawmaker Mukta Kumari Yadav opined that the finance committee cannot stop the process after the decision of the Supreme Court. The Rastriya Swatantra Party lawmaker and economist Swarnim Wagle said that the licensing process should be carried out transparently. Former finance minister Bishnu Paudel said that brokerage firms should be issued licenses in accordance with the law. “The finance committee should honor the decision of the Supreme Court,” he said. During Tuesday’s discussion at the finance committee, Sebon Chairman Ramesh Kumar Hamal stressed the need for additional brokerage firms in the domestic stock market. “Brokerage firms are the important stakeholders of the capital market. The new firms are being given licenses as per the need of the market. It is normal to receive a complaint when a syndicate of brokerage firms is being dismantled,” he said. The Sebon, on 18 Sept 2022, invited applications for a new stock exchange, commodity exchanges, and stock brokerage firms. However, the process stalled for five months after advocate Deepak Bikram Mishra went to the Supreme Court (SC) demanding to stop the licensing process. The licensing process was stalled after the apex court issued an interim order on 21 Oct 2022. But, the joint bench of Justices Sushma Lata Mathema and Anil Kumar Sinha in the second week of April 2023 dismissed the petition, paving the way for the Sebon to move ahead with the licensing process. Following this, the Sebon on April 13 again invited applications from interested parties for new stock exchange and commodities exchanges. According to Sebon, the new stock exchange should have a paid-up capital of Rs 3bn, of which 70 percent will be institutional investments. The licensing process for the new stock exchange has been stalled following instructions from Prime Minister Pushpa Kamal Dahal.  Amid allegations from various quarters that the government was trying to grant licenses for a new stock exchange to certain businesspersons, the licensing was stopped after Prime Minister Dahal directed Sebon to halt the process in the second week of May. Three companies have applied for the new stock exchange, namely the Himalayan Stock Exchange, National Stock Exchange, and Annapurna Stock Exchange. As for the license issuance for two commodities exchanges, Sebon is currently evaluating the applications of four companies.

With the economic downturn in the country badly affecting demand for credit and debt recovery becoming difficult, the profit of banks and financial institutions (BFIs) has taken a beating in the 10 months of the current fiscal year. The central bank statistics show BFIs’ net profit has dipped by around four percent in this fiscal. The net profits of BFIs (A, B, and C class financial institutions) amounted to Rs 62.606bn till mid-May this fiscal compared to Rs 65.113bn during the same period of the last fiscal year. The central bank data shows profits of commercial banks (class ‘A’ institutions) and development banks (class ‘B’ institutions) have plunged in the current fiscal year while finance companies (class ‘C’ institutions) have posted a surge in their profits. In the review period, the profit of commercial banks has declined by two percent in the current fiscal year. The net profits of the banks till mid-May stood at Rs 57.163bn compared to Rs 58.338bn in the corresponding period of the last fiscal year. The profit of development banks has plummeted by double-digit in the review period. The net profits of the class ‘B’ institutions dipped by 25.59 percent to Rs 4.297bn in the 10 months of the current fiscal year compared to Rs 5.775bn in the same period of the last fiscal year. However, finance companies have managed to post an increase of 14.58 percent in their profits. The net profit of the class ‘C’ institutions rose to Rs 1.146bn by mid-May 2023 compared to Rs 1.001bn a year ago. According to bankers, the rise in non-performing assets (NPAs) and increase in provisioning amount has hit the BFIs’ profit in the current fiscal year. They attribute the decline in profit to the slowing economic activities coupled with higher interest rates, and borrowers’ inability to repay debts. According to them, banks have been focusing more on loan recovery since debt servicing has become difficult of late. With the sharp increase in NPAs, banks have been forced to set aside more money for loan loss provisions. Among the 21 commercial banks, Nabil Bank has topped the chart, earning a net profit of Rs 6.12bn. Global IME Bank is ranked second with Rs 5.34bn followed by NIC Asia Bank with Rs 4.39bn. Muktinath Bikas Bank is way ahead of other development banks in profit earning in this fiscal. Of the 17 development banks in operation in Nepal, Muktinath Bikas Bank has posted a net profit of Rs 957.22m, followed by Garima Bikas Bank with Rs 690.16m and Shine Resunga Development Bank with Rs 618.33m. Among the finance companies, Capital Merchant Finance posted a profit of Rs 475.26m followed by Manjushree Finance with Rs 124.1m and Gorkhas Finance with Rs 105.3m.