PRACHANDA, PM KHANAL MEET UPDATE

PM. PRACHANDA MEET UPDATE
Kathmandu, 21 Aug.: Caretaker Prime Minister Jhalanath Khanal and Maoist Chairman Prachanda held discussions Sunday morning with only six hours remaining to meet a presidential deadline to from a national consensus government.
They discussed their parties’ positions on appointing Khanal’s successor, a press aide of the government chief, who is also UML chairman, said.
UML has convened a meeting of the party central committee Monday to discuss the political situation if a consensus candidate isn’t selected by five in the afternoon Sunday
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MEDIA GOOGLE
“Parties always promise completing understanding. Promises aren’t kept. Peace and constitution have been sidelined by government formation.”
(Speaker Subash Nemwang, Kantipur, 21 Aug.)
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JAPANESE ENCEPHALITIS SURFACES IN FAR-WEST
Kathmandu, 21 Aug.: Two persons died of Japanese encephalitis Friday, Kantipur reports from Banke.
The deaths were recorded at Bheri Anchal Hospital.
Gomi Rana of Dang died Monday this year.
According to the hospital, number of cases are rising.
Fifteen deaths have recorded this year at the hospital so far
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NEA SEEKS LOAN TO SETTLE INDIAN BILL
Kathmandu, 21 Aug.: The Finance Ministry has given consent to Nepal Electricity Authority to take loan amounting to eighty crores from Citizens Investment Fund (CIF) to pay dues to India, which has been pending for more than six months, Ramesh Prasad Bhusal writes in The Himalayan Times.
Nepal buys up to 100 MW electricity from India. NEA had earlier asked the government for unconditional loan, but after this did not materialise, it proposed to keep Devighat hydro-project (15 MW) as guarantee for the CIF loan. Though the ministry has given the given the green signal for this loan, it has put forth conditions on the use of money.

According to sources, the ministry wants the money to be used only for paying dues to India and has specifically said the money is not to be used for projects like Chamelia, Kulelkhani 3-A and for transmission lines.

NEA had sought Rs 1.5 billion loan for the first installment unconditionally.

“This has given relief to some extent,” said Dipendranath Sharma, Managing Director, NEA. At present, NEA has been paying about Rs 16 crores every month to India. The amount fluctuates as per the need for energy in the country.

After the Finance Ministry’s conditional consent, NEA is confused whether or not to take the loan. According to NEA, it owes India around Rs 80 crores. The dues have been pending for the last six months. Besides, NEA is in financial trouble after contractors threatened to stop work on various projects due to untimely payments. Thus, the loan will not solve NEA’s problems, though it will help lower dues.

This is not the first time NEA has taken loan against one of its projects as guarantee. A few months ago, it had put the Middle Marsyangdi project (70 MW) as guarantee with Employees Provident Fund for loan investment of Rs 10 billion for Upper Tamakoshi Hydro-project (456 MW).

High level NEA officials are furious. They have criticised the government for not providing loan as per NEA needs. “When we were good, the government sucked us by taking each and every facility from NEA ranging from vehicles to money, but when we are in trouble it behaves badly,” said Rameshwor Yadav, GM, customer service.

The Finance Ministry, on the other hand, criticises NEA. For the past few years, it has made the process of obtaining loan difficult for NEA. Besides, NEA is not only in dire straits financially, it is also heavily politicised. It has been accused of not being able to complete projects on time. Its cumulative loss at present stands at about Rs 27 billion and the amount is increasing.
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CHINA PUSHES NEW SECURITY DEAL

