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With the weak revenue collection, the government is struggling in managing resources while the process of formulation of the federal budget for the next fiscal year is gaining momentum. In the last few months, the government has tried to restart economic activities with a series of measures including lifting the import restrictions and land plotting restrictions, but the efforts have not been reflected in the revenue collection.

With resource management becoming an uphill task, the government has decided to scrap the projects that did not start their work by mid-April. The Finance Ministry has decided not to proceed with the projects that are yet to start preliminary works. 

Amid the resources crunch, the government a few months ago introduced austerity measures announcing to curtail expenses in a number of categories. The Finance Ministry has already shortlisted the projects and has sent a circular to the line ministries not to take forward projects that are not in top priority for now. The data of the nine months of the current fiscal year of the Finance Ministry show revenue collection remains dismal even after the import restrictions were lifted. The federal government’s half of revenue comes from taxing imported goods. The Department of Customs (DoC) and Inland Revenue Department (IRD), the key agencies of the revenue regime, have reported poor revenue collection as of mid-April of this fiscal. DoC managed to collect only Rs 34.76bn in revenue in Chaitra (mid-March to mid-April) against the target of Rs 57.29bn.

By the end of the third quarter of the current fiscal year, the department has managed to collect only Rs 285bn against the target of Rs 490bn, which is only 58 percent of the target. The story of IRD is also the same. The department has collected Rs 337bn in revenue as of mid-April, which is less than Rs 342.65bn collected during the same period last fiscal year 2021/22.

With DoC and IRD posting dismal results, the overall revenue of the federal government in the nine months of the current fiscal year has declined by 13.36 percent. The government’s revenue collection stood at Rs 683.20bn as of mid-April compared to Rs 789.26bn collected during the same period last fiscal year 2021/22, according to the Financial Comptroller General Office (FCGO).  The collected revenue has not been enough even to meet the recurrent expenditure of the government which stood at Rs 706.76bn as of mid-April. The total expenditure of the government stood at Rs 943.05bn. 

Continuous improvement in the external sector

With noticeable improvements in the country’s forex reserves, balance of payment (BOP), tourism income and remittance inflow, the recovery in the country’s external sector has continued. The country’s BOP is at a surplus of Rs 148.10bn in the eight months of FY 2022/23 compared to a deficit of Rs 258.64bn in the same period of FY 2021/22. 

In US Dollar terms, the BOP is at a surplus of 1.12bn in the current fiscal year compared to a deficit of 2.17bn in the same period of the last fiscal year. The country’s forex reserves increased by 15.2 percent in the review period. Nepal’s forex reserves stood at Rs 1,401.21bn in mid-March 2023 (Falgun) from Rs 1,215.80bn in mid-July 2022. In US dollar terms, the gross foreign exchange reserves increased by 12.1 percent to Rs 10.69bn in mid-March 2023 from Rs 9.54bn in mid-July 2022.

The central bank said that the foreign exchange reserves of the banking sector are sufficient to cover merchandise imports for 10.8 months, and merchandise and services imports for 9.4 months. Similarly, remittance inflows have increased by 25.3 percent to Rs 794.32bn in the review period. The inflow of remittances had decreased by 1.3 percent in the same period of the last fiscal year. 

Imports start to surge After the easing of the import restrictions, the country’s imports have started to surge again. Nepal imported goods worth Rs 143.123bn in Chaitra (mid-March to mid-April), the highest on a month-to-month basis, in the current fiscal year. The country imported goods worth Rs 139.22bn in Falgun (mid-February to mid-March), an increase of 10 percent compared to Magh (mid-January to mid-February).

Nepal had imported goods worth Rs 142.31bn in Bhadra (mid-August-mid-September), the second highest on a month-to-month basis in FY 2022/23. However, the country’s total imports in the first nine months of the current fiscal year are lower than the last fiscal year. According to DoC, goods worth Rs 1,201.508bn were imported in the current fiscal year compared to Rs 1,466.662bn during the same period of the last fiscal year. The imports during the first nine months of this fiscal have declined by 18.08 percent. 

Trade deficit decreased by 18 percent The country’s trade deficit has decreased by 17.06 percent in the nine months of the current fiscal year. According to DoC, the country’s total trade deficit has been limited to Rs 1,083.22bn in the nine months of FY 2022/23 compared to Rs 1,306.08bn during the same period of FY 2021/22.

The trade deficit declined this fiscal as the country’s total foreign trade shrunk by 18.89 percent during the review period. Both imports and exports have decreased in the current fiscal year. 

Tourist arrivals hit a four-year high in March Continuing the upward momentum in 2023, the arrival of tourists in March hit a four-year high signaling that tourism in Nepal has largely recovered from the impacts of the Covid-19 pandemic. The latest statistics of the Nepal Tourism Board (NTB) show tourist footfalls in March 2023 stood at 99,426, the highest since March 2019.

