The government is yet to generate any sizable sources to finance the Business Continuity Credit Plan meant to support the micro, small and medium enterprises and tourism industry badly affected by the Covid-19 pandemic even though the plan came into implementation last month.

Under the Rs50 billion rehabilitation package businesses in targeted sectors can get credit at five percent interest for one year and six percent in the following year, to use the fund for the remuneration of their staff.

Nearly six months after the package was announced through the budget in May, the government last month introduced the working procedure on implementation of the package. Subsequently, the central bank directed the banks and financial institutions to implement the package.

The government has allocated Rs1 billion to implement the programme. But, according to Dev Kumar Dhakal, executive director at the central bank, the government is yet to deposit any extra amount.

“The Nepal Rastra Bank will inject Rs3 billion in the fund,” he said. “We have already put Rs1.5 billion in the rehabilitation fund.”

As per the budgetary provision, the sources of funds for this rehabilitation package will be foreign aid, government owned entities and the government’s own resources.

An official of the finance ministry said that the ministry has already got assurance from a number of the government entities that they would make available funds.

“Nepal Oil Corporation has committed to provide Rs5 billion while Employees Provident Fund has assured of injecting Rs4 billion soon,” said Jhakka Acharya, joint secretary at the ministry.

According to him, Citizen Investment Trust has promised to inject Rs2 billion while the Nepal Reinsurance Company, Rastriya Beema Sansthan and Deposit and Credit Guarantee Corporation have committed to inject Rs1 billion each immediately.

“We hope to get half of the total rehabilitation fund from government entities,” he said. But, they are yet to provide the fund for the purpose.

These funds are expected to be relatively expensive for the government with many of them demanding a five percent interest rate, according to the ministry.

With the government struggling to collect enough revenue, most of the fund could be managed through the foreign aid.

In the first four months of the current fiscal year, the federal government’s revenue collection shrank by three percent compared to the same period last fiscal year. The revenue collection has largely been enough to meet the recurrent (administrative) expenditure.

As of December 17, the government’s revenue collection stood at Rs305.86 billion while administrative expenditure stood at Rs284.78 billion, according to the Financial Comptroller General Office, which keeps record of income and expenditure of the government.

The government’s delay in generating necessary resources for the programme has come at a time when the banks are reporting that the demand for the credits under this package has started to grow.

“The demand for credit under the package is growing,” said Bhuvan Dahal, president of Nepal Bankers’ Association, a grouping of chief executive officers of the commercial banks. “Most of the demand so far has come from the hotel sector.”

The hospitality industry is one of the most affected sectors as domestic and foreign tourists dried up due to the pandemic.

Dahal, who is also chief executive officer of Sanima Bank, said his bank has started to approve the credit under the package.

As per the working procedure of the tw0-year credit programme, an enterprise from the most affected sectors can get up to Rs100 million credit while the enterprise from the sector that is facing medium level impact can get up to Rs70 million. The enterprise from the partially affected sector can get upto Rs50 million.

Half of the credit is available for paying remuneration to the staff and half can be used as working capital to continue the business.

An enterprise cannot fire any staff as long as the credit facility is in effect.

Devendra Khanal, deputy chief executive officer of Rastriya Banijya Bank said that the state-owned bank’s branches have been collecting loan demands.

“They are yet to arrive at the headquarters for approval,” he said.

Entrepreneurs affected by the pandemic say that the credit facility is being made available by the government has come too late.

“Many hotels, particularly smaller ones have shut down their operations,” said Binayak Shah,first vice-president of Hotel Association of Nepal, a group of hoteliers. “Had the credit facility been available a few months ago, survival of many now closed enterprises would have been possible.”