Dragged down by poor performance of agriculture sector along with the sluggish pace of non- agriculture sector, the Nepali government has scaled down the estimated GDP growth rate to 3.5 percent for the current fiscal year (July 16, 2005 to July 15, 2006), the Ministry of Finance MoF) said in Kathmandu Thursday.

The government in its budget for the current fiscal year had vowed to achieve 4.5 percent economic growth, the mid-term review of the budget issued by the MoF said.

The inflation rate during the period remained at 7 percent against 4.6 percent witnessed in the same period last year, the review said, adding, "The decision to revise the prices of petroleum products due to sharp rise in their prices in the international market was the chief cause for higher inflation in the period."

Likewise, as a result of rapid increment in imports as compared to exports, trade deficit expanded alarmingly during the period. The total exports went up by 10.5 percent whereas imports soared by 18.6 percent.

Similarly, the government mobilized a total 31.58 billion Nepali rupees (451.14 million U.S. dollars) revenue, which was 5.9 percent higher than the last year's actual mobilization. However, during the period, growth of total expenditures remained higher than the revenue growth rate, the review said.

The international currency reserve increased by 10.4 percent to 140 billion Nepali rupees (2 billion U.S. dollars) and the amount is enough to finance goods import for 10.4 months. The continuing healthy growth in the remittance income is one of the major reasons for the growth in reserve of international currency, said the review.

Likewise, money supply growth rate remained 4.8 percent against 2.5 percent witnessed last year. Expansion in domestic credits, which increased by 4 percent mainly due to soaring flows of retail banking, was the main reason behind the relatively higher growth of money supply. The total banking deposits also went up by 5.2 percent whereas flow of loans to private sector from the banking system increased by 6.1 percent.

Source: Xinhua