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Nepal is expected to make slower progress in meeting criteria related to graduation of the country from the Least Developed Country (LDC) to the Developing Country (DC) in the next fiscal year 2023/24 compared to the earlier estimate, according to a new report of the National Planning Commission (NPC). The National Resource Estimate Committee headed by the NPC Vice Chair Min Bahadur Shrestha made a downward revision in all criteria of LDC graduation but said it would not go below the threshold set by the United Nations. In November 2021, the United Nations General Assembly approved a proposal to upgrade Nepal from an underdeveloped country to a middle-income developing country by 2026. The 40th plenary of the 76th Session of the United Nations General Assembly (UNGA) unanimously adopted a resolution endorsing the graduation of Nepal from the LDC category with the preparatory period of five years, according to a statement issued by the Permanent Mission of Nepal to the United Nations in New York. The decision to graduate from Nepal was taken based on Nepal’s progress in two out of three areas, namely the human asset index and the economic vulnerability index. However, the country has long been struggling to meet the criteria related to per capita income, the third component. According to its committee's estimate, Nepal’s per capita income will reach USD 1,572, down from USD 1,595 estimated while preparing the three-yearly Medium-Term Expenditure Framework (MTEF) in the fiscal year 2020/21. The MTEF had estimated progress in the number of economic sectors for the fiscal years 2021/22, 2022/23, and 2023/24. Likewise, Nepal’s score in the economic vulnerability index is estimated at 23.5 in the next fiscal year, up from an earlier estimate of 23. As per the UN criteria, the threshold for LDC graduation is below 32. “Nepal’s economy is vulnerable due to high dependence on imports, particularly that of agricultural goods imports and climate change,” said an expert. Nepal’s dependence on imports for revenue has been exposed as import restriction measures resulted in a massive slump in the government’s revenue. When it comes to the human asset index, Nepal is set to score 77 from an earlier estimate of 78 under MTEF. In order to graduate from LDC, this score should be above 66. “Covid-19 affected the human development performance on which Nepal has been performing very well in recent years,” the expert said. Nepal’s economy suffered badly from Covid-19, and after recovering from the pandemic, the emergence of a massive balance of payment deficit and a liquidity crunch in the last one and a half years. Now, the country is facing a fiscal deficit with revenue insufficient even to finance the administrative expenditures of the government. The Shrestha-led committee has decreased the estimated resource collection by the government in the next fiscal year 2023-24 by over Rs 300 billion compared to its earlier estimate while preparing the medium-term expenditure framework in fiscal 2020-21. The committee made the downward revision in earlier estimates as the government has been witnessing a sharp decline in revenue collection. The committee has estimated the resource generation of Rs 1688.4 billion for the next fiscal year, which is less than Rs 309.4 billion against the earlier estimate of Rs 1997.8 billion as per the three-year Medium Term Expenditure Framework. The government’s revenue, foreign grants and loans, and internal loans are sources of the government’s resources. Even when the government prepared the MTEF in the fiscal year 2020/21, an ambitious estimate of resource collection was not made citing the impacts of the Covid-19 pandemic on the economy. The committee has estimated the revenue collection to decline by 2.5 percent in the current fiscal year from the growth of 30.5 percent in the last fiscal year. The revenue has not been enough even to cover the recurrent expenditure of the government so far. As of February 25, the government collected revenue of Rs 535.82 billion while recurrent expenditure by the same date stood at Rs 555.57 billion, according to the Financial Comptroller General Office (FGCO). The revenue collection declined by Rs 104 billion by February 25 this fiscal year compared to the same period last fiscal year. Considering these factors, the government has already made a downward revision of revenue collection through the mid-term review of the budget.

The Nepal Stock Exchange (NEPSE) plunged by 3. 65 points to close at 2,023. 54 points on Monday. Similarly, the sensitive index dropped by 0. 84 points to close at 383. 01 points. A total of 5,120,888 unit shares of 259 companies were traded for Rs 1. 89 billion. Meanwhile, Swabhimaan Laghubitta Bittiya Sanstha Limited was the top gainer today with its price surging by 9. 73 percent. Likewise, Rapti Hydro and General Construction Limited was the top loser with its price dropped by 6. 43 percent. At the end of the day, the total market capitalization stood at Rs 2. 92 trillion.