Kathmandu, 21 Aug.: China has proposed a new security agreement with Nepal calling for greater cooperation and information sharing between the two countries on a range of issues, including management of border security, Anil Giri writes in The Kathmandu Post.
The draft was handed to the Nepali side in 2009 during the visit of then State Minister for Home Affairs Rizwan Ansari to Beijing. However, it kept gathering dust until the Jhala Nath Khanal government assumed office in February.
The agreement, still classified ‘secret’, could have been signed between the two countries last week during the visit of Zhou Yongkang, a powerful member of the China’s ruling Communist Party’s Standing Committee. The resignation of Prime Minister Khanal has now created complications for its formal signing, said government sources.
Implications of the draft agreement weren’t immediately clear. Security officials contacted for comment said that they had not seen the document and were unable to give feedback. The agreement, even if signed, will only come into effect under the framework of an extradition treaty. At the moment, the two countries have no extradition treaty.
Last week, the visiting Chinese State Minister for Public Security did raise questions about the status of the agreement with Deputy Prime Minister and Home Minister Narayan Kaji Shrestha. “The Chinese side asked about Minister Ansari’s Beijing visit and the proposal that he was handed,” Home Ministry Spokesperson Sudhir Shah told The Post. “I am not aware what happened back then.”
The draft copy, obtained by the Post, says that Nepali and Chinese Home Ministries, in accordance with the laws of the respective countries, will jointly work out and implement measures for the prevention of criminal activities and that their respective authorities will organize investigation into, search for and arrest of suspected criminals. Also, either side must inform the other of case details, evidence and hand over criminals in question.
In its Article(1), the draft states that the two sides will cooperate in the prevention and suppression of terrorism, separatism and extremism and illegal border crossing.
The draft also calls for cooperation in stopping forgery of passports, visas and other travel documents, trafficking in firearms, ammunition, explosives, nuclear materials and other radioactive materials.
The Chinese side proposed cooperation in preventing trafficking in narcotic drugs and psychotropic substances, including precursor chemicals. It also proposed assistance to help prevent smuggling, fraud, money laundering and counterfeiting of currency, trafficking in persons, cyber crimes and other transnational crimes.
The draft offers exchange of information on above mentioned crimes, information on citizens of either country who may have committed crimes or been unlawfully assaulted on the territory of the other country and information on the legislation of crime prevention and suppression. It offers to exchange experience on exit and entry control, including administration of aliens, border control and safety administration of road traffic, port and shipping and civil aviation.
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REPO NOT ATTRACTIVE FOR COMMERCIAL BANKS AFTER DEPOSIT SURGE

Kathmandu, 21 Aug.: With the banking sector witnessing a marked improvement in liquidity situation, bankers are showing little interest in taking liquidity from the Nepal Rastra Bank (NRB), Prithvi Maan Shrestha writes in The Kathmandu Post..

No bank and financial institution (BFI) applied for repo (central bank providing financing against treasury bills of BFIs) in three out of four weeks during mid-July to mid-August, according to NRB. “No BFIs applied for repo in the first two weeks and the last week, while a handful of banks applied in the third week,” said a senior central bank official. NRB has already reduced the frequency of repo issuance from twice a week to once.

Given the abundance of liquidity in banks, they are not applying for repo. According to NRB, the banking market has a surplus liquidity of Rs 24 billion as of Thursday. “Technically, it is the time to discontinue repo issuance with BFIs not interested in this instrument,” said NRB Deputy Governor Maha Prasad Adhikari. “However, we are continuing to issue repo so that some BFIs facing liquidity problem could get liquidity through this window.”

Due to increased government spending, transfer of deposits from B and C class financial institutions and other factors, commercial banks have witnessed a surge Rs 10 billion in their deposits during mid-July to mid-August. Deposits of commercial banks surged to Rs 683 billion in mid-August from Rs 673 billion in mid-July, while lending remained almost stagnant with a growth of Rs 2 billion to Rs 523 billion. The gap between deposit and lending resulted in surplus liquidity.

The central bank is also giving liquidity (in Nepali currency) to banks by mopping up foreign exchange thrice a week. “The central bank is giving domestic currency of around Rs 2 billion to banks every week against foreign exchange,” said the NRB official. “This has also helped increase liquidity in the banking sector. Factors such as lack of other investment areas also contributed to rise in bank deposits in banks.”

With the surge in liquidity, Nabil Bank and Standard Chartered Bank subscribed government treasury bills worth Rs 6 billion having a maturity period of 364 days a few days ago. “Due to comfortable liquidity situation in recent days, we subscribed the long-term treasury bills,” Nabil’s general manager Amrit Charan Shrestha said.

However, the central bank has not hastened to issue reverse repo (central bank mopping up liquidity from BFIs). It has been almost a year since the NRB has not issued reverse repo. “We are not thinking about issuing reverse repo immediately as Dashain, when people withdraw large amounts of cash, is around the corner,” said Adhikari. Also, there are concerns that whether mopping up liquidity from banks would be a right approach given the current surge in deposits could be temporary. “I don’t think it is the right time to mop up liquidity from banks as the current situation is temporary,” said Nabil’s Shrestha.

There are also concerns that banks could reduce interest rate on deposits in the absence of other investment areas which would make Nepali interest rate cheaper than that of India leading to capital flight. A recent delegation of the International Monetary Fund that assessed Nepal’s economic and financial situation suggested keeping interest rate on deposits not below India’s rate.
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