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The Nepal Electricity Authority (NEA) is planning to complete the financial closure of the Upper Arun Hydroelectric Project within 2023. The government-owned power utility has started preparations for the financial closure of the 1,061 MW project with the World Bank and domestic lenders. NEA has initiated the development of the project by establishing Upper Arun Hydropower Limited. NEA has estimated that it will require Rs 214.86 billion to develop the project. Of the total cost of the project, 70 percent, or Rs 150.40 million is being raised through loans. The World Bank has expressed commitment to invest Rs 97.06 billion as a loan in the project. The World Bank will be the lead international financial institution to finance the construction of the project that lies in the upper reaches of the Arun River at Bhotekhola Rural Municipality of Sankhuwasbha district. "An agreement with the World Bank will be reached soon," said a senior official at the NEA. The World Bank is giving concessional loans in collaboration with the European Investment Bank. "The World Bank has already promised to provide loans for this project. We are working to make a financial agreement with the World Bank within this year," said the NEA source. The project will be developed under a 70:30 debt-to-equity ratio. According to NEA, the project will be funded with Rs 150 billion in loans including Rs 97 billion from international financiers and Rs 53 billion from domestic creditors. This is the first time the global lender is back in the hydropower project in the Arun River after the debacle of the Arun-3 project in the mid-90s. According to NEA, Rs 53 billion rupees will be raised from a consortium of domestic institutions including Hydropower Investment and Development Company Limited (HIDCL), Nepal Bank, Rastriya Banijya Bank, and Citizen Investment Trust. A preliminary memorandum of understanding has been signed between the promoter company Upper Arun Hydropower Limited and these institutions in August last year. NEA plans to sign the final agreement with the World Bank and domestic institutions at the same time. The promoter company Upper Arun Hydropower Limited will invest 30 percent i.e., Rs 64.46 billion in the project as equity. The government had advanced the concept of this project in 1985 and a feasibility study was done in 1986. The government in 2011 had entrusted the development of the project to NEA. Currently, works are being carried out to design the tender for the construction of the project. NEA plans to start the construction of the project in 2024. It is estimated that the project will take about 6 years to complete the project which is the picking run-of-river project. NEA has said that about 100 meters high will be constructed on the Arun River and the water will be channelized through an 8.5 km long tunnel to an underground hydroelectric plant in Chongrak. The project will generate 4.51 billion units of electricity annually. That electricity from the project will be connected to the substation at Haitar Sankhuwasabha by constructing a 400 kV double circuit transmission line about 6 km long from the powerhouse.

A clash broke out between loan shark victims and police in Shantibatika on Monday. The clash broke out after the loan shark victims, who had been staging a sit-in inside Shantibatika, tried to head towards Bhadrakali this afternoon. Some loan shark victims and police personnel were injured in the clash. Police said that they have arrested some of the demonstrators from the scene. It has been learnt that the police baton charged the loan shark victims and also lobbed tear gas shells to take the situation under control. A large number of security personnel has been deployed in and around Shantibatika.  