The next fiscal year's federal budget will be smaller than the current fiscal year. With the government struggling to manage financial resources due to a widening gap between income and expenditure, the National Planning Commission (NPC) has set the next fiscal year's government expenditure ceiling at Rs 1688.40 billion. The ceiling set by the NPC is smaller by Rs 105.43 billion than the budget for this fiscal year. The then Finance Minister Janardan Sharma had brought the budget of Rs 1793.83 billion for FY 2022/23. However, the Finance Ministry on February 12, trimmed the budget size during the mid-term review by 13.59 percent after realizing that raising the required resources from all sources, particularly revenue and foreign aid, is unachievable. The revised budgetary allocation now amounts to Rs 1,549.99 billion from Rs 1,793.83 billion earlier. The Finance Ministry will prepare the next fiscal year's budget based on the NPC ceiling. According to NPC Member Ram Prasad Phuyal, the ceiling has been lowered for the next fiscal in view of weak revenue mobilization and the decline in foreign assistance. "The budget ceiling for the next fiscal year has been fixed after analyzing various factors such as contraction in revenue mobilization, decline in foreign loans and grants, and additional pressure on payment of the foreign debt due to fluctuation in foreign exchange," said Phuyal. NPC estimates that the government revenue collection will total Rs 1,403 billion for the next fiscal year. The body has set foreign assistance targets (grants and loans) at Rs 201 billion and internal loans at Rs 230 billion for FY 2023/24. Based on the ceiling, ministries will have to propose programs and projects for the next fiscal year, following which discussions will be held to finalize them. Although NPC sets the ceiling of the budget for the upcoming fiscal year, the Finance Ministry generally does not follow the recommendations of the NPC. The National Resources Estimation Committee headed by the NPC Vice Chairman Min Bahadur Shrestha has fixed the ceiling of the federal budget for the next three fiscal years. The NPC has set the budget ceiling of Rs 1,880 billion and Rs 2,088 billion for FY 2024/25 and FY 2025/26 respectively. Similarly, the revenue target for 2024/25 and FY 2025/26 has been set at Rs 1,606 billion and Rs 1,831 billion respectively. NPC has estimated that the country's economy will grow by 4.5 percent in the current fiscal year, 6 percent in FY 2023/24, 7.5 percent in 2024/24 and eight percent in 2025/26.

The Nepal Electricity Authority (NEA) has extended the deadline for submitting bids for developing solar plants and supplying electricity till March 13 amid solar manufacturers showing unwillingness to participate in bids complaining about the price cap on solar power. Issuing a tender notice on November 28, the state-owned power utility had invited bids from the solar manufacturers setting the deadline for February 26. In an addendum notice, the NEA extended the deadline till March 13 while also notifying the bids will be opened at 2 pm on the same day. The NEA plans to buy a maximum of 100 MW of power from such solar plants proposed to be developed by the private sector at 16 locations across the country. This is for the first time that the state-owned power utility sought to buy solar power through bids. It is the biggest move by the NEA to buy grid-connected solar power with just 44MW of solar power being connected to the national grid till the last fiscal year 2021/22. In January last year, NEA decided to purchase solar energy only through a competitive bidding process, ending the fixed rate regime of the previous three years. NEA officials say the move is also aimed at bringing down the prices of solar power amid declining prices of solar power over the last decade. In March last year, the state-owned power utility decided to cap the maximum rate to be offered to solar power generators at Rs5.94 per unit. Earlier, NEA used to sign power purchase agreements with solar power developers at a fixed rate of Rs 7.30 per unit. Solar power manufacturers have however long been complaining that the price cap imposed by the NEA was impractical and the solar projects could not be developed within the price limit. “NEA only saw prices drastically coming down in neighboring India,” said Ram Bahadur Bhandari, Managing Director of Suryodaya Urja, a company involved in larger solar plants in Nepal. “But it failed to see the facilities being provided by the Indian government such along the scale of solar plants in India.” According to him, solar developers in India develop high-capacity solar plants which give economies of scale helping to reduce per-unit cost. “The Indian government has also been generous to provide cheap or free lands to develop the solar plants and offer tax concessions.” As per the tender notice, bidder(s) can propose a maximum capacity set for specific locations ranging from 10MW to 30MW based on the location. They however cannot propose to deliver less than 1MW at the delivery point. The bidder can choose any solar photovoltaic power generation technology. As per the notice, the developer will also be responsible for evacuating power from the plant to the nearby NEA substation. Nepal has a long way to go to realize its potential in solar energy. According to the Nepal Energy Sector Synopsis Report-2022, the country has the potential to generate around 2,100MW of solar electricity. Nepal also aims to generate a total of 15,000 MW of electricity by 2030 of which 5-10 percent will be generated from mini and micro-hydropower, solar, wind, and bio-energy projects. “The policy of NEA has not been friendly to promote solar energy,” said Bhandari. “So, we have abandoned our plan to develop a solar plant in Bardiya despite buying lands for the same because of the price cap imposed by the NEA.”