ECONOMY Two Troubles

Despite astounding BoP surplus, the economy confronts serious trouble in share market and real estate<br><STRONG>A CORRESPONDENT</STRONG>

Jan. 15, 2012, 5:45 p.m. Published in Magazine Issue: Vol. : 05 No.-13 Jan. 13 -2012 (Poush 29,2068)<BR>

Finance Minister Barsha Man Pun Ananta is in a hurry to resolve the two remaining problems.


Last week, he made two meaningful comments in different programs.


First, he asked the investors to have faith in the share market. He even urged them to increase investment in the capital market to prop up the ailing sector.


Second, he dropped hints that government was exploring possibility to allow the housing apartments to transform the under-construction complexes into hotels – thereby allowing banks to switch their loans from realty heading to tourism.


In fact, the meeting of senior officials of the finance ministry and the central bank last week also decided to recommend the Nepal Rastra Bank to relax measures to allow the banking sector a breathing space to deal with their huge loans in real estate.


The government is particularly worried because these problems have the potential to derail the stable banking sector.


Huge Turnaround

Despite these problems the government has been thumping its chest for the amazing turnaround it has been able to make on the balance of payment front.


The overall BOP recorded a surplus of Rs. 46.31 billion during the four months of the current fiscal year compared to a deficit of Rs. 5.72 billion during the corresponding period of the previous year.


This is the highest level of BOP surplus ever recorded since the BOP compilation started in 1974/75. The current account also registered a surplus of Rs. 20.73 billion compared to a deficit of Rs. 1.96 billion during the corresponding period of the previous year.


“The acceleration in the growth of remittance along with improvement in the service account attributed to the surplus in the current account,” states a press release by the Nepal Rastra Bank.


Migrant workers' remittances increased by 34.2 percent to Rs.103.20 billion compared to a growth of 13.6 percent during the corresponding period of the previous year. Likewise, under the financial account, foreign direct investment of Rs 2.74 billion was recorded in the review period compared to such investment of Rs 3.42 billion in the same period a year ago.


The gross foreign exchange reserves increased by 25.9 percent to Rs. 342.74 billion in mid-November 2011 from a level of Rs. 272.15 billion as at mid-July 2011. Such reserves had declined by 2.7 percent to Rs. 261.68 billion during the corresponding period of the previous year. Based on the trend of import during the four months of the current fiscal year, the current level of reserves is sufficient for financing merchandise imports of 10.3 months and merchandise and service imports of 9.1 months.

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