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.