At a time when the physical progress of national pride projects has been sluggish, the Office of the Auditor General (OAG) in its latest report has said that it is the government that should be blamed for the dismal progress of the projects that have been dubbed as 'game changers' for the Nepali economy. The 60th annual report of the OAG says has pointed out multiple reasons for the less than satisfactory progress in the national pride projects. According to OAG, starting construction work without preparing a detailed project report (DPR), no clarity in the project implementation modality, land acquisition, and compensation disputes, and lack of inter-agency coordination in the transfer of utility services have plagued these projects in which billion of rupees have been spent by the state. "While the periodic plan has always accorded the highest priority to the national pride projects and ensured resources, the progress of these projects is far from satisfactory," reads the report. The government in the fiscal year 2012/13 declared 17 projects as national pride projects and the number of such projects has increased to 21 now. Of these 21 projects, the physical progress of very few is satisfactory. As of now, the government has identified four irrigation projects, three hydropower projects, three international airports, six road projects, an electric railway project, a drinking water project, two projects aimed at promoting the holy sites of Pashupati and Lumbini, and an environmental conservation project as national pride projects. But the start of the construction of many of these projects is yet to see the light of day. While projects such as Upper Tamakoshi Hydroelectric Project, Gautam Buddha International Airport, and Pokhara Regional International Airport have been completed, the much talked about Kathmandu-Tarai Expressway, Second International Airport, Mid-Hill Highway are still under construction. The OAG report is critical of the projects that have been completed. In particular, the OAG has questioned the operation of Gautam Buddha International Airport, and Pokhara Regional International Airport. These two airports, in which billions of rupees have been spent, have still not come into operation at full capacity. Both airports have struggled to get foreign airlines to start international flight operations. The airport in Pokhara is yet to see any international airlines agreeing to start flights to connect Nepal's tourism hub to the rest of the world. Infrastructure experts said lawsuits against the projects, and delay in court decisions have also affected the implementation of projects. The second international airport project in Nijgadh is one such example. While the project was initiated in 1995, the project has been mired in controversy with lawsuits and environmental concerns. While Rs 3 billion has already been spent on the project for land acquisition but there is no sign of the project taking off. The Supreme Court in 2022 directed the government to proceed with the construction of the airport at a suitable location so that environmental damage is minimized. But, the construction of this project has been in limbo. The development of the 900 MW Upper Karnali Hydroelectric Project is also tangled in legal hurdles. Former government officials who had worked at the highest level at various ministries said unnecessary lawsuits filed at the court have also hindered the national pride projects. A former secretary said that some of the project's construction has been delayed due to court cases and the delay in its decision. "I am not saying that cases should not be filed in court if there are financial and other misdeeds. However, in some cases, cases are filed in the court to fulfill personal interests," he said, adding, "If the verdict was given early, the project could have progressed accordingly." According to him, structural problems, lack of capacity, and poor inter-agency coordination has hit projects such as Budhigandaki Hydroelectric Project, and Kathmandu-Tarai Expressway, among others. The lack of clarity and policy flipflop on the part of the government has delayed the development of the Budhi Gandaki Project. While the past governments had planned to award the project to a Chinese contractor, now the government is planning to hand over the project to Nepal Electricity Authority. Experts are of the opinion the hearing and judgment of the cases related to national pride projects should be expedited in the court. "Huge money is being spent on these projects. Hence, court cases should be decided quickly. Since time itself is a cost, the longer the case is prolonged in the court, the more time the construction of the project will be affected and the cost will automatically increase," said a former secretary of the Ministry of Physical Infrastructure and Transport. The latest report of the Ministry of Finance (MoF) shows only 15.16 percent of the budget allocated for these projects in the federal budget has been spent so far in the first six months of the current fiscal year. Among the 21 national pride projects, Sunkoshi Marine Diversion Project has an edge over others when it comes to budget utilization. The project has spent 88 percent of the allocated amount in the first half of this fiscal. Of the total allocation of Rs 2.71 billion, the project has used Rs 2.39 billion till mid-January. On the other hand, the much-hyped power transmission project of the Millennium Challenge Account (MCA) Nepal has the least progress. Only 3.66 percent of physical progress has been made till mid-January in this project. The MoF, in the mid-term review of the budget, has said 18 percent of the allocated budget has been spent on Pushpalal Highway, 42.60 percent on Postal Highway, 39 percent on Kosi Corridor, and 22.71 percent on Kali Gandaki Corridor in the first half of this fiscal year. The expenditure in Karnali Corridor is 9 percent, while Metro Rail and Monorail Development Project have utilized 22 percent. The much talked about Kathmandu-Terai Expressway is yet to expedite its works as only 9.11 percent has been spent in this fiscal. Meanwhile, the Budhi Gandaki Reservoir Project has spent only 15.86 percent of the allocated budget. The MoF report shows none of the four irrigation projects, namely Babai, Mahakali, Sikta, and Ranijamara, have budget utilization above 50 percent in the first half of this fiscal.  

