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Government treasury negative by Rs 15b
KATHMANDU, AUG 05 -
The government's treasury has turned negative by Rs. 15 billion as of Monday as a result of a surge in government spending towards the end of the last fiscal year. The treasury had turned negative by Rs. 8 billion in the previous fiscal year too.
Finance Ministry officials said the latest figure represents deficits of Rs. 7 billion in the last fiscal year and Rs. 8 billion in the previous fiscal. They added that it was normal to have a negative treasury in August, but that the figure this year was unusually high.
Officials said the high negative treasury was a result of extra expenditure for the salaries of government employees and the failure to get reimbursement from donors for expenditure made for projects for which donors had pledged support.
"The government's failure to spend the budget under the heading of donor support is another reason for the deficit as the government had to use its own resources," said Bodh Raj Niraula, joint secretary at the Ministry of Finance.
The government had to face an extra financial burden as it increased the salaries of government employees after the budget was announced in the last fiscal year. The government's plan to introduce a supplementary budget to adjust this situation did not materialise due to political wrangling.
"An increase in revenue surpassing the target was inadequate to fulfil the extra salary demands leaving the government no option except to take an overdraft from the central bank," said Niraula. The government has been complaining that donor-aided projects were failing to spend the budget under the heading of donor support due to strict conditions put forward by the donors. Finance Minister Surendra Pandey raised this issue with the president of the Asian Development Bank Haruhiko Kuroda when he visited Nepal recently.
The Finance Ministry's austerity measures including cutting resources for visits of VIPs were not sufficient to cover the extra burden of government salaries. The government spent Rs. 8 billion in additional salaries in the last fiscal year, said the Finance Ministry.
The latest treasury position represents the true position of the national account as it covers the transactions of banking units except the Nepal Bank Limited (NBL) branch in Pyuthan that are involved in government resources transactions. The government's transactions are carried out through eight NRB branches, 65 branches of Rastriya Banijya Bank (RBB), 42 branches of NBL, five branches of Everest Bank and one branch of Nepal Bangladesh Bank.
A central bank official said that NRB had asked the Finance Ministry to convert the negative treasury amount that went as overdraft from the central bank into government bonds. NRB's proposal is guided by the fact that it will receive interest on the overdraft after it is converted into bonds. Niraula said that the overdraft could be converted into bonds. "But the ministry has not taken any decision in this regard so far," he added.
Following the conversion of the overdraft into bonds, the government will have to adjust them with the internal loans to be raised in the current fiscal year. It will limit the government's ambition to raise more internal loans for the current fiscal year with the adjustment of Rs. 15 billion.
Posted on: 2010-08-06 08:31
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