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With the government struggling to maintain a balance on fiscal management, Finance Minister Prakash Saran Mahat has requested development partners for loans and substantial grants to Nepal. Mahat made such a request during a discussion with the international development partners on Thursday, saying that as Nepal has been affected by global climate change despite the country’s negligible carbon emission, the aid should also be mobilized in the form of grants. The meeting was attended by the representatives of multilateral development partners including World Bank, Asian Development Bank, International Monetary Fund, and International Finance Corporation, as well as bilateral partners including USAID, Japan, Korea, Switzerland, Norway, Finland, European Union, and Germany. During the discussion, Mahat briefed the development partners about the priorities of the government and the guidelines and principles of the upcoming federal budget. Stating that the debt of the government has been increasing, he said that Nepal is very aware of the debt obligations that will be created in the future. In response, the representatives of the foreign development agencies pledged to support the goals and priorities taken by the government. They, however, expressed concern over the reforms in capital expenditure. Since the government has not been able to spend the capital expenditure as allocated by the budget, the funds committed by the development partners are not being mobilized. The development partners also expressed concerns about improving the management of public institutions, reducing duplication of expenditure, preparing a reform plan for internal resource mobilization, etc. According to the press statement issued by the Ministry of Finance, the development partner suggested expanding the scope of taxation, improving low capital expenditure and gradually transforming the informal sector into the formal sector. The development partners also emphasized the need for better planning for projects, prioritizing major reform agendas, improving inter-agency coordination, and making full use of concessional loans.

Nepal received less than Rs 3bn in net foreign direct investment (FDI) during the first nine months of the current fiscal year 2022/23 reflecting the economic predicament that the country finds itself in. According to the latest macroeconomic data of the Nepal Rastra Bank (NRB), net FDI inflow as of mid-April stood at Rs 2.62bn, which is just nearly 16 percent of the total FDI the county received during the same period of the last fiscal year. The country received FDI worth Rs 16.51bn during the first nine months of FY 2021/22 Economists and business community members attribute the decline in net FDI to the current political environment of the country. According to them, the political environment is one of the factors that affect the overall investment climate including FDI. Even after the general elections held last November, Nepal is finding itself in a political mess where there is no majority of a single political party. After the elections, a new coalition government was formed in late December involving CPN (UML) and CPN (Maoist Centre) as major parties. Then, in February, another coalition government of the Maoist Centre, Nepali Congress and other smaller parties was formed. “The sharp decline in FDI inflows reflects the current sorry state of the political and economic situation of the country,” an economist said. “At a time when domestic investors are reluctant to invest, we cannot expect foreigners to invest in the country.” For a long time, Nepal has remained among the countries that receive the lowest FDI in the world. Despite many talks on attracting foreign investments in the country, the country has failed to attract foreign investors as targeted. At less than 1 percent of GDP, Nepal’s current levels of FDI are the lowest among similar economies. Economists say it is necessary to improve the existing policy and structural system to bring more foreign investment into Nepal. According to them, while the immediate reason for the decline in FDI might be the global recession and domestic political situation, there are structural and procedural obstacles in Nepal that discourage investors. Despite introducing a one-door system in the Investment Board Nepal and Industry Department, FDI has not come in as expected. “It has failed to facilitate FDI so far because it has failed to become a complete one-stop service center,” the economist said. In the second week of March, Prime Minister Pushpa Kamal Dahal had said that the government is seriously working on further simplifying the procedures, fully operationalizing the one-stop service, and developing necessary rules for the automatic approval of foreign direct investments (FDIs) applications. Of late, the government has eased procedures related to FDI. The Department of Industry (DoI), the government agency responsible for providing services to foreign investors, has developed a mechanism to approve foreign direct investments (FDIs) through the online channel. The mechanism allows the department to approve FDI worth Rs 100bn automatically. The government has already published a notice in this regard in the Nepal Gazette and the system will be implemented on Jestha 1. “Through the newly-developed mechanism, investors can get online approvals for FDI worth Rs 100bn,” said Ram Chandra Tiwari, Director General of DoI. Citing the complaints about the higher threshold for FDI, the government in November last year lowered the threshold to Rs 20bn from Rs 50bn. At the same time, the government tightened the business visa issuance system to prevent misuse of the facility following rising cases of investment pledges not being fulfilled after the applicant had obtained the visa. As per the new rule, the Industry Department will recommend a business visa for three months by which time the investor has to submit a certificate of company registration. While the actual flow of FDI plunged sharply during the first nine months of the current fiscal year, the amount of FDI pledges made by foreign investors has also come down during the period in the current fiscal year. According to DoI, Nepal received FDI pledges of Rs 28.11bn during the nine months of the current fiscal year compared to Rs 33.42bn in the same period of the last fiscal year. Net FDI in Nepal (First nine months)