While there are concerns growing over the rise in internal and external debt burdens of the country in recent years, Nepal appears to be in a safe position in terms of indebtedness compared to most South Asian countries. In South Asia, Nepal’s external debt to revenue ratio is the third lowest after Afghanistan and India, according to Debt Justice, an INGO, said in its latest report published early last week. Nepal’s projected external debt payment in 2022, 2023, and 2024 stands at 4.2 percent, 4.3 percent, and 4.5 percent, respectively, of total government revenue, according to the report. When it comes to Afghanistan, it is 1.5 percent, 1.6 percent, and 1.7 percent of the revenue in the three years, the report stated. India’s scheduled external debt payment is 3.2 percent, 3.1 percent, and 3.3 percent of its revenue in these three years. Sri Lanka is in the most vulnerable position followed by Pakistan. High indebtedness and shortage of foreign exchange reserves invited massive protests in both countries as the former strongman president of Sri Lanka—Gotabaya Rajapaksa was forced to flee the country last year. According to the report, Sri Lanka’s external debt payment to annual revenue ratio is projected to be 81.4 percent, 75 percent, and 78.6 percent in 2022, 2023 and 2024, respectively. The report said Sri Lanka is spending the highest percentage of its revenue on servicing foreign debt. When it comes to Pakistan, its projected external debt payment in these three years is expected to be 40 percent, 46.7 percent, and 42.5 percent. Projected external debt payment by Bangladesh, Bhutan, and Maldives in these three years compared to their government’s annual revenue is projected to be much higher than that of Nepal, according to the report. The Debt Justice said that the figures for external government debt payments have been calculated primarily from the World Bank’s International Debt Statistics database while the figures for government revenue are calculated from World Economic Outlook by the International Monetary Fund (IMF) in October last year. Data show that Nepal is less vulnerable to external debt compared to other South Asian countries. "Nepal still has a lot of fiscal space to grow its external debt," said an economist. According to the Public Debt Management Office, Nepal’s total outstanding external debt stood at Rs 1102.5 billion out of a total of Rs 2070.5 billion as of the second quarter of the current fiscal year 2022-23. Nepal’s total debt to Gross Domestic Product (GDP) ratio as of the second quarter of this fiscal stood at 42.67 percent and the share of external debt was 22.72 percent. Nepal’s newly introduced law on Public Debt Management allows the government to raise external loans up to one-third of the country's GDP in the past year. Officials say as nearly 90 percent of external loans have been received from multilateral donors like the World Bank and the Asian Development Bank, whose interest rate is below one percent, Nepal is not facing much risk of inflated cost. But in recent years, Nepal’s public debt has been growing rapidly. Both external and internal loans of the government have been surging to cover the cost of post-earthquake reconstruction since 2015 and to tackle Covid-19, according to the PDMO. As a result, the government has been forced to spend big on debt servicing. A total of Rs 186.6 billion has been allocated for loan repayment in the current fiscal year, of which Rs 134.32 billion is for internal debt servicing. In the last fiscal year, the government spent Rs 121.99 billion on debt servicing. Amid growing debt liability amid sluggish revenue collection, there are concerns that the debt would be used in projects with high yields. “It is necessary to ensure that debt is utilized in financially feasible high-yielding sectors,” said the economist. Percentage of external debt against govt's revenue  

Senior leaders of the three major political parties have discussed the appointment of chief justice. Prime Minister and CPN (Maoist Center) Chairman Pushpa Kamal Dahal, main opposition CPN-UML Chairman KP Sharma Oli, aNepali Congress President Sher Bahadur Deuba and Speaker of the House of Representatives Devraj Ghimire have agreed to call a meeting of the Constitutional Council. Nepali Congress Chief Whip Ramesh Lekhak said that matters relating to the appointment of chief justice and summoning a meeting of the Constitutional Council were discussed in the meeting. Oli took the proposal of Prime Minister Dahal’s proposal to call a meeting of the Constitutional Council in a positive way. He said that the meeting will take place within a few days. The acting chief justice is taking responsibility of the apex court after the lawmakers of the Nepali Congress and the CPN (Maoist Center) filed an impeachment motion against then Chief Justice Cholendra Shumsher Rana. Lekhak said that the meeting also discussed TRC among other bills.    

The gold is being traded at Rs 110, 000 per tola in the domestic market on Monday. According to the Federation of Nepal Gold and Silver Dealers’ Association, tejabi gold is being traded at Rs 109, 500 per tola. Similarly, the silver is being traded at Rs 1,450 per tola today.