According to NTB, Nepal welcomed 42,006 tourists in March 2022, 14,977 tourists in March 2021, and 42,776 tourists in March 2020.  According to NTB, 227,755 tourists visited Nepal in the first three months of 2023. Tourist arrivals have surged by 35 percent in March compared to February. Nepal welcomed 55,074 international visitors in January, 73,255 in February, and 99,426 in March. 

Tourism income up by 98.6 percent

With international travel coming back to normalcy, Nepal’s tourism earnings have also recovered significantly. According to Nepal Rastra Bank, Nepal earned Rs 37.12bn in the eight months of FY 2022/23 compared to Rs 18.69bn during the same period of FY 2021/22. The country's tourism earnings nosedived in FY 2019/20, and FY 2020/21 due to restrictions on international travel as countries imposed various lockdowns to contain the spread of the Covid-19 pandemic.

Forex reserves surged by 15.2 percent The country's forex reserves increased by 15.2 percent in the eight months of the current fiscal year. According to the NRB report, Nepal’s forex reserves stood at Rs 1401.21bn in mid-March, 2023 (Falgun) from Rs 1215.80bn in mid-July 2022. In US dollar terms, the gross foreign exchange reserves increased by 12.1 percent to Rs 10.69bn in mid-March 2023 from Rs 9.54bn in mid-July 2022.

NRB in the report said the foreign exchange reserves of the banking sector are sufficient to cover merchandise imports for 10.9 months, and merchandise and services imports for 9.4 months.

Remittance inflow surged by 25.3 percent NRB has said that remittance inflow has increased by 25.3 percent to Rs 794.32bn in the eight months of the current fiscal year. Remittance had decreased by 1.3 percent in the same period of the last fiscal.

In US Dollar terms, remittance inflows increased by 14.8 percent to 6.09bn in the review period against a decrease of 2.6 percent in the same period of the previous year.

Petroleum products imports decline in quantity

The quantity of all petroleum products (diesel, petrol, LPG, and ATF) has declined in the nine months of FY 2022/23. The quantity of diesel imports decreased by 26.85 percent in the review period compared to the same period of FY 2021/22. However, the import value has increased by 6.07 percent.

Similarly, the quantity of petrol imports also declined by 9.25 percent but the import value increased by 5.30 percent.  This is mainly because of the surge in fuel prices caused by the Ukraine-Russia war.

The Nepal Stock Exchange (NEPSE) gained 2.71 points to close at 1,888.32 points on Monday. Similarly, the sensitive index surged by 0.23 points to close at 359. 37 points. A total of 2,260,823-unit shares of 270 companies were traded for Rs 751 billion. Meanwhile, People’s Power Limited was the top gainer today, with its price surging by 8. 11 percent. Kalinchowk Darshan Limited was the top loser as its price fell by 9.62 percent. At the end of the day, total market capitalization stood at Rs 2. 75 trillion.

After industrialists of the Sunsari-Morang Industrial Corridor hit the street seeking a regular and reliable supply of electricity, the Nepal Electricity Authority (NEA) on Sunday accepted that load-shedding has been enforced in the industrial corridors as it struggles to manage power distribution. The state-owned power utility has said that the current supply of electricity is insufficient to meet the demand due to the prolonged dry season. The industrial corridors in different parts of the country have been facing power cuts of up to 12 hours on a daily basis in recent times. According to industrialists, this has hit factory production badly. NEA Executive Director Kulman Ghising said that the current power cut issue is a short-term problem and would be resolved in the next two weeks. "We are working to ensure such problems do not occur in the coming years," said Ghising in a press meet at NEA on Sunday. According to him, due to the lack of transmission infrastructure, NEA has not been able to deliver electricity to the industries even by importing from India. Ghising said it could have imported the necessary electricity from India but there is a lack of infrastructure to supply that electricity from Dhalkebar to eastern Nepal. "The electricity imported from India will come from Dhalkebar from where only 240-240 MW electricity can be sent from Dhalkebar to east and west," he said. "If we send more power, the transmission line will not be able to handle such supply." NEA has said it could not import more than 100 MW of electricity from Bihar. According to the NEA, industries in Biratnagar and eastern Nepal had to face power cuts due to the problem in the Rukmini substation. "The substation has been repaired, and electricity supply has been ensured since Saturday," said Ghising. " However, there is still a compulsion of power cuts during the peak hours in some industries." NEA says power generation this winter plunged more than last winter due to the prolonged dry season and decrease in water levels in the rivers. According to Ghising, there won't be a supply problem from next year. "The 400 KV Inaruwa-Dhalkebar-Hetauda transmission line will be completed in the next one year. Similarly, the 220 kV Hetauda-Bharatpur-Butwal transmission line will be completed in the next few months," he said. "We will be in a comfortable position to supply the electricity in industrial corridors." While NEA has tried to assure the private sector, industrialists from eastern Nepal are demanding that the power utility should publish the schedule of load shedding. Power cuts at manufacturing plants have caused a drop in production besides damaging expensive equipment, they say. Suyesh Pyakurel, President of Chamber of Industries Morang, said that industries in Sunsari-Morang Industrial Corridor have been forced to close due to the power cut. "We understand that 24-hour electricity cannot be supplied at this time," he said. "However, it has become increasingly difficult for us to operate the industry when the power is cut daily without a schedule." The NEA has been cutting power daily from 6 am to 10 am and from 5 pm to 10 pm in industrial areas. Apart from that, the industrialists complain that there are power cuts at other times as well.

