The government has yet to generate significant sources to fund the business continuity credit plan to support micro, small and medium enterprises and the tourism industry hard hit by the Covid-19 pandemic, even though the plan went into effect last month.
Under the Rs 50 billion rehabilitation program, enterprises in the targeted sectors can obtain credit at an interest rate of five percent for one year and six percent for the following year, in order to use the credit. funds for the remuneration of their staff.
Almost six months after the package was announced in the May budget, the government last month introduced the working procedure on Implementation of the package. Subsequently, the central bank asked banks and financial institutions to implement the package.
The government has allocated Rs1 billion to implement the program. But, according to Dev Kumar Dhakal, executive director of the central bank, the government has yet to deposit any additional amounts.
“Nepal Rastra Bank will inject 3 billion rupees into the fund,” he said. “We have already put 1.5 billion rupees in the rehabilitation fund. ”
In accordance with the budget provision, the sources of funding for this rehabilitation program will be foreign aid, government-owned entities and government own resources.
A finance ministry official said the ministry had already obtained assurances from a number of government entities that they would make funds available.
“The Nepal Oil Corporation has pledged to provide Rs 5 billion while the Employee Contingency Fund has made sure to inject Rs 4 billion soon,” said Jhakka Acharya, co-secretary at the ministry.
According to him, Citizen Investment Trust has pledged to inject 2 billion rupees while the Nepal Reinsurance Company, Rastriya Beema Sansthan and the deposit and loan guarantee company have pledged to inject 1 billion rupees each immediately.
“We hope to get half of the total rehabilitation fund from government entities,” he said. But, they have yet to provide the fund for this purpose.
These funds are expected to be relatively expensive for the government, with many of them charging an interest rate of five percent, according to the ministry.
With the government struggling to raise enough revenue, most of the fund could be managed through the stranger oneidentifier.
During the first four months of the current fiscal year, federal government revenue collection declined by tthree percentt compared to the same period of the previous year. Revenue collection was more than enough to cover recurrent (administrative) expenses.
As of December 17, government revenue collection amounted to 305.86 billion rupees while administrative expenses amounted to Rs284.78 billionn, according to the Office of the Comptroller General of Finance, which maintains a register of government revenues and expenditures.
The government’s delay in generating the necessary resources for the program came at a time when banks are reporting that the demand for loans under this program has started to increase.
“The demand for credit under this package is increasing,” said Bhuvan Dahal, president of the Nepal Bankers Association, a group of general managers of commercial banks. “So far, most of the demand has come from the hotel industry.
The hospitality industry is one of the most affected sectors as domestic and foreign tourists have dried up due to the pandemic.
Dahal, who is also managing director of Sanima Bank, said his bank had started approving credit under the program.
According to the working procedure of the two-year credit program, a company in the most affected sectors can get up to Rs 100 million while the company in the sector that faces medium-level impact can get up to 70 million rupees. The company in the partially affected sector can obtain up to Rs50 million.
Half of the credit is available to pay staff compensation and the other half can be used as working capital to continue the business.
A business cannot terminate any staff while the credit facility is in effect.
Devendra Khanal, deputy general manager of Rastriya Banijya Bank, said branches of the public bank have collected loan applications.
“They have yet to arrive at headquarters for approval,” he said.
Entrepreneurs affected by the pandemic say the credit facility made available by the government came too late.
“Many hotels, especially the smaller ones, have closed their doors,” said Binayak Shah, senior vice president of the Nepal Hotel Association, a group of hoteliers. “If the credit facility had been available a few months ago, the survival of many now closed businesses would have been possible. “