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The decline in the profit of commercial banks has also hit the government’s tax collection from the banking sector. The income tax payment from the banking sector to the government has declined by 5.59 percent in the nine months of the current fiscal year 2022/23. The banks paid a total of Rs 19.99bn in income tax to the government as of the third quarter of the current fiscal year compared to Rs 21.16bn in the corresponding period of the last fiscal year. According to bankers, the decline in profit in the current fiscal year has directly affected the income tax. “As banks’ income and profit took a beating this year, their contribution to the income tax also suffered,” said Anil Sharma, CEO of Nepal Bankers’ Association (NBA). With bad loans increasing gradually from the start of the current fiscal year, the banks have reported a sharp rise in non-performing loans (NPLs) in the last three months. Bankers attribute the rise in NPLs to the slowing economic activities coupled with higher interest rates, and borrowers’ inability to repay debts. According to them, loan recovery and debt servicing have become difficult of late. With loan recovery and debt servicing becoming difficult, banks have been forced to provision huge amounts for NPLs. On the other hand, the high-interest rate that banks were forced to pay for their deposits in the first half of the current fiscal year, has increased their cost of funds. The NPL of commercial banks stood at 3.03 percent till mid-April, 2023. As NPLs surged sharply, the loan loss provisions of banks also increased. The amount for provisioning has increased by 324.27 percent. Banks have set aside Rs 31.32bn for loan loss provisions till mid-April 2023 compared to Rs 7.38 billion during the same period of the last fiscal year. While banks’ interest income grew by 31.60 percent, their interest expenses expanded by much higher during this period. As banks have to pay higher interest rates for deposits amid a prolonged liquidity crunch, their interest expense surged by 34.98 percent. This has affected the bank's net interest income which grew by 25.43 percent. Banks saw their net fee income and net trading income shrinking in the first nine months of the current fiscal. The net fee income decreased by 5.03 percent while net trading income shrunk by 36.74 percent during this period. The challenging macroeconomic climate has affected the profitability of banks; the commercial banks recorded a net profit of Rs 48.18bn in the third quarter of this fiscal compared to Rs 51.01bn during the same period of the last fiscal. Banks and financial institutions (BFIs) have to pay 30 percent in income tax in Nepal. Among the commercial banks, Nabil Bank paid the highest income tax of Rs 2.19bn, followed by NIC Asia Bank with Rs 1.72bn and Global IME Bank with Rs 1.7bn. Income tax paid by commercial banks FY 2022/23, Q3 Rs 19.99 billion FY 2021/22, Q3 Rs 21.16 billion FY 2020/21, Q3 Rs 21.91 billion  

The Millennium Challenge Accounts-Nepal (MCA-Nepal) has announced concrete progress in the implementation of the Millennium Challenge Corporation's Nepal Compact program, a US development grant program. The announcement of MCA Nepal, a special purpose vehicle (SPV) established to implement the MCC Compact, has come at a time when Jonathan Brooks, Deputy Vice President of MCC for Europe, Asia, the Pacific, and Latin America, is currently visiting Nepal. According to MCA-Nepal, six bidders have participated in a bidding process to construct the 315 km long transmission line. The bidders, all of whom are Indian contractors, were confirmed after the MCA-Nepal on May 22, opened the bid for the project. Megha Engineering and Infrastructure Ltd, Power Mech Projects Ltd, Kalpataru Power Transmission Ltd, KEC International Ltd, Transrail Lighting Ltd, Tata Projects Ltd, and Larsen & Toubro Ltd participated in the bidding process. MCA-Nepal has said that the minutes of the bid opening with details will be made available on its website soon. “These are companies participating in three separate packages of the transmission lines,” said a source at MCA-Nepal. “Even though the bid was opened for companies from all the world including from the United States and China too, only the Indian companies participated in the bidding process.” It is an important milestone for MCC which was mired in controversy before the MCC-Compact’s ratification by the Nepal’s House of Representatives on Feb 27 last year. The bidders have been confirmed ahead of the compact's entry into force in August this year. According to the MCA-Nepal source, many of the bidders have already worked in Nepal. However, the number of bidders appears to be relatively lower with only six companies participating in all three packages of the contract that include Lapsiphedi-Ratmate-New Hetauda 400kV D/C Transmission Line, Ratmate-New Damauli 400kV D/C Transmission Line, New Damauli-New Butwal 400kV D/C Transmission Line (Base), and New Butwal -Nepal/India Border 400kV D/C Transmission Line. The source said that Brooks visited Nepal to observe the preparatory works before the entry into force of the MCC Compact. With the political environment in the country becoming favorable, MCA-Nepal expects to implement the project without much disturbance. The SPV plans to complete determining the compensation to be paid to the owners of the land for the construction of transmission lines before the implementation date starts in August. The rules of the MCC require the compact to be implemented within five years after the start of the implementation date. Nevertheless, it will not be easier for MCA-Nepal to overcome the possible challenges related to the acquisition of land, a problem constantly appearing in other projects in the country as well. According to the MCA-Nepal source, the SPV also does not expect to complete the acquisition of lands when the implementation of the project begins. “It is impossible to complete land acquisition before the entry into force of the Compact,” the source said. Even MCC’s Deputy Vice-President Brooks had highlighted the importance of land acquisition and forest clearance during his meeting with Deputy Prime Minister and Home Minister Narayan Kaji Shrestha on May 20. “As the project should be completed in five years, Brooks brought up issues like the agreement between Nepal and India on the cross-border transmission line, land acquisition and forest clearance,” the Home Minister's secretariat said in a press statement. As Chief District Officer heads a committee to determine the compensation of the acquired lands and right of way for the transmission line, the US official sought support from the Home Ministry to ease the hurdles, according to Nepali officials. Brooks also met with Finance Minister Prakash Sharan Mahat on Monday. The two officials held extensive discussions on the remaining works to be carried out before implementing the project. Dr. Mahat expressed commitment to completing the project as soon as possible by concluding the important matters in the project cycle by fulfilling due legal procedures as soon as possible. MCA Nepal officials say that the MCC project has not been facing any significant political hurdles after its endorsement by the House of Representatives last year with an interpretative declaration. Deputy Prime Minister Shrestha also promised to implement the project successfully considering that the MCC Compact has already been endorsed by the Nepali parliament.

