E-Kantipur

FEB 09 - There is disagreement in the calculation whether Nepal will have a surplus after debt servicing of foreign loans or whether it will have to manage additional money for debt servicing.

The Finance Ministry has calculated that Nepal will have a surplus of Rs. 800 million due to strengthening of the Nepali rupee against the U.S. dollar over the last six months.

The Nepali currency's position against the U.S. dollar stood at Rs. 74.45 per US$ 1 on Monday which remained at Rs. 80 when the budget was allocated for foreign debt servicing. The ministry has also decided to use the surplus money to repay internal loans, according to Finance Secretary Rameshwor Khanal.

However, officials at the  Financial Comptroller General Offfice said that the country may face a shortage of Rs. 1 billion for external debt payments as the valuation of special drawing rights (SDR), a currency being used by the International Monetary Fund and other multilateral donors), had gone up.

When Nepal repaid an instalment to the Asian Development Bank (ADB) on Aug. 15, 2009 for its loans to the Rural Water Supply Sector Project, the instalment amount was US$ 262,675.89 with the principal US$ 232,298.82 and interest US$ 30377.07.

But, another instalment of repayment made by Nepal on Feb. 15, 2010, went up to US$ 275,696.22 with the principal US$ 238576.51 and interest US$ 37119.71.

An FCGO official said that the principal amount remains the same in every instalment of payment but the interest should decrease due to the declined status of the principal. But, in the case of the above payment both principal and interest have gone up. The ADB had started evaluating its loans under SDR since the fiscal year 2008/09 although the payments are made in U.S. dollar, euro, Japanese yen and other currencies depending on the donor countries. "As per our assessment, the valuation of the SDR has gone up by 30 percent causing big harm to Nepal's debt servicing," said the official.

But, Secretary Khanal said that Nepal must have surplus money due to a weakening U.S. dollar. "The SDR generally remains proportional to the U.S. dollar as the dollar's stake in the SDR valuation remains the biggest," he added. The value of the SDR is fixed on the basis of the average value of the U.S. dollar, euro and Japanese yen. Nepal has allocated Rs. 14.54 billion for external debt servicing for the current fiscal year. Out of that, Nepal will be paying Rs. 6.41 billion to the ADB, Rs. 4.22 to the World Bank and Rs. 3.21 billion to bilateral donors.

Nepal has made external debt servicing of Rs. 5.36 billion as principal and Rs. 1.24 billion as interest until mid-January, according to the ministry.

Posted on: 2010-02-09 10:12

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