With the drastic slowdown in economic activities in the country, the government is finding it hard to manage resources to fund its recurrent expenditure even after all import restrictions were lifted in early December last year. Nepal's half of the federal government’s revenue comes from the taxes it levies on imports. The Department of Customs (DoC) and Inland Revenue Department (IRD), the key agencies of the country's revenue regime, have reported dismal revenue collection as of mid-April of this fiscal. According to DoC, revenue collection stood at Rs 34.76 billion in Chaitra (mid-March to mid-April) against the target of Rs 57.29 billion. After the government's import control measures, which were aimed at improving the external sector of the economy, affected revenue collection, the government first lifted the over seven-month ban on the imports of automobiles, liquors, and expensive mobile sets in early December last year. Then, on January 20, the Nepal Rastra Bank annulled the nearly year-long provision of importers requiring to deposit cash margins of up to 100 percent in the banks to open letters of credit (LC) for the imports of around 300 goods. However, these measures have failed to help the government to improve revenue collection. Nearly half of the target revenue collection occurs in Chaitra month when imports are supposed to grow to meet the demands of publicly funded projects as the government's capital expenditure accelerates in the second half of the fiscal year. By the end of the third quarter of the current fiscal year, the customs department could collect only Rs 285 billion against the target of Rs 490 billion, collecting only 58 percent of the target. “Even after the import restriction measures were lifted, automobile dealers have not made fresh imports of automobiles,” said a senior official of the customs department. “They have not completed customs clearance even though around 4.000 vehicles have been parked in the customs for months.” Most of these vehicles that were imported in recent months were based on the LCs opened before the government imposed a ban on the import of vehicles along with foreign alcohol and expensive mobile sets among others in April last year. The official said that the automobile dealers have complained about the lack of demand for vehicles in the market and the lack of auto loans. Import taxes on vehicles fall among the largest sources of revenue. In the last fiscal year 2021/22, the government collected revenue of Rs 66.30 billion from four and two-wheelers, according to the customs department. “Likewise, the import of capital goods including machinery and iron and steel have also slumped,” the official said. “It suggests a slowdown in economic activities by both the public and the private sector.” During the first quarter of the current fiscal year, the economy grew by just 0.8 percent. Besides import-based revenue, the situation of inland revenue collection is also dismal. According to IRD, collection of revenue under its offices as of mid-April stood at Rs 337 billion which is less than Rs 342.65 billion collected during the same period of the last fiscal year 2021/22. As of April 15, the overall revenue collection of the government stood at Rs 683.86 billion against the collection of Rs 789.96 billion collected during the same period last fiscal year 2021/22, according to the Financial Comptroller General Office (FCGO). The revenue has not been enough even to meet the recurrent expenditure of the government which stood at Rs 706.85 billion as of April 15. The government is facing difficulty even paying the contractors who have finished their work on various development projects. Citing the reduced resource availability, the government decided to reduce administrative expenditure by 20 percent. Subsequently, the government trimmed its expenditure plan (budget) for the current fiscal year 2022/23 by 13.59 percent through the mid-term review of the budget. This translates to a reduction of a staggering Rs 243.83 billion in the current fiscal year's budget. The revised budget now amounts to Rs 1,549.99 billion against the initial budget of Rs 1,793.83 billion.

Prime Minister Pushpa Kamal Dahal, Speaker of the House of Representatives Devraj Ghimire and Nepali Congress President Sher Bahadur Deuba have reached CPN-UML Chairman KP Sharma Oli’s residence in Balkot on Monday. They have reached Balkot to discuss the TRC bill among other contemporary political issues with Oli. PM Dahal, who is also the Chairman of the CPN (Maoist Center), has reached Balkot for the first time after he left the alliance led by the UML. Though the three senior leaders had held meetings for two times at the initiatives of Speaker Ghimire earlier, they could not reach a conclusion. Though the leaders had agreed to make the TRC among other bills justifiable and widely acceptable, they are yet to decide on the issues and procedures. The whips of three political parties have also reached Balkot to take part in the meeting. Breaking the then five-party alliance, Dahal was appointed as the prime minister on December 25 by forging an alliance with the UML. The alliance with the UML broke down after the Maoist Center decided to support the Nepali Congress in the presidential election. Later, the UML recalled the ministers and withdrew the support extended to the Dahal-led government. Now, the UML is playing the role of main opposition in the Parliament. After the main opposition opposed the government’s proposal to fast-tracking the transitional justice bill, the government has not moved the bill ahead.