Cash crunch rings alarm bells
KATHMANDU, Jan 07 - Low growth in remittance inflow and soaring trade deficit have given rise to complexities in the country’s economy. Statistics of the first four months presented by Governor Bijay Nath Bhattarai at the Finance and Labour Committee of the Legislature-Parliament show that problmes have increased.
Nepal Rasta Bank (NRB)’s first four-month data show remittance inflow grew by only 6.6 percent, while trade deficit widened by 48 percent, causing Balance of Payment (BoP) deficit of a record Rs. 20.49 billion. The BoP, national account of inflow and outflow of income, was at a surplus of Rs. 11.86 billion during the same period last year.
Now, export has declined by 23.7 percent but import has surged by 27.8 percent. Decline in the number of migrant workers by 12. 3 percent has resulted in a drop in remittance inflow. Since growth in remittance inflow hasn’t been able to fill the trade deficit gap, the current account deficit stands at Rs. 13.94 billion. Last year, there was surplus of Rs. 8.38 billion.
Meanwhile, a private sector delegation met Finance Minister Surendra Pandey on Wednesday and urged him to reduce the Cash Reserve Ratio (CRR) of banks. Reeling under liquidity crunch, banks have lately increased
interests on deposits as well as lending.
“The rise in interest rate has spiralled up production costs at a time when the industrial sector is facing acute power crisis,” said Kush Kumar Joshi, president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI). “We’ve urged the minister to take steps to reduce CRR.”
Similarly, Forum of Nepalese Bankers on Wednesday asked Governor Bhattarai to reduce both CRR and Statutory Liquidity Ratio by 1.5 percent.
The governor said the country could plunge into economic crisis if cooperatives were not monitored strongly. “There is a need to start supervision of big savings and credit cooperatives. We suspect that paper notes remain stockpiled in the cooperatives.”
Of late, the government has been closely watching the cooperatives sector with large exposure of loans in real estate. Three weeks ago, the government had said it would begin monitoring 40 large saving and credit cooperatives. The plan
was that the Department of Cooperatives would monitor these cooperatives with technical assistance from NRB.
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