Uddhab Pyakurel is an associate professor at the Kathmandu University School of Arts. Along with his university job, Pyakurel is also engaged in a research of Nepal’s foreign policy and international relations. ApEx talked to him about the foreign policy challenges of the Pushpa Kamal Dahal government and Nepal’s relations with big powers. What are the key foreign policy challenges of the Pushpa Kamal Dahal government? Confusion in understanding Nepal’s geo-political reality within the ruling Maoist Party has remained the main challenge for Dahal and his party while being in the government or in the opposition since 2008. His own party is not rational when dealing with Nepal’s immediate and distant neighbors. That is why they use buzzwords like “equi-distance” and “equi-proximity” which doesn’t help a country like Nepal. Our leadership has to deal with many practical things to meet not only the nation’s aspiration but also day-to-day needs of people. For this purpose, a party with ruling ambitions has to go beyond emotional and ideological stands, and revisit those positions in a new context. With all communist parties in Nepal, we often find double standards. Their leaders are actually ready to compromise more than that is expected of them while dealing with external forces, but they put on a strong and unyielding attitude in front of their party cadres. Familiarizing the party cadres through new discourse and discussions in the changed global context will be helpful to both the Maoist party and its leader Dahal. They should revisit their old positions and formulate new ones to show that the party has a clear position. How do you see NP Saud as a foreign minister?  It could be considered as a great relief for Dahal to have Nepali Congress as a coalition partner. The government has a relatively pragmatic stand and attitude on Nepal’s foreign policy because of this. But it must be said that Congress didn’t cooperate with Dahal by appointing NP Saud as a foreign minister. He has in the past shown a lack of interest and engagement on issues to be dealt by a foreign minister. Saud could have been a good education minister, even home minister. But as a foreign minister, his performance has been less than average. I think this is unjust for Saud too. Nepali Congress and CPN (Maoist Center) have different views on how to deal with major powers. How does this affect our external relations? I don’t think that all the parties and leaders in the government have different views when it comes to dealing with major powers. You are right that some political parties including the Maoists still have a “double stand” in their view of external powers. But as stated earlier, the Nepali Congress, with relatively better understanding, could have played a role to shape a clear view. It seems like a missed opportunity for the Congress, as it could not place the right person in the right place. We have some outstanding issues with India including the border dispute. How can we resolve them? Clarity in issues and art of negotiation with acceptable modus operandi for counterparts are two major factors of a successful negotiation. But Nepal and India have never followed this modus operandi. Weak presentation in issues due to a lack of preparatory work has always remained a big problem for Nepali side while dealing with India. That is why most of the issues have not been resolved. On the issue of our borders, both the countries are missing an opportunity here to sign the protocol to realize the agreement made by ‘Nepal-India Joint Technical Level Boundary Committee’ formed by both the governments in 1981. If it is signed, both the governments will have time to concentrate on major points like Susta and Kalapani. What is happening today is that the media covers the news of border disputes on an almost daily basis when in fact they could have been dealt with by the apex body of the two countries. The border issues are getting more complicated and ruining the environment for negotiations. That is why all negotiations and discussions are more or less the same abstracts i.e. 1950 treaty, security concerns, good relation, etc. The Nepali side has recently added the EPG (Eminent Persons’ Group) report on the menu. Unilateral menu in the bilateral talk is not considered as an art of negotiation. Contemporary issues which have impacted public life can be presented, and if the issue is there with a good preparation, I don’t think that there will be any chance for the two countries to deny it. Even if treaty provisions offer equal treatment to Nepali and Indian citizens if they visit and stay in the neighborhood, many new provisions introduced recently made citizens’ mobility further complicated. Both the governments need to discuss the issues which will eventually strengthen people-to-people relations. This is only the best way for better relations between the two countries. How do you view China’s BRI in Nepal? We need to understand BRI as the concept, and the usefulness of the program for a country like Nepal. The BRI seems to be good for middle income countries with an aspiration to build mega infrastructure projects. Nepal, being dependent on a subsistence economy, has just begun with relatively small scale projects and a moderate amount of expenses. That very amount is managed by it from within its friendly nations, largely in grants and low interest. That is why the Nepal government and BRI authority have so far been unable to negotiate for projects. Kathmandu-Kerung Railway has motivated Nepal to use the BRI, but it seems that they could not agree on a funding model. The hope was also dashed after China itself delayed and put the project of Shigatse-Kerung railway on hold for years.

