Where the money for poverty reduction is flowing?

 Simple Question for Economists?

Nepal Budget 2022/23: 

1. Budget allocation according to SDG Categories:

            No Poverty = Rs. 170.66 Billion

            Zero Hunger = Rs. 80.26 Billion

            Which Equals to Rs. 250.92 Billion

 

2. UNDP report Multidimensionally poor: 17.5 %  ( 52 Lakh) people

 

3. If Rs. 250.92 Billion budget is allocated equally to 52 lakh people then it equals to Rs. 48,000 for each. If four people per family then a family receives Rs. 1,92,000 per family per year. No more hunger and poverty for the year. But ?

 

How much of this amount go to the Household or People below poverty line?

 

Data Source: 

1. Budget Speech of Fiscal Year 2022/23  Annex 13 from:  www.mof.gov.np

2. UNDP Report, Multidimensional Poverty Index 2022 https://hdr.undp.org/sites/default/files/Country-Profiles/MPI/NPL.pdf

 

The Big Question for Banking Industry in Nepal

There have been many media news of Nepal Bankers Association meeting announcement about decision on interest rates. 

After the end of Covid-19 pandemic, each decision  on interest rate is reflected in the margin or mark-up of banks earning. The margin can be observed by the lending rate minus base rate and spread rate as shown in Fig 1 and Fig 2. Banks excess earning gradually increased (as in Fig, red arrow Þ). It is noted that each 1 percentage point is more than Rs. 50 billion annual burdens to public or earning of banks (as total Private Sector Credit is Rs. 5758 billion in mid-March 2023).

The banking market is confined with the deposits of public. The innocent depositors are only the price-takers. Supply of deposit is highly interest inelastic, if all banks change their rate simultaneously in same direction. Deposits cannot immediately go out from the system, if all banks reduce the deposit rate at same point of time. On the other hand, the creditors are also bounded by the agreement, it is very hard for them to change the banks. Thus, any noncompetitive and industry level decisions (cartels) always harm the society. Such activities are neither economic, nor legal and even not ethical decisions in the society. This should not even be the objective of the such elite association of the society. The association should believe on fair competition. The price control activities of association are immoral too. In most countries, this is illegal and controlled by Antitrust Law also charges heavy fines if violated, the law facilitates competition. 

The good part of regulation is that the data, information and activities of banks are transparent. Even rules are violated, our future generation will evaluate and judge our activities, they may tag us as Cartels.  These experiences were in many countries as an example- the Britain's bank Cartels during (1914-late 1960s). This is our choice how we position ourself in the history. This is our moral responsibility too, not to encourage cartels anymore. Best wishes for all.  

The views are my personal.

In the Support of Free and Fair Economics!!!  :)

Data Sources: Table No. 50 Structure of Interest Rates, CMES, NRB

https://www.nrb.org.np/category/current-macroeconomic-situation/?department=red&fy=2079-80

Government Expenditure Pattern in Nepal

The structure of the government expenditure shows that the pattern of expenditure has been altered since 1998/99. Since the period, the share of recurrent expenditure gradually increasing and exceeds share of capital expenditure in total government expenditure. The patten shows that the expenditure has increased the cost of operation of government rather than raising productive capacity of the economy.  

The picture shows the pattern of government expenditure of Nepal since 1975 to 2022, the expenditure are categorized as recurrent, capital and financial expenses. The recurrent expenditure is the expenses for government employees and other daily services, capital expenditure is the expenses for physical capital assets and financial includes repayment of loan and interest accrued for government debt of Nepal.

Types of Businesses in Nepal

The findings of the Economic Census 2018 reveal that household based economic activities have significant share in Nepal. There are 42 percent businesses are own house businesses, followed by the businesses in buildings 35 percent while are in the businesses buildings. The shopping mall only covers 2 percent of total business and 4 percent business are as types of businesses.   

Types of Businesses in Nepal (Registered and Non-Registered)
Types	Number	% Share
Street Business	34,101	4
Home Business	386,323	42
Business in Building	323,621	35
Traditional Market	67,441	7
Modern Shopping Mall	20,809	2
Exclusive Block or Building	58,344	6
Others  1)	32,717	4
Total	923,356	100
Data Source: www.cbs.gov.np
sumanneupane.blogspot.com

Tenure of Business Place (Registered and Non-Registered)
	Number	% Share
Owned	400,848	43
Rented	426,380	46
Lease/Contract	7,859	1
Others	22,912	2
NA1	65,357	7
Total	923,356	100
Source: www.cbs.gov.np

There are 46 percent of businesses are operated in rented house, while 43 percent are using own places for businesses and 1 percent businesses are operating with lease contracts.

Economic Entities and Employment Distribution in Nepal: Where to Focus for Post-Pandemic Recovery?

Distribution of Economic Units by Broad Industrial Classification Table I presents that there were 9,23,356 business units (establishments) in 2018 by division of economic sector.  There are equal numbers of registered, 50.1 percent, and non-registered, 49.9 percent, establishments in Nepal. 

In Nepal, the main activities of the economic units are Wholesale and retail trade including repair of motor vehicles and motorcycles (53.9 percent); followed by accommodation and food (14.1 percent); manufacturing (11.3 percent) and ather  activities (20.7 percent).

In Nepal, ‘wholesale and retail trade’ is main establishment is followed by ‘accommodation and food’ while 'manufacturing' is in the third position in terms of number of establishments in Nepal. However,  if we observe in terms of employment (engagement) ‘wholesale and retail trade’ is followed by ‘education’ and ‘manufacturing’ in the third and ‘accommodation and food’ is in the fourth position in terms of number of establishments in Nepal. This reflects, service sector is the main sector in terms of  employment of people in Nepal.

Table 1 Main Economic Activities in Nepal
Types	Share (%)	Total Businesses		Employment or Engagement of Persons
				1-10	11-50	51-100	101 &over
	100	923,356		96.0	3.6	0.2	0.2
Wholesale, retail trade	53.9	498,069		53.6	0.3	0.0	0.0
Accommodation, food	14.1	130,540		13.9	0.2	0.0	0.0
Manufacturing	11.3	104,058		10.8	0.4	0.1	0.1
Others Remaining	20.7	190,689		17.6	2.7	0.2	0.1
Source: Economic Census, 2018 available at www.cbs.gov.np www.sumanneupane.blogspot.com

In 9,23,356 economic units, most are small and medium size industries. Where 96 percent of economic units have engaged (employed) 1-10 people, while there are 3.6 percent businesses which have engaged (employed) within 11 to 50 employees.

Table II: Employment (Persons Engaged) in Number (based on Economic Census, 2018)
Sectors	% Share	Total
All Industries		3,228,457
Wholesale, retail trade	30.6	988,346
Education	15.9	513,336
Manufacturing	15.8	510,523
Accommodation, food	10.7	346,273
Financial, insurance	6.4	206,979
Others All	20.5	663,000
Source: Economic Census, 2018 available at www.cbs.gov.np
www.sumanneupane.blogspot.com

The economic census shows that out 9,23,356 business units provide employment to 32,28,457 people in Nepal. It includes only registered businesses in agriculture and both registered and non registered business in all other sectors. Thus, to cushion the loss in employment, the government should focus to revive small and medium size business that employs 1-50 people per businesses and it is 98 percent of the total businesses in Nepal. 

to be continued .....