Smuggling of imported goods, slow capital expenditure and high interest rates result in low revenue collection: FNCCI

Published On: April 2, 2023 08:16 PM NPT By: Republica | @RepublicaNepal

KATHMANDU, April 2: The private sector on Sunday urged the newly-appointed Finance Minister Prakash Sharan Mahat for government’s intervention to solve the ongoing problems of the liquidity shortage and excessive interest rates on bank loans.

Apart from the liquidity problem, the private sector has underlined the problem of solving the liquidity condition of cooperatives and microfinance, taking initiatives to increase foreign direct investment and checking smuggling of imported goods through the open border with India, among others. They requested the government to mobilize the external loans for development purposes and to increase capital expenses to inject more liquidity to solve the ongoing problem of excessive interest rates.

In a meeting with Minister Mahat, representatives of the Federation of the Nepalese Chambers of Commerce and Industry (FNCCI), pointed out high interest rates as the root cause of the ongoing problems. The FNCCI President Shekhar Golchha said the government needs to look for ways to increase cash flow in the market to reduce the existing exorbitant rate of interest. “Joint effort of the government and the central bank is needed for this purpose,” Golchha said.

Golchha underscored the need for increasing the development expenditure by the government. The records of the Financial Comptroller General Office show that the government has spent only 24 percent of the allocated budget for development projects when almost nine months of the current fiscal year has been completed.

Golchha said checking smuggling through the open border could help increase revenue collection of the government. “The new government has to build up such an environment that helps enhance the confidence of the private sector,” he said.

According to the FNCCI, illegal trading started to flourish at the time when the government imposed a ban on a number of imported goods citing depleting foreign currency reserves. “Although the government has now completely removed the restrictions, the illegal trading has not come under full control of the authority,” Golchha said.