Identifier
Created
Classification
Origin
05KATHMANDU2403
2005-11-08 01:03:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Kathmandu
Cable title:  

GOVERNMENT'S REVENUE COLLECTION POOR

Tags:  ECON EAID EFIN ABUD NP 
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UNCLAS KATHMANDU 002403 

SIPDIS

SENSITIVE

DEPT FOR SA/INS

E.O. 12958: N/A
TAGS: ECON EAID EFIN ABUD NP
SUBJECT: GOVERNMENT'S REVENUE COLLECTION POOR

REF: KATHMANDU 2308
KATHMANDU 1537

POOR GROWTH IN GOVERNMENT'S REVENUE COLLECTION
--------------------------------------------- -

UNCLAS KATHMANDU 002403

SIPDIS

SENSITIVE

DEPT FOR SA/INS

E.O. 12958: N/A
TAGS: ECON EAID EFIN ABUD NP
SUBJECT: GOVERNMENT'S REVENUE COLLECTION POOR

REF: KATHMANDU 2308
KATHMANDU 1537

POOR GROWTH IN GOVERNMENT'S REVENUE COLLECTION
-------------- -


1. (SBU) THE GOVERNMENT OF NEPAL'S RECENT INCOME AND
EXPENDITURE FIGURES, RELEASED BY NEPAL'S MINISTRY OF
FINANCE (MOF) ON OCTOBER 26, SHOW THAT TOTAL REVENUE
COLLECTION RECORDED A GROWTH OF ONLY 0.6 PERCENT IN THE
FIRST QUARTER OF FY 2005/06. (NOTE: FIRST QUARTER IS FROM
JULY 16 TO OCTOBER 15. END NOTE.) MEDIA REPORTS
DESCRIBED THE GROWTH RATE AS ONE OF THE LOWEST IN RECENT
YEARS. BRIHASPATI RAJ PANT, MOF REVENUE DIVISION UNDER
SECRETARY, TOLD EMBOFF THAT REVENUE COLLECTED DURING THIS

SIPDIS
PERIOD WAS BELOW TARGET, BUT IT WOULD BE PREMATURE TO
CONCLUDE THAT THIS TREND WOULD CONTINUE THROUGHOUT THE
YEAR. PANT ADDED THAT ACTUAL COLLECTION FIGURES COULD NOT
BE ASCERTAINED BECAUSE DIFFERENT COLLECTION CENTERS COULD
NOT SUBMIT REVENUE STATEMENTS IN TIME DUE TO LENGTHY
NEPALI HOLIDAYS COINCIDING WITH THE DEADLINE FOR
SUBMISSION OF REVENUE STATEMENTS. (NOTE: IN THE
GOVERNMENT'S BUDGET FOR FY 2005/06, THE REVENUE COLLECTION
TARGET WAS SET AT USD 1.15 BILLION, OUT OF WHICH,
ACCORDING TO THE MOF, THE TOTAL REVENUE COLLECTED DURING
THIS PERIOD WAS USD 177 MILLION, ONLY 15.5 PERCENT OF THE
ANNUAL TARGET. END NOTE.)

DEVELOPMENT EXPENDITURES DECLINED, OTHERS INCREASED
-------------- --------------


2. (U) THE FIGURES RELEASED BY THE MOF SHOW A DECREASE IN
THE GOVERNMENT'S DEVELOPMENT EXPENDITURES, WHILE
ADMINISTRATIVE, SECURITY AND OTHER EXPENSES HAVE INCREASED
DURING THE FIRST QUARTER. SPENDING ON DEVELOPMENT
ACTIVITIES DURING THE FIRST QUARTER OF FY 2005/06 WAS USD
6.2 MILLION, WHICH IS 43 PERCENT LESS THAN THE USD 11.0
MILLION SPENT DURING THE SAME PERIOD IN THE PREVIOUS
FISCAL YEAR. IN CONTRAST, THE GOVERNMENT'S RECURRENT
EXPENDITURES, INCLUDING ADMINISTRATIVE AND SECURITY
EXPENDITURES, AND PAYMENTS OF INTEREST ON LOANS, GREW BY
6.2 PERCENT TO USD 169.44 MILLION, COMPARED TO USD 155.56
MILLION LAST YEAR. IN ADDITION TO REGULAR EXPENSES, THE
MOF INVESTED USD 17.5 MILLION IN SEPTEMBER TO BAIL OUT
NEPAL OIL CORPORATION (NOC) FROM A FINANCIAL CRISIS (REF
A). ACCORDING TO THE MOF FIGURES, THE CUMULATIVE TREASURY
DEFICIT AS OF OCTOBER 15 HAD REACHED USD 31.15 MILLION.
THE GOVERNMENT HAD A SURPLUS FUND OF USD 21.55 MILLION AT
THE END OF THE SAME PERIOD LAST YEAR.

COMMENT
--------------


3. (SBU) ALTHOUGH POOR REVENUE COLLECTION IN THE FIRST
QUARTER OF FY 2005/06 HAS RAISED CONCERN OVER THE
GOVERNMENT'S ABILITY TO MEET ITS REVENUE TARGETS, NEPAL
COULD STILL DO SO. DUE TO IMPROVED ECONOMIC ACTIVITIES,
BETTER RESULTS ARE POSSIBLE IN THE MONTHS TO COME. SINCE
THE CURRENT MAOIST CEASE-FIRE WAS ANNOUNCED, TOURIST
ARRIVALS AND INTERNAL MOVEMENT OF PEOPLE HAVE BOTH
INCREASED, AND PRODUCTION AND CONSUMPTION OF GOODS AND
SERVICES HAVE ALSO RISEN. AN EXTENSION OF THE MAOIST
UNILATERAL CEASE-FIRE IS PIVOTAL FOR THE CURRENT UPBEAT
ECONOMIC MOOD TO CONTINUE. HOWEVER, IF THE SECURITY
SITUATION DETERIORATES, NEPAL WILL FACE A BLEAK ECONOMIC
FUTURE.

MORIARTY