Government spending reached Rs 50.5 billion in mid-May, up 23 percent compared to last year, and much of that was spent in meeting recurrent expenses. Regular spending was up by about 25 percent and development expenditures grew by just 22 percent. The revenue collected during these ten months of the fiscal year was Rs 37.3 billion, resulting in an overall deficit of Rs 10 billion. The hole was plugged by issuing savings and development bonds (Rs 3.1 billion) and treasury bills worth Rs 1.1 billion, and by taking out foreign cash loans worth about Rs 3.4 billion. The government also obtained an overdraft of Rs 2.7 billion, which by law should come down to within Rs 1 billion by mid-July when the fiscal year ends.

Prices rose faster, by three percent year-on-year compared to 1.9 percent growth last year. Food and beverage prices remained low and offset the increase in the non-food category. The prices of imported goods grew by 7.7 percent, reflecting the increased costs of petroleum products (since October last year) and the depreciation of the Nepali currency vis-?-vis the greenback. Prices went up most in the hills (seven percent), then in the tarai, by 2.6 percent. Kathmandu Valey saw the smallest rise, 1.7 percent.

There has been a slowdown in the growth of exports, which grew by about 17 percent compared to the roughly 38 percent achieved in the same period last year. The Nepal Rastra Bank reported decline in the export of some major products?carpets,
garments and jewellery. The slowdown in exports was balanced by a slump in imports, which grew by just 6.9 percent to about Rs 95 billion. Imports grew by about 26 percent in the same time frame last year. The trade deficit narrowed by about three percent to Rs 47 billion. The Balance of Payments, based on eight month figures, was favourable by about Rs 9 billion. The overall foreign exchange holdings in the banking system increased by about 11 percent to about Rs 103 billion, of which over 20 percent is held as Indian currency.