Govt spending improves, revenue suffers

Kathmandu, Dec. 16

Coronavirus pandemic has badly hit business and economy across the globe but Nepal's macroeconomic indicators of the first four months of the current fiscal year tell otherwise.

While various sectors of the economy such as tourism, education, construction and industry are still contracted and struggling to bounce back with their efforts and government support, the government's expenditure, including the development budget mobilisation, has gone up in the first four months of FY 2020/21.

According to a report published by the Finance Ministry on Wednesday, the total expenditure of the government this year increased by 19.1 per cent to reach Rs. 269 billion against last year's Rs. 226 billion.

The capital expenditure has registered growth of about Rs. Rs. 3.39 billion this year with total spending of Rs. 29.44 billion. It began to show improvement from mid-September to mid-October as the expenditure jumped to Rs. 15 billion from Rs. 3.75 billion a month earlier. Recurrent expenditure and financial provision have also gone up. The following month witnessed the doubling of capital expenditure.

The ministry has noted that although development works and private sector construction have not picked up yet, increased economic mobilisation has contributed to improved indicators.

Federal government's income is up by 1.1 per cent and has reached Rs. 240 billion while total receipt is increased by 21.2 per cent. It has witnessed Rs. 20.9 billion revenue deficit and Rs. 29.2 billion budget deficit.

The number of people showing readiness to pay the taxes has also significantly increased despite the threats posed by the COVID-19 pandemic. As much as 163,134 Nepalis have obtained Personal Permanent Account Number (PPAN) in the four months period and 77,621 got the Business Permanent Account Number (BPAN).

With this, the government has issued about 3.57 million PANs.

According to the Finance Ministry, Nepal received Rs. 90.5 billion in foreign aid this year against Rs. 15.6 billion of last year. However, the share of loan has significantly gone up compared to the previous year. The share of grant is 14.2 per cent this year while it was 78.8 per cent last year.

Likewise, goods exports in first four months this year was up by 10.8 per cent and reached Rs. 40.2 billion. The number of companies registered during the crisis has also gone up by 6.2 per cent which is the indicator that business confidence is building gradually.

The inflation rate came down to 3.79 per cent in mid-October which was 6.21 last year.

Similarly, remittance inflow has also increased by 12.6 per cent in the first three months this year and reached Rs. 258.86 billion.

 

Revenue suffered

However, revenue collection is impacted by the pandemic as many businesses couldn't come into operation while many are running in low capacity. While the government has met the revenue target in customs duty and income tax with the mobilisation of 101.74 per cent and 105.55 per cent revenue respectively against the target, Value Added Tax, excise duty and non-tax revenue have gone significantly down.

Government could collect only 94 per cent tax revenue of its target while non-tax revenue was just 64.69 per cent of the target.

It collected Rs. 226.03 billion tax revenue against the target of Rs. 240.4 billion and received Rs. 14.1 billion non-tax revenue against the target of 21.81 billion.

One of the significant losses was seen in service income which contracted by 53.9 per cent and reached Rs. 19.6 billion against Rs. 42.5 billion of the last year. Likewise, services spending has also gone down by 37.8 per cent.

This loss was due to the closure of the tourism and hospitality sector. From April to October this year, only 3,059 tourists entered Nepal of which 1,874 came in October alone, read the report.

Similarly, the number of migrant workers seeking working labour permission has decreased by 95.7 per cent. Just 3,463 workers obtained the permission while 79,680 had received such permission in the first four months of the last fiscal year.

Published in The Rising Nepal daily on 17 November 2020.