Per capita debt down 2 percent to Rs21,665

  • Debt-to-GDP ratio falls to 24.1 percent, the lowest in at least 10 years according to the Ministry of Finance
- Post Report, Kathmandu

May 29, 2017-

Each Nepali is saddled with a debt of Rs21,665, which is a fourth of the country’s per capita income of Rs90,521. This indicates there is enough room for the country to borrow more money to finance development works and achieve higher economic growth rates.

Nepal’s per capita debt stood at Rs22,081 in the last fiscal year. This amount fell by 2 percent at the end of the first eight months of the current fiscal year to Rs21,665, according to the Economic Survey of the Ministry of Finance (MoF) launched on Sunday.

Nepal’s total debt stock hovered around Rs625 billion at the end of the first eight months of 2016-17, down from Rs627.8 billion recorded in the fiscal year 2015-16. Of this amount, Rs233.2 billion has to be returned back to domestic lenders and Rs391.3 to foreign lenders.

The funds borrowed from domestic and foreign sources are 24.1 percent of the country’s gross domestic product, according to the Survey. This debt-to-GDP ratio is lowest in at least last 10 years.

“A relatively lower debt-to-GDP ratio shows we have enough fiscal space to expand borrowing to fund development activities,” said Laxman Aryal, head of the Economic Policy Analysis Division at the MoF.

The problem currently facing the country is not shortage of financial resources. The country’s gross national savings, for instance, stands at 43.8 percent of the GDP, which is one of the highest in the world. Despite having these resources at the disposal, the country faces huge infrastructure gap, which is creating a binding constraint on growth.

This is an indication that available resources are not being utilised properly. No wonder, the government has been running resources surplus for the last four consecutive fiscal years.

Things are likely to remain the same in the current fiscal year as public spending has remained slow. As of Saturday, the government spent only 52 percent of the annual budget of Rs1,048.9 billion, while only 34 percent of the capital budget of Rs311.9 billion was utilised, shows the latest report of the Financial Comptroller General Office. Since only one-and-a-half months are left for the fiscal year to end, the government will not be able to fully utilise available resources.

As public spending has remained slow, the government’s savings have surpassed Rs260-billion mark.

“Public spending, especially capital spending, needs to go up, so that physical infrastructure required to attain high growth rate could be built,” Nara Bahadur Thapa, head of the Research Department at the Nepal Rastra Bank, said. “This will ultimately attract private investment as higher public spending crowds in private investment.”

Low fund absorptive capacity of the government has not only prevented the country from bridging infrastructure gap, but affected the banking sector as well.

Banks are currently facing shortage of funds that could be immediately extended as loans, because revenue collected by the government is locked up in state coffers. As a result, interest lending rates are going up. If the money parked at the government’s treasury is released, banks would be in a better position to extend loans to borrowers, which would help the economy to grow at a faster pace.

Published: 29-05-2017 08:43

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