Nepalis have received as much as Rs 60 billion in cash this month in the form of salaries, Dashain allowances and remittances, according to Nepal Rastra Bank (NRB). But they will spend much more than that as the festive mood will prompt them to travel, buy new clothes and new gadgets and devices, and eat better than normally, making them use their savings as well. [break]
Data from the Ministry of Finance (MoF) shows that following an average 23 percent salary hike, the government alone has released as much as Rs 11 billion in salary and allowance to civil servants, teachers, health workers and security personnel this month.
Staff of public enterprises, who number over 33,500, have also separately received well over Rs 1 billion. Likewise, the central bank estimates that another segment of Nepalis, who are working abroad, will remit at least Rs 25 billion so that families back home can indulge in festive consumption.
The private sector too has already injected about Rs 23 billion into the market in the form of salaries, allowances and bonuses.
“These figures are just the formal sources of money. We believe the cash that people have received through informal income sources could amount to another Rs 40 billion,” said a NRB official.
Apart from that, economists said people in the urban areas will also use their savings, while rural folks will sell livestock and grain holdings to buy new clothing and manage social obligations
Considering all this, NRB anticipates people will spend 30 percent more this Dashain than they did last year, according to Bhaskar Mani Gyawali, NRB spokesperson.
Given that Nepal´s private consumption (at current prices) for food, non-food items and services totaled Rs 1,099.65 billion per annum -- that is Rs 91.63 billion a month -- in fiscal year 2010/11, NRB´s estimate suggests Nepalis could spend as much as Rs 120 billion during the festive month of Aswin (mid-September to mid-October).
To manage the money supply, NRB has already announced that it is injecting an additional Rs 30 billion in the market in the form of fresh banknotes.
Commercial banks also said they are flush with cash, (NRB says the banking system presently has a liquidity surplus of Rs 24 billion), and this is also expected to encourage consumption.
As for the areas in which people will spend the major chunk of their money, central bank officials said it would be tricky to answer that at this moment.
Nonetheless, experts said high-income groups will spend additional money on liquor, travel and feasting. Middle-income groups, on the other hand, will spend the major chunk of their money buying durables, gadgets and new clothes.
Low income group, however, will spend the bulk of their money for food, clothes and social obligations.
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