The Kathmandu District Court has extended the remand of the 16 people arrested in connection with the fake Bhutanese refugee scam by two more days. SP Sitaram Rijal of the District Police Range, Kathmandu said that the District Court has allowed those arrested in connection with the case to keep in custody for two more days. The District Attorney’s Office has to register the case in the court within the next two days. On Monday, police had submitted a report on the fake Bhutanese refugee scam to the District Attorney’s Office with a recommendation to take action against 33 individuals involved in the case. So far, 16 individuals have been arrested including former deputy prime minister Top Bahadur Rayamajhi and former home minister Bal Krishna Khand while 17 are on the run.  

The CPN (Maoist Center) has decided to pull out of the Madhes Province government. The party, however, has decided to continue its support extended to the government. Chief Minister Saroj Kumar Yadav on Tuesday expanded his Cabinet by including the Nepali Congress and the CPN (Unified Socialist). Soon after the Cabinet expansion, the Maoist Center decided to quit the government. The Maoist Center Parliamentary Party leader Bharat Prasad Sah said that the Parliamentary Party meeting held today decided to quit the government. “We have decided to pull out of the government. However, we have decided to continue the support extended to the government for now. We decided to quit the government after we did not get two ministries as demanded by us in Monday's meeting,” he said. When Chief Minister Yadav expanded the Cabinet for the third time on February 7, 2023, Sunita Yadav was appointed as the Minister for Industry, Tourism and Forest and Rahabar Ansari as the state minister. Meanwhile, he appointed Krishna Prasad Yadav of the Nepali Congress as the Minister for Physical Infrastructure Development and Birendra Prasad Singh as the Minister for Health and Population today. Similarly, Govinda Bahadur Neupane was appointed as the Minister for Land Management, Agriculture and Cooperatives from the CPN (Unified Socialist). Province Chief Hari Shankar Mishra administered the oath of office and secrecy to the newly appointed ministers as per Article 168 (9) of the Constitution amidst a function this afternoon.  

Nepal will play against hosts Zimbabwe and West Indies in the World Cup Qualifiers. According to the International Cricket Council (ICC), Nepal will play against Zimbabwe on June 22. Similarly, Nepal will play against the USA on June 20 and West Indies on June 22. In the last match of the group stage, Nepal will play against the Netherlands on June 24. Prior to their group stage matches, Nepal will play two practices. Nepal will play against the UAE on June 13 and Oman on June 15. The Cricket Association of Nepal (CAN) on Monday had announced a preliminary squad for the 2023 ICC Men's Cricket World Cup Qualifier scheduled to take place in Zimbabwe from June 18 to July 9 this year.

The National Assembly endorsed the government’s policies and programs for the fiscal year 2023/24 on Tuesday. The upper house of the federal Parliament approved the policies and programs that were presented by President Ram Chandra Paudel with majority in the joint meeting of the federal Parliament on May 20. Amendment proposals put forth by Tulasa Kumari Dahal, Bimala Ghimire and Dr Bimala Rai Poudyal were rejected by the majority. Prior to the endorsement, Prime Minister Pushpa Kamal Dahal responded to the queries raised by upper house lawmakers during the deliberation over the policies and programs. The NA shall meet again at 13.01 pm on May 28.

Prime Minister Pushpa Kamal Dahal expanded his Cabinet on Tuesday. Birendra Prasad Mahato of the Janata Samajbadi Party has been appointed as the Minister for Forest and Environment. President Ram Chandra Paudel appointed Mahato as the Minister for Forest and Environment on the recommendation of Prime Minister Dahal. Similarly, Pramila Kumari of the Janata Samajbadi Party has been appointed as the Minister for Education, Science and Technology. Earlier, Ashok Kumar Rai of the Janata Samajbadi Party was appointed as the Minister for Education.