It’s battle royale on a card. In a high-stakes game, the who's who of the Nepali corporate world are in a race to get the license to operate a new stock exchange.   This is turning out to be the most important contest in the Nepali corporate world in recent times. Even before the Securities Board of Nepal (Sebon) opened applications for the license, the business head honchos were busy forming their groups to apply for the permit. As the deadline for application submission ends on Sunday, three companies have applied for the license to start a new stock exchange. The Himalayan Stock Exchange is the first one to apply for the permit. Promoted by the major shareholders of Himalayan Reinsurance Company, the company applied for the license on April 21. There was fierce competition among the top corporate houses during the license issuance of the second reinsurance company. While five reinsurance companies sought the licenses, it was Himalayan Reinsurance that came out as the winner. The company is promoted by Nepal's leading business houses, namely Golchha Group, Shanker Group, Lucky Group, Ramesh Corp, Murarka Group, and KL Dugar Group, among others. The major promoters of the Himalayan Stock are Shanker Group and Deepak Bhatta Group. Besides, former FNCCI presidents - Bhawani Rana, Pashupati Murarka, and Shekhar Golchha along with Rajendra Khetan, Saurav Jyoti, Vivek Dugar, Kumud Kumar Dugar and Amit Kumar More are also the promoters of the Himalayan Stock Exchange. On Sunday (April 23), two more companies- National Stock Exchange and Annapurna Stock Exchange- reached the Sebon to file their applications. The National Stock Exchange has been backed by non-resident Nepalis (NRNs) businessmen, Agni Group, Kedia Group, and Reliance Group. The NRN businessmen Upendra Mahato, Jiba Lamichhane, Badri KC, and Kul Acharya are also shareholders of this proposed stock exchange. Deepak Timilsina, Mahesh Kumar Shrestha, Rishi Aggarwal, Ankit Kedia, and Ramji Regmi have been proposed as the board of directors of the National Stock Exchange. The third one—Annapurna Stock Exchange—also submitted its application on Sunday. The Annapurna Stock is led by Surendra Raj Wagle and has seven directors as Ganesh Kumar Shrestha, Mukti Bodh Neupane, Anil Sapkota, Prakash Kumar Shrestha, Shekhar Subedi, and Balram Upreti. Making a second amendment to the Securities Market Operation Regulation 2064 in the second week of September 2022, the Sebon initiated the process to establish the second stock exchange in the country. On September 18, 2022, the Sebon invited applications for a new stock exchange, commodity exchanges, and stock brokerage firms. However, the process stalled for five months after advocate Deepak Bikram Mishra went to the Supreme Court (SC) demanding to stop the licensing process. The licensing process was stalled after the apex court issued an interim order on October 21, 2022. But, the joint bench of Justices Sushma Lata Mathema and Anil Kumar Sinha in the second week of April 2023 dismissed the petition, paving the way for the Sebon to move ahead with the licensing process. Following this, the Sebon on April 13 again invited applications from interested parties for new stock exchange and commodities exchanges. According to Sebon, the new stock exchange should have a paid-up capital of Rs 3 billion, of which 70 percent will be institutional investments. Currently, the Nepal Stock Exchange (Nepse) is the only stock exchange in the country. The government has a majority stake in the Nepse. While there have been talks of bringing strategic investors into the Nepse, the process has not moved ahead. Sebon is trying to create a competitive environment by adding one more stock exchange. According to Sebon Chairman Ramesh Kumar Hamal, the board will award the license following the necessary process. "Now the evaluation committee will evaluate the companies' application. The license will be awarded based on the recommendations of the evaluation committee," he said. Four companies applied for commodity exchange license According to Sebon, four companies have applied for commodity exchange licenses. The board has called for proposals for granting licenses to two commodity exchanges. Among them are Multi Derivative Exchange Limited, Multi-Asset Derivative Exchange Limited, Himalayan Commodity Derivative Exchange Limited, and Nepal Multi Derivative Stock Exchange Limited.