May 29: The Economic Survey 2079/80 presented by Finance Minister Dr Prakash Sharan Mahat in the Federal Parliament on Sunday indicates that the country's economy is still in trouble.

It is estimated that the expansion of Nepal's economy will be low in the current fiscal year (FY), Finance Minister Dr Mahat said while unveiling the survey report.

The economic growth rate of Nepal is estimated to drop to 2.16 percent in the current year due to the decline in industrial production including that of the construction, wholesale and retail businesses.

Last year's economic growth rate was 5.46 percent. The survey said that the overall inflation remained high, especially due to the increase in the price of petroleum products due to the Russia-Ukraine war.

As the capital expenditure of all three levels of government has not increased, there hasn’t been any improvement in capital formation, job creation, production and productivity growth. Despite the increase in annual rice production, the lack of winter rainfall adversely affected the winter crops this year. The slowdown in wholesale and retail trade, construction and real estate business, and the decline in overall economic activities is estimated to contract the growth of the industry and service sectors.

Finance Minister Mahat said, "It seems that the government should formulate an economic policy and implement it to restore the confidence of the general public and the private sector."

Changes in the structure of economy

The survey showed that the structure of Nepal's economy is changing. The contribution of the agricultural sector to the GDP is decreasing and that of the non-agricultural sector is increasing. It is estimated that the contribution of the agricultural sector to the gross domestic product will be 24.1 percent and the contribution of the non-agricultural sector will be 75.9 percent.

In the current fiscal year, the ratio of government sector consumption to GDP is estimated to be the lowest in the last decade. By mid-March of the current fiscal year, the ratio of government and private sector consumption is estimated to be 5.4 and 86.3 percent, respectively, and the share of non-profit organizations will be 1.9 percent.

There has been no significant change in the consumption structure of the government sector, private sector and non-profit organizations. In the current year, it is estimated that the consumption of the government sector will decrease and the consumption of the private sector and non-profit organizations will increase.

As the ratio of total national savings to gross domestic product is gradually decreasing with the onset of Covid-19, it is seen that it will increase normally in the fiscal current year. In the current FY, the total national savings is estimated to be 31.7 percent of the GDP. Last year, this ratio was 29 percent.

Highest Inflation in 6 years

This year, inflation is expected to be the highest in the last six years. The economic survey released by the government has shown that inflation in Nepal has been increasing gradually from 2018 to 2023.

The price hike based on consumer prices was 4.1 percent in 2018. Currently, it is 7.8 percent.

The data shows that inflation was 4.1 percent in 2018, 4.6 percent in 2019, 6.1 percent in 2020, 3.6 percent in 2021, 6.3 percent in 2022 and 7.8 percent in 2023.

15.1 percent of Nepalese below poverty line

According to the Economic Survey, a total of 15.1 percent of Nepal's population is below the absolute poverty line. Based on the Nepal Living Standards Survey 2010/11, the National Planning Commission has stated that 15.1 percent of the total population is currently in abject poverty.

The poverty figures differ regionally. Absolute poverty is the highest in Karnali province at 39.5 percent while the lowest is in Bagmati province at 7 percent. After Karnali, 25.3 percent of the population in Sudurpaschim Province and 24.2 percent in Madhesh Province are in poverty.

The new budget is brought in moderation

The government is preparing to announce the budget for the next fiscal year (FY 2023/24) at a time when the country's economy is in a difficult situation.

Finance Minister Dr Mahat is scheduled to announce the budget in a joint meeting of the House of Representatives and the National Assembly at 4 pm today (May 29). Due to the pressure on resources, the budget is going to be smaller in size for the next FY than the current fiscal year.

The National Planning Commission has fixed the ceiling of Rs 1688 billion for the upcoming FY’s budget.

According to sources at the Ministry of Finance, the budget has been prepared accordingly.

According to sources, many new programs will not be introduced this time due to the pressure on resources in the budget. The government will not emphasize on any new programme as the finance minister has made it clear through the policies and programmes that the government will give continuity to the old programmes and projects.