In a bid to implement the long-delayed Mobile Device Management System (MDMS), the government has decided to exempt customs duty on a new smartphone brought by migrant workers while returning home. The Cabinet meeting on Tuesday decided to amend the Baggage Rules, 2016 allowing the migrant workers to bring in a new mobile set, in addition to their phone. However, the returnees will have to submit a legal work permit for at least six months to get the customs duty waiver on the extra handset. Earlier, the government had planned to enforce the MDMS from December 30, 2022, but later withdrew the implementation following a strong uproar. The Nepal Telecommunications Authority (NTA) halted the full implementation of the MDMS following the instruction from Prime Minister Pushpa Kamal Dahal. The Finance Ministry had levied an 18 percent customs duty if returnee migrant workers were found to have brought more than one handheld device from abroad. Nepali migrant workers abroad launched a ‘no remittance’ campaign on social media, stating they will stop sending remittances to Nepal to protest the rule. According to Punya Bikram Khadka, Spokesperson at Department of Customs (DoC), the new arrangement will come into effect once DoC receives the cabinet decision in written form. The cabinet decision will be published in the Nepal Gazette first. "Once it is published, we will start the implementation," he said. NTA Chairman Purusottam Khanal said that the authority will now move toward the implementation of MDMS. "Since the cabinet has amended the Baggage Rule, we are technically ready to implement the system," he said. Once the MDMS is implemented, NTA can block smartphones that have been brought to Nepal without customs clearance. MDMS has been expected to end the import of ‘gray’ mobile sets as the authority can block such smartphones. According to mobile phone importers, around 30-40 percent of the smartphone market in Nepal is of ‘gray’ handsets with about Rs 12-15bn worth of mobile devices imported to Nepal illegally every year. The enforcement of MDMS has come at a time when the domestic mobile phone market is going through a slowdown. “The MDMS implementation could provide some respite to handset dealers,” said Deepak Malhotra, President of Mobile Phone Importers’ Association. According to him, it is high time that the government enforces the mechanism effectively. The domestic mobile phone business is currently going through a lean patch with a slowdown in demand as sales have fallen by more than 40 percent, say importers. According to them, mid-range phones dominate the market and even that segment is not doing well currently. They say it is the government that will also benefit from the implementation of MDMS as all types of imports will become legal and more revenue will be added to the state coffers. MDMS is a security system that enables NTA to implement policies that secure, monitor, and manage end-user mobile devices. It is expected that once MDMS comes into force, the sales of ‘gray’ devices in the market will stop as SIM cards on unregistered phone sets will not work. NTA has built a centralized system that keeps a record of mobile phones after their International Mobile Equipment Identity (IMEI) number is registered with it. Every mobile phone has a unique 15-digit IMEI number and such numbers of officially imported mobile phones are initially registered by the importing company. As per the law, the telecom regulator has to provide a type approval for the phones before the handsets are imported. The existing arrangements allow NTA to determine the genuineness of mobile handsets in the country by examining their IMEI numbers.  

The Nepal Stock Exchange (NEPSE) plunged by 3. 34 points to close at 1,838.59 points on Thursday. Similarly, the sensitive index dropped by 0. 71 points to close at 353. 09 points. A total of 2,105,657-unit shares of 259 companies were traded for Rs 578 billion. Meanwhile, Aatmanirbhar Laghubitta Bittiya Sanstha Limited was the top gainer today with its price surging by 6. 10 percent. Likewise, Forward Microfinance Laghubitta Bittiya Sanstha Limited was the top loser with its price dropping by 5. 99 percent. At the end of the day, the total market capitalization stood at Rs 2. 68 trillion.