Submit your Article

The price of gold has dropped by Rs 200 per tola in the domestic market on Wednesday. According to the Federation of Nepal Gold and Silver Dealers’ Association, the yellow bullion is being traded at Rs 103, 600 per tola today. The yellow metal was traded at Rs 103, 800 per tola on Tuesday. Meanwhile, tejabi gold is being traded at Rs 103, 100 per tola. It was traded at Rs 103, 300. Similarly, the price of silver has dropped by Rs 5 and is being traded at Rs 1,290 per tola today.

The Ministry of Finance has denied access to additional budget, other than reduced allocated funds, for government agencies following the January 31 decision to cut government expenditure amid a financial resource crunch. In line with the decision of reducing recurrent expenditure and cutting expenditure for not ready-to-go projects, the government has already reduced the size of the budget in the mid-term review of the budget for the current fiscal year 2022/23. On February 12, the government announced a cut in its annual budget by a whopping 13.59 percent, the largest cut in recent years, after realizing that raising the required resources from all sources, particularly revenue and foreign aid, is not achievable. The revised budgetary allocation now amounts to Rs 1,549.99 billion from the original size of Rs1,793.83 billion. “Along with overall trimming of budget, the budget has been trimmed under individual headings too,” said a senior official at the Financial Comptroller General Office (FCGO). “Now, the Line Ministry Budget Information System (LMBIS) automatically refuses to entertain any demand for extra resources other than reduced allocation.” According to the official, any payment order issued exceeding the new limit is being turned back by the system itself. “Allocation of the budget has been revised for the development projects depending on their progress in the works,” the official said. The government’s revenue suffered mainly due to the prolonged import restrictions on high revenue-generating goods including vehicles, alcohol, and expensive mobile handsets. The restrictions were first imposed in April 2022 for the import of 10 types of products. The number of restricted products was later reduced gradually but the ban on vehicles, alcohols, and expensive mobile sets continued till mid-December last year when the ban was lifted. Likewise, the Nepal Rastra Bank made it mandatory to deposit a cash margin of up to 100 percent for opening letters of credit for the import of a number of products which also hit import-based revenue. Import covers around 50 percent of Nepal’s total revenue, according to the Department of Customs. Though these measures were taken to address the external sector vulnerability amid the ballooning balance of payment deficit and depleting foreign exchange reserves, the steps invited a new crisis of a shortfall of resources for the government. “It is for the first time since the fiscal year 1967-68 that the country has witnessed a negative growth in revenue collection,” said Deputy Prime Minister Finance Minister Bishnu Paudel, presenting a mid-term review of the budget in Parliament on February 12. In the past, there was a trend of reduced revenue growth but not negative growth. The shortfall in revenue was also aggravated by added liability by the previous government led by Sher Bahadur Deuba whose administration increased salaries for civil servants and increased the beneficiaries of social security allowances. This prompted the current government to take harsh measures of slashing the overall budget which is likely to result in reduced economic growth. Likewise, reprioritization of projects which has not been implemented even after getting a resource guarantee from the finance ministry, surrender of the budget which cannot be spent in the current fiscal year, and abandoning any proposal that creates new liabilities are other measures planned by the finance ministry. Addressing the parliament, minister Paudel had said that the government also aims to control revenue leakages by taking action against those involved in such practices and recover the prolonged dues of revenue to improve the revenue situation.

