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Spiraling Danger
In the last one year, inflation has surged substantially threatening to disturb the fragile macroeconomic stability
By A CORRESPONDENT
At a time when Nepal is struggling with an intensive conflict, the news of spiraling inflation has come as another bombshell that could shake the national economy enough to thoroughly disturb the fragile macroeconomic stability. Despite prolonged insurgency and political conflict, macroeconomic indicators were still healthy – but this could change if the inflation rate is allowed to head further north towards double-digit.
During the current fiscal year, the rate of inflation has increased eerily. According to the Nepal Rastra Bank, the inflation rate has touched 8.5 percent in the first four months of the current fiscal year because of decrease in the production of major agricultural products like rice coupled with increase in the prices of petroleum products.
This rate of inflation is substantial compared with the last year when it had stood at 2.7 percent during the same period.
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Economic activity : On the wane |
During the review period, the prices of rice and rice-based products have risen by 18 percent, prices of food stuff and liquor have risen by 8.6 percent and prices of non-food stuffs and services have risen by 8.3 percent.
A number of reasons had combined to fuel the rise in inflation. The frequent upward revision of the prices of petroleum products and the increase of Value Added Tax (VAT) rate from 10 to 13 percent triggered the surge in inflation. Analysts predict that the rate could rise further and attain double-digit shape, which could spell a disaster for the already ailing economy.
Even as the inflation is growing, the government is struggling to collect revenue as per its target. The recent statistics revealed by the Ministry of Finance showed that during the first six months of the current fiscal year, revenue collection grew merely by six percent compared with the government target of registering 14 percent growth.
According to the Ministry, till mid-January, Rs 31.58 billion was collected as revenue – Rs 26.43 billion as tax revenue and Rs 5.14 billion as non-tax revenue. The government aims to collect Rs 81.81 billion this fiscal year. Last fiscal year, the government had collected Rs 70 billion as revenue.
Adding to the gloomy news, the Central Bureau of Statistics (CBS) came with new figures last week showing Nepal’s GDP growth rate in the fiscal year 2004/05 was 2.33 – less by 1.21 percent compared to 3.54 percent growth rate in the previous fiscal year because of ‘weak agricultural growth rate, low capital formation and dismal performance of non-agricultural sectors.’
In the fiscal year 2004/05, the agricultural growth rate stood at only 2.97 percent compared to 3.86 previous year. Likewise, non-agricultural sector grew by 2.07 percent during the period compared to 3.42 percent last year. Economists fear worsening situation given the inadequate rainfall during this year’s monsoon and also due to prolonged dry weather in the current winter – which could hurt the productivity of winter crops.
Number Of Overseas Workers Increase Sharply
The number of Nepalese youths going overseas for work has increased sharply in the first six months of the current fiscal year 2005/06. Compared to the same period last fiscal year, the number of workers leaving for overseas increased by 50.45 percent.
According to the Department of Labor and Employment Promotion, 93,948 workers left for overseas this year in the first six months alone – up from 62,441 who left for overseas during the same period last year. According to statistics, Malaysia is the top favorite destination.
The number of workers going to Malaysia increased by 56 percent reaching 47,776. Those leaving for Qatar also increased by 61 percent to reach 28,176. Saudi Arabia was the third favorite destination attracting 8320 workers followed by the United Arab Emirates where 8294 workers went during the period.
Likewise, the number of women workers increased by 149 percent during the period reaching 638 – Israel alone attracted 336 Nepalese women workers.
The department has added that compared to growth in numbers of workers leaving for overseas, the number of complaints against individuals and institutions (manpower agencies) on fraud charges has declined sharply. Compared to 165 and 509 numbers of complaints against individuals and institutions last year, the number has fallen to 301 and 197 this year.
The department has facilitated in the recovery of Rs 13.7 million as compensation to victimized workers during the period. The victims have demanded for Rs 40.4 million as compensation in total. During this period, two manpower companies were de-registered on the basis of complaints. A year ago, 17 such companies had to be de-registered.
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