VZCZCXRO8477
PP RUEHCI
DE RUEHKT #0739/01 2220453
ZNR UUUUU ZZH
P 100453Z AUG 09
FM AMEMBASSY KATHMANDU
TO RUEHC/SECSTATE WASHDC PRIORITY 0605
INFO RUEHBJ/AMEMBASSY BEIJING 7068
RUEHLM/AMEMBASSY COLOMBO 7385
RUEHKA/AMEMBASSY DHAKA 2716
RUEHIL/AMEMBASSY ISLAMABAD 5428
RUEHNE/AMEMBASSY NEW DELHI 3164
RUEHCI/AMCONSUL KOLKATA 4700
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEAIIA/CIA WASHDC
RHHJJPI/PACOM IDHS HONOLULU HI

UNCLAS SECTION 01 OF 02 KATHMANDU 000739 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ELAB ENRG ETRD PGOV NP
SUBJECT: NEPAL: ECONOMIC HIGHLIGHTS FOR JULY 2009 
 
¶1. (U)  Below is a compilation of economic highlights from 
Embassy Kathmandu for the month of July 2009, including the 
following: 
 
-- FY 2009/10 Budget Nearly 34 Percent Larger 
-- Economic Survey Shows Declining Performance 
-- UN Says Hunger in Some Areas 'Extremely Alarming' 
-- Growth in Overseas Workers and Remittance Slows 
 
 
FY 2009/10 Budget Nearly 34 Percent Larger 
------------------------------------------ 
¶2. (U) The Government of Nepal (GON) introduced a Rs. 
285.9 billion (USD 3.7 billion) budget for fiscal year 
2009/10 on July 13.  The proposed budget is nearly 34 
percent larger than the FY 2008/09 budget and more than 
double the amount the government spent two years ago. The 
largest share of the budget, 45.6 percent, is earmarked for 
social services, including education, which accounts for 
16.3 percent of total spending. The GON plans to make a 
massive investment in infrastructure improvement, including 
Rs. 18.5 billion for road construction, upgrading and 
maintenance.  Revenues are expected to total Rs. 176 
billion, with the balance of budget financing 
coming from increased foreign aid  (Rs. 78.5 billion in 
grants and loans) and domestic borrowing (Rs. 30.9 
billion.) The projected Rs. 52.4 billion deficit is more than 
40 percent higher than the previous year's shortfall. 
 
Government's Economic Survey Paints Bleak Picture 
--------------------------------------------- ---- 
¶3. (U) Nepal's economy grew by just 3.9 percent in FY 
2008/09, compared to 5.3 percent in the previous year, 
according to the Finance Ministry's annual economic survey 
released on July 8.  The survey, based on the first eight 
months of the fiscal year, showed that the consumer price 
index rose nearly 13 percent, up from 7.7 percent the 
previous year.  Growth in the agricultural sector, which 
accounts for about one third of the total gross domestic 
product, fell to 2.1 percent, less than half the previous 
year's rate.  The non-agricultural sector grew by 4.8 
percent, compared to 5.7 percent in FY 2007/08.  The 
Ministry blamed slow agricultural growth on adverse weather 
and attributed the non-agricultural sector's weak 
performance to the energy crisis, "bandhs" (strikes) and 
other problems. 
 
UN Says Hunger in Some Areas 'Extremely Alarming' 
--------------------------------------------- ---- 
¶4. (U) The level of hunger in the mid- and far-western 
mountain regions of Nepal is "extremely alarming," 
according to a report issued by the UN World Food Program 
(WFP) in late July, which says the percentage of 
malnourished people in these areas is on par with Congo and 
Ethiopia.  Overall, Nepal ranked 57th out of 88 countries 
studied by the WFP.  Of the 15 sub-regions in Nepal, the 
level of hunger in 12 was categorized as "alarming" or 
worse.  No sub-region fell within the moderate or 
low-hunger categories, which the WFP said, "underscores the 
seriousness of the food security situation in Nepal." 
 
Growth in Overseas Workers and Remittances Slows 
--------------------------------------------- --- 
¶5. (U) The number of Nepali workers going overseas fell by 
12.8 percent in fiscal year 2008/09, compared to the 
previous year, according to the Department of Foreign 
Employment (DoFE) in the Ministry of Labor and Transport 
Management.  DoFE reported that 217,164 workers left for 
overseas jobs during FY 2008/09, which ended on July 15. 
Although that is 31,887 fewer than the record number of 
workers who went overseas in FY 2007/08, it is still the 
second highest total of all time.  Experts said the slower 
growth is a result of the global economic downturn, which 
led Malaysia and the United Arab Emirates, two of the most 
popular labor destinations, to downsize the foreign 
work forces in certain sectors.  Although the number of 
Nepalis going to Qatar fell by 10.8 percent, it still 
remained the top labor destination, with 76,175 Nepali 
workers arriving there in FY 2008/09. 
 
¶6. (U) Remittances grew by 55.5 percent to a total of USD 
2.45 billion during the first 11 months of FY 2008/09, 
 
KATHMANDU 00000739  002 OF 002 
 
 
according to the Nepal Rastra Bank.  However, the 
year-on-year growth rate has steadily declined since the 
third month of the fiscal year, when it reached 80.7 
percent. (Note. These figures do not include people working 
in India.) 
 
Vehicle Registrations Soar, Road Construction Lags 
--------------------------------------------- ----- 
¶7. (U) The number of vehicles registered annually has 
nearly doubled over the past four years, according to the 
Department of Transport Management (DoTM) in the Ministry 
of Labor and Transport Management.  DoTM reported 102,570 
new vehicle registrations in fiscal year 2008/09, which 
ended July 15. In FY 2004/05, up from 55,775 in FY 
2004/05.  The new registrations brought the total number of 
vehicles in the country to 805,614, more than half of which 
are registered in Kathmandu Valley, according to DoTM. 
Motorcycles account for nearly three-quarters of all 
registered vehicles.  According to the government's 
proposed budget for the new fiscal year, just 62 kilometers 
of roads were added across the country during the first 
eight months of FY 2008/09. 
 
Fuel Consumption Grows 15 Percent 
--------------------------------- 
¶8. (U) Despite frequent short supply of petroleum 
products, consumption rose by 15 percent in FY 2008/09, 
according to the Nepal Oil Corporation (NOC), the state-run 
monopoly.  The NOC reports that an average of 2,301 
kiloliters (KL) of fossil fuels were consumed daily, led by 
the use of diesel, which grew by 54 percent to a total of 
463,140 KL.  Much of this growth was attributed to the 
increased use of power generators in the wake of protracted 
load-shedding.  Consumption of gasoline grew by 22 percent 
to a total of 123,782 KL. NOC officials said the 15 percent 
growth in consumption of liquefied petroleum gas reflected 
rising urbanization. 
 
Tourists Arrivals Up for Month, Down for Year 
--------------------------------------------- 
¶9. (U) Tourists arrivals by air increased by 10 percent in 
July, compared to the same month last year, according to 
the Nepal Tourism Board. Even though this was the second 
consecutive monthly increase, the overall number of 
arrivals this year is still down 4 percent, compared to the 
first seven months of 2008.  With a 16-percent increase in 
monthly arrivals, compared to July 2008, the United States 
remained the second largest source of tourists.  A total of 
14,897 Americans have arrived by air so far this year. 
India is still, by far, the largest sources of tourists. 
The number of tourists arriving from India increased by 33 
percent in July, compared to the same month last year, 
bringing the 2009 total to 52,942. (Note. In recent years, 
air arrivals have accounted for about 70 percent of all 
tourists.) 
MOON