The government is bringing large savings and credit cooperatives under the purview of Nepal Rastra Bank (NRB). Amending the Nepal Rastra Bank Act 2002, the large savings and credit cooperatives operating in the country are being brought under the regulation of the central bank. In particular, cooperatives having paid-up capital of more than Rs 250 million or annual business of Rs 500 million in deposits and loans are being brought under the purview of the central bank. It is estimated that there are 600 large-sized savings and credit cooperatives operating in the country currently. Of the more than 30,000 cooperative institutions operating across the country, 18,000 are savings and credit cooperatives. It has been proposed that the NRB can regulate, inspect and supervise the cooperatives by using the existing laws related to cooperatives. The central bank should issue guidelines and standards regarding the regulation, inspection, and supervision of savings and credit cooperatives. As there is no powerful authority to regulate cooperatives till now, it is suspected that people keep the money earned from undisclosed sources at such financial institutions. This is the reason the government is bringing the cooperatives under the regulation of the NRB. The proposed bill has also recommended amendments to the Cooperatives Act 2017. It has been proposed in the bill that the cooperatives that deal mainly with savings and credit should follow the guidelines and standards set by the central bank. Such institutions will be inspected and supervised by the NRB on the basis of corporate governance and risk. Bringing large cooperatives under the NRB is one of the amendments that the government is planning in the amendment of the 19 Acts. With the risk of Nepal finding a place on the 'grey list' of the Financial Action Task Force (FATF), the government has already decided to expedite the endorsement of amendment bills related to anti-money laundering (AML). The government sought to amend those laws through Some Nepal Acts Amendment processes. The Ministry of Law, Justice, and Parliamentary Affairs has recently registered the Bill for the purpose. A majority of the 19 laws in the group are meant to address deficiencies in compliance with the FATF’s anti-money laundering and terrorist financing standards. Some of the major laws that need amendment are the Money Laundering Prevention Act 2008, Land Revenue Act 1978, Tourism Act 1978, Securities Act 2007, Human Trafficking and Transportation (Control) Act 2008, Confiscation of Criminal Proceeds Act 2014, Mutual Legal Assistance Act 2014, Organized Crimes Prevention Act 2014, Criminal (Code) Act 2017 and Cooperatives Act 2017. Nepal is currently under pressure from FAFT and international lenders like the International Monetary Fund (IMF) to enact a number of laws to address the deficiencies to comply with the standards on AML and counter-terrorism financing (CFT). Though the amendment bill was presented at the erstwhile parliament, it was dissolved before it was endorsed. Later, the government sent an ordinance the President Bidya Devi Bhandari in November last year. But the President didn’t authenticate the ordinance on time, and following the elections of the House of Representatives, the ordinance could not be introduced. The Asia Pacific Group (APG) on Money Laundering has been conducting a mutual evaluation of Nepal’s compliance with the global standards on anti-money laundering and terrorist financing (AML/CFT). Though the APG team concluded the field visit to Nepal in December last year based on which its report will be prepared, Nepali officials believe Nepal could accommodate the progress made after their visits to Nepal before the APG plenary meeting scheduled to be held in April. The report will then go to the APG plenary, which will determine whether Nepal will be under the International Cooperation Review Group (ICRG) monitoring of the FATF. The ‘grey list’ is used to denote a group of countries/jurisdictions with “strategic deficiencies” in their regime to counter money laundering and terror financing. Once listed as ‘jurisdiction under increased monitoring’ by the FATF, they must develop an action plan within a specific period. A country on the grey list is not subject to sanctions. However, the grey list signals to the international banking system that there could be enhanced transactional risks from doing business with the said country. Nepal was on the FAFT's 'grey list' from 2008-2014. After a series of progress made on the AML/CFT regime that includes an amendment to the Anti-Money Laundering Act 2008, and the enactment of other laws, the FATF finally removed Nepal from the list in 2014. Ceiling on deposits After the Cooperatives Act 2017 is amended, savings and credit cooperatives will be allowed to collect individual deposits up to Rs 2.5 million only. As per the proposal, the limit of individual deposits should not exceed Rs 2.5 million. The institutions having deposits above Rs 2.5 million will be given a five-year period to bring the deposits within the prescribed limit.  

The country has raised Rs 30 billion internal and Rs 26.46 billion external loans till January 14, 2023, it is stated in the half-yearly review of the budget of current fiscal year 2022/23 released on Sunday. Similarly, the government has received foreign grants worth Rs 8.12 billion during the same period. Government mobilizes internal and external loans and foreign grants for the implementation of annual policies and programs. According to the Ministry of Finance, discussions are being held with different development partners for the mobilization of development assistance for the current fiscal year and coming fiscal year. The half-yearly review report stated that initiatives are underway for loan and grants with more than two dozens of development partners. The government has been taking initiative to take Rs 39 billion concessional loan from the Asian Development Bank for the implementation of Kakadbhitta-Laukahi road section. Discussion with the World Bank to get this loan is underway, according to the Finance Ministry. Similarly, the government is preparing to take Rs 13 billion subsidized loan for the School Sector Reform Program as well as Rs 13 billion subsidized loan for Quality Health System Project from the World Bank. It is said that the project document has already been prepared to get this loan assistance. The Finance Ministry mentioned in the review report that a subsidized loan for budgetary assistance of around Rs 13 billion is going to be taken from the World Bank under Nepal Fiscal Reforms DPC-2 Program as well as preparation is underway to take budgetary assistance worth around Rs 13 billion under 'Finance for Growth' program. The Asian Development Bank has already given initial consent for the implementation of the 635-MW Dudh Koshi Storage Hydroelectric Project. "The Asian Development Bank has given hints to provide around Rs 75.40 billion subsidized loan for the implementation of the project. Coordination is underway to collect investment from other donor agencies in the project," mentioned the review report. Similarly, homework is on to secure a subsidized loan worth US Dollars 500 million (around Rs 65 billion) to implement the 1061-megawatt Upper Arun Reservoir-based Hydropower Project. In addition to this, the government is coordinating with other probable investors for the project to manage remaining funds required to undertake the project. For the implementation of the Customs Reform and Modernization Strategies and Action Plan, the government is in the process of receiving a loan of around Rs 6.50 billion in subsidy from the Asian Development Bank. Moreover, the government is making preparations to get a soft loan of worth Rs 13 billion from the ADB to implement a public finance management and service delivery reform program. Discussions are underway in regard with a draft of the Memorandum of Understanding to secure around Rs 14.40 billion grants from the British Government to undertake the Local Infrastructure Support Programme. Besides this, Nepal is to take a loan of worth Rs 1.19 billion from the ADB for the implementation of the Rural Roads Improvement Programme. The government is in touch with some of its development partners and donor agencies to receive foreign assistance. It reached the phase of collecting submissions from the Ministry of Law, Justice and Parliamentary Affairs in regard to obtaining 40 million Euros from the European Union for the implementation of the School Sector Reform Project and projects in other areas. The EU has been urged to provide Rs 15.06 million grants to Nepal for the support of the agricultural and rural development endeavors.