The insurgency and emergency of the past months has slowed not just the government's spending, but has curbed spending in general. The Nepal Rastra Bank (NRB) says the detedriorating law and order situation kept government spending slow in the first four months of this fiscal year (until mid-October). Recurrent expenses grew by about seven percent and development spending by six percent, while there was a sharp growth in freeze expenditure-money that has to be spent during the fiscal year-up by 46 percent to Rs 1.5 billion.

This growth partly reflects spending brought forward by the different ministries to pay for the preparations for the SAARC summit. Government spending may have got worse since, because the central bank figures do not take into account the developments since the 23 November Maoist attacks and the declaration of the state of emergency three days later.

Resource mobilisation grew by just seven percent, compared to 31 percent growth in the same period last year. Revenue grew by a mere nine percent compared to 22 percent growth in the last fiscal year, hit by a slowdown in imports and sluggish industrial production. The budget deficit in mid-November was Rs 4.2 billion, which was plugged with foreign loans (Rs 1.5 billion) and over-drawing Rs 2.7 billion from the central bank. Inflation is still under three percent, despite a rise in food and beverage prices. The price rise of fruits, vegetables, sugar and oil offset the reduction in the price of rice.

The bank had no good news on the external front: exports are down by about eight percent compared with 42 percent growth in the same period last year. Exports to India grew much more slowly than last year, while there was a slide in Nepal's main overseas exports-carpets (down 15 percent), readymade garments (down by 34 percent) and pashmina (down by a whopping 78 percent). Imports also dropped by 3.5 percent, compared to the 13 percent by which it grew in the same period last year.

As if this wasn't bad enough, a Rastra Bank researcher told us we can expect more bad news. "Every sector seems to be going from bad to worse," he said.