Govt considering to take overdraft loans from NRB as it faces severe shortfall of financial resources

Published On: June 12, 2023 08:00 AM NPT By: RAJESH KHANAL

KATHMANDU, June 12: The federal government’s accumulated loss has reached Rs 88.35 billion as of mid-May this year, which has put the government under pressure to depend more on borrowing for its day-to-day operations.

In the same period last year, the government had a surplus of Rs 104.20 billion in its treasury, shows the record of Nepal Rastra Bank (NRB). Due to a notable fall in the revenue collection, the government has been under pressure on the financial management since the beginning of the current fiscal year.

Last year, the government imposed a ten-month long restriction on imports to overcome the negative balance in the foreign sector indicators. As a result, the government has been facing a severe shortfall in revenue collection following a drop in imports.

According to a government report, the revenue collection this year has gone down 12 percent compared to the review period last year. This has compelled the government to take overdraft loans from NRB to meet its financial liabilities.

With the crunch in the financial resources, the federal government has disbursed only half of the amount of the third installment allocated for the province and local governments. Along with a widening accumulated loss of the federal government, the sub-national governments have also been facing pressure due to declining surplus on their treasury.

Overall, if the financial condition of all 761 governments is accounted for, the government has an accumulated loss of Rs 45.38 billion. According to economists, the government will be compelled to take overdraft loans from the NRB if the overall condition of government reserve funds, including those of the local governments, turn negative.

As of mid-May this year, the government has collected only 64 percent of the targeted revenue. Similarly, the foreign grant amount also stood at only Rs 7.22 billion, against the expected amount of over Rs 38.46 billion. During the period, the government has taken external loans of Rs 64.91 billion and domestic borrowing of Rs 179.70 billion.

According to the law, the government can take a maximum of five percent of the total revenue collection as an overdraft loan when it undergoes severe financial problems.