Economic situation is improving, Minister Mahat claims

KATHMANDU: Minister for Finance Dr. Prakash Sharan Mahat has claimed that the economy is gradually improving due to reforms initiated by the government.

Organizing a press conference at the ministry on Wednesday, Dr Mahat said economic activities were increasing in the country.

However, contrary to the minister’s claim, economic activities have not witnessed the anticipated surge. The shortfall in revenue collection indicates a slowdown in economic activities in the country. The government has only generated Rs 342 billion in revenue during the first five months of the fiscal year 2023/24, which is about 24% of the annual target.

Undeterred by the current challenges, Minister Mahat said the government remains committed to expanding the economic and budget system reform program. He said the government initiated several economic and budget system reforms through the fiscal budget. “These reforms included fiscal discipline, multi-year contract norms, and a revamped budget allocation system,” he said, adding that the government also initiated a new policy on international development assistance, prioritizing grants and subsidized loans to address climate change effects.

On the occasion, Mahat also shared encouraging economic results stemming from the reform efforts. “During this period, there has been a growth rate of approximately 6% in capital expenditure. Additionally, there is a notable increase in various tax categories: customs duty has risen by 13%, value-added tax has logged about 7.19% growth, income tax has registered a growth of about 12%, and the overall tax revenue has increased by 7.57%,” he said. “In the financial sector, the impact of monetary policy adjustments is evident. The policy rate has been reduced from 6.5% to 5.5%, the bank rate from 7.5% to 7%, and the deposit collection policy rate from 4.5% to 3%. Consequently, there is a gradual decline in interest rates.”

He also said the banking sector has experienced a substantial increase in credit flow and deposits indicating a positive impact on economic activities.

Mahat also said external sector indicators showcased a surplus in the current account and a significant boost in foreign exchange reserves. He attributed this to a 30% increase in remittance inflows, a remarkable upswing in the tourism sector.

Outlining the government’s future course of action, Mahat said immediate plans include maintaining coordination between the government and the private sector, ensuring relief for earthquake-affected areas, and prioritizing rapid reconstruction. “Legal and policy reforms related to investment are on the agenda, aiming to create a favorable environment for both domestic and foreign investors,” he added.