Things are starting to get bad on the economic front. Government spending has grown fast, revenue collection is slow and trade is shrinking. That summarises the Nepal Rastra Bank's assessment of the past fiscal year, ending mid-July. Add to that the recent upheavals in industry-from the Maoists' anti-alcohol campaign, to janakarabahis (people's actions) against carpet and garment makers, and fresh demands by pro-Maoist trade unions. And expect worse in the coming days.

There has been a general slowdown in savings. Low interest rates throughout 2000/01 is the main reason why time-deposit growth was almost 10 percentage points slower than the previous year. Here's how this happens: banks have more money to invest and fewer people willing to borrow, so they offer less interest to those with money to save. NRB figures show that domestic credit grew by one percentage point, but most of that was hogged by government, but private borrowing was down by almost four percentage points to about 17 percent in 2000/01 because of slackening demand for import credit, mainly.

The government went on a spending spree last year, getting rid of Rs 67.83 billion, almost twice as much the year before. And it did this even as revenue growth decreased to Rs 48.86 billion, two percentage points from 1999/2000. Foreign grants did help plug some of the deficit, but the overall year-end shortfall was Rs 14.94 billion. The government borrowed Rs 3.79 billion from foreign sources and issued treasury bills, development bonds and savings certificates worth Rs 5.58 billion. Still short of cash, it overdrew Rs 5.57 billion from the central bank-five times more than its legal limit.

But the last year was not all bad: inflation fell as the urban consumer prices nationally grew by 2.4 percent, compared to 3.5 percent the year before. The prices were kept down by low food and beverage prices, even though those of imports, recreation, education, etc remained on the high side.

Foreign trade has also slowed down-overall exports grew by only about 15 percent, down from 40 percent growth the previous year. Exports to India have slowed down, and carpet and garment sales to other countries have also dropped. Pashmina sales last year hit a high of Rs 6.85 billion, but exports have slowed down since. However, because imports also slowed down considerably, affected by increased transport costs and a dearer dollar, the trade deficit narrowed by 4.3 percent to Rs 53.14 billion. The 12-month Balance of Payments estimate, based on monetary statistics, increased by Rs 5.76 billion. Foreign exchange reserves stood at Rs 105.16 billion, about 24 percent of it as Indian currency.