IMF says delays in adopting full-year budget may 'dampen' investment, growth in Nepal

The International Monetary Fund (IMF) said that delays in adopting a full-year budget for 2012/13 could further dampen investment and growth.

IMF has given such statement during the visit to Nepal led by Todd Schneider, Deputy Division Chief, Asia and Pacific Department from September 10-24, 2012, to conduct the 2012 Article IV Consultation discussions with the Finance Finance Minister Barsha Man Pun, Nepal Rastra Bank governor Yuba Raj Khatiwada, and Finance Secretary Krishna Hari Baskota, private sector, among others.

During the discussions, IMF said a full-year budget—limiting the deficit to about 2 percent of GDP, consistent with macroeconomic and debt sustainability—should be adopted as soon as possible.

Similarly, it also urged the government to focus on budget implementation to ensure appropriately high levels of capital spending to meet Nepal’s pressing infrastructure needs and support medium-term growth.

It also suggested on the revenue side saying that further strengthening of tax administration and collection will be vital, as will a focus on collecting arrears. Tighter expenditure management and cash planning will also be key to ensuring that government and donor-supported investment projects are implemented, IMF statement added.

“At the same time, large losses that arose at the Nepal Oil Corporation (NOC) in 2010/11 and Nepal Electricity Authority (NEA) are unsustainable. Adoption of an automatic price adjustment mechanism that ensures that the NOC avoids future losses is strongly recommended.” reads the statement.

Likewise, IMF said that monetary policy be conducted in a manner that ensures interest rates remain within a certain margin of those in India. In the current environment, excess liquidity generated by strong remittance growth in 2011/12 poses a risk to this objective, and monetary policy should be tightened to absorb this liquidity, it added. nepalnews.com