Submit your Article

The Nepal Stock Exchange (NEPSE) gained 16. 54 points to close at 1,866.34 points on Thursday. Similarly, the sensitive index surged by 2. 19 points to close at 355. 62 points. A total of 6,128,621-unit shares of 272 companies were traded for Rs 1. 65 billion. Meanwhile, Joshi Hydropower Development Company Ltd was the top gainer today with its price surging by 6. 94 percent. Likewise, Sunrise Focused Equity Fund was the top loser with its price dropping by 6. 00 percent. At the end of the day, the total market capitalization stood at Rs 2. 72 trillion.

The government and the World Bank on Wednesday signed a financing agreement for a $120 million concessional loan from the International Development Association and a grant agreement for $19.7 million from the Global Partnership for Education for the School Sector Transformation Program (SSTP) Operation, which support the implementation of the government’s flagship School Education Sector Plan. The agreement was signed by Arjun Prasad Pokharel, Finance Secretary, and Faris Hadad-Zervos, the World Bank Country Director for Maldives, Nepal, and Sri Lanka. The World Bank in a press statement said the SSTP operation focuses on improving foundational skills by implementing the national integrated curriculum in early grades. According to statement, the operation supports the government’s program through the development and implementation of the Recovery and Accelerated Learning Plan to address learning losses as a result of school closures due to the Covid-19 pandemic and other disasters, strengthening teaching and learning in the classrooms, construction of green and resilient classrooms, ensuring minimum enabling conditions such as qualified teacher, child-friendly taps and seating, and toilets in the early childhood education development centers, and strengthening digital teaching and learning materials, among others. "The operation also envisions improving the equity of the school sector by supporting girls, disabled students, and those of lower socio-economic status, through targeted scholarship programs," reads the statement. “We are hopeful that the reform agenda envisioned in the School Sector Transformation Program will be instrumental in increasing equitable access and improving the quality of education, which are critical for human capital development,” said Pokharel. Speaking on the occasion, Hadad-Zervos of the World Bank said the School Sector Transformation Program operation supports the Government of Nepal’s Green, Resilient, and Inclusive Development (GRID) agenda by investing in quality and equitable access to education, which is key to developing human capital and fostering inclusive and resilient growth.

Nepal Association of Tour and Travel Agents (NATTA) has raised concerns over the decision to impose 13 percent value added tax (VAT) on air-travel tickets for visits abroad and demanded its withdrawal. The government in the budget for the upcoming fiscal 2023-24 announced to levy a 13 percent VAT on air tickets for visits abroad. NATTA, as a representative body of tour and travel agents, believes the imposition of VAT on air tickets for international travel would negatively impact the tourism sector. "The provision of charging a 13 percent additional tax on air tickets for foreign visits makes it challenging to afford international trips when the international travel fare is already expensive and it is capable of affecting the travel and tour business," NATTA Chair Ramesh Thapa said in a press statement today. He said the decision to levy additional 13 percent VAT on air tickets for foreign travel is applied when its process is made from Nepal and it is not charged while proceeding for tickets from abroad. "The domestic tour and travel business is certain to be marred by the decision when it is struggling to make through a post-COVID-19 situation. The decision hampers recovery efforts after the pandemic." Thapa further argued the decision to impose an additional two percent luxury tax on services of high-end hotels and restaurants was not expected at all. However, NATTA welcomed the government decision to observe the period from 2023-2032 as a visiting year. The priorities to the constructions of the Nijgadh Airport, other airports, revival of cultural heritages, identification on new touristic destinations and acceleration of infrastructure development are other positive aspects of the budget. The decision to allocate an additional over 2.5 billion budgets to the tourism sector than in the current fiscal year encourages the related community.    

The government will be spending more than a quarter of its revenue on repaying domestic and external loans in the next fiscal year. In the budget for the next fiscal year 2023/24, the government has announced to spend as much as Rs 330.55bn in loan repayment which accounts for 26.47 percent of total projected revenue. The government has to repay Rs 221bn in loans in the current fiscal year, as per the revised estimate. With the massive amount allocated for repaying the internal loans, the total budget for repayment of loans has increased substantially. As large amounts of internal loans will be matured in the next fiscal year, the government had to allocate a huge amount for repaying the internal loans. Rs 275.78bn has been allocated for repaying domestic debts which accounts for the repayment of both loan principal and interest amount. The allocated amount is higher than the total internal loans planned to be raised in the next fiscal year. The government has planned to raise Rs 240bn in internal loans in the next fiscal year. According to the Ministry of Finance, the government will spend as much as Rs 93.23bn for repaying the interest on internal loans in the next fiscal year. In the new budget, as much as Rs 182.55bn has been allocated for repaying the principal loan amounts. Because of the liquidity crunch in the banking system, the government had to pay more interest for raising internal loans in the last two years. Experts caution the government to keep the debt servicing budget under five percent of the revenue collection. “The government's ability to finance important sectors including the health, education, and infrastructure sector will be reduced for requiring a massive amount in debt servicing,” said an economist. The government started to raise loans on a large scale from internal and external creditors for post-quake reconstruction purposes from FY 2015/16. According to the International Monetary Fund (IMF), following a gradual decline in the early 2010s, and against the background of the country’s transition to fiscal federalism and the need to rebuild after the earthquake of 2015, Nepal’s public debt has risen significantly over the last five years. The country's total debt has increased from 25 percent of GDP in FY 2015/16 to 44 percent in FY 2020/21, with the largest increase in FY 2019/20 after the start of the Covid-19 pandemic. According to the Public Debt Management Office, Nepal’s total outstanding debt as of mid-May stood at Rs 2.15trn, of which Rs 1.08trn is internal debt while Rs 1.07trn is external debt. The latest IMF Debt Sustainability Analysis shows that both external and overall debt remains at low risk of debt distress. “Despite a challenging global environment, developments since the Extended Credit Facility (ECF) request had limited effect on public debt dynamics, as the increase in the current account deficit in FY 2021/22 has been absorbed by a drawdown in reserves rather than accumulation of external debt,” reads an IMF report. IMF has projected Nepal’s debt to peak at 50 percent of GDP in FY 2025/26 and gradually subside afterward.