Current Macroeconomic and Financial Situation of Nepal
(Based on Four Months’ Data Ending Mid-November, 2021/22)
Major Highlights
> CPI-based Inflation remained 5.32 percent on y-o-y basis.
> Imports increased 61.6 percent and exports increased 104.3 percent.
> Remittances decreased 7.5 percent in NPR terms and 7.8 percent in USD terms.
> Balance of Payments remained at a deficit of Rs.150.38 billion.
> Gross foreign exchange reserves stood at USD 10.47 billion.
> Federal Government spending amounted to Rs.287.54 billion and revenue collection Rs.334.31 billion.
> Broad money (M2) expanded 1.4 percent. On y-o-y basis, M2 expanded 16.1 percent.
> Deposits at BFIs increased 1.3 percent and claims on the private sector increased 9.4 percent. On y-o-y basis, deposits increased 17.2 percent and claims on the private sector 31.2 percent.
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Consumer Price Inflation
The y-o-y consumer price inflation stood at 5.32 percent in the fourth month of 2021/22 compared to 4.05 percent a year ago. Food and beverage inflation stood at 4.79 percent whereas non-food and service inflation stood at 5.73 percent in the review month.
Wholesale Price Inflation
> The y-o-y wholesale price inflation stood at 6.68 percent in the review month compared to 9.41 percent a year ago.
> The y-o-y wholesale price of consumption goods, intermediate goods and capital goods increased 7.43 percent, 6.15 percent and 7.26 percent respectively. The wholesale price of construction materials increased 20.10 percent in the review month.
Salary and Wage Rate Index
The y-o-y salary and wage rate index increased 5.03 percent in the review month. Such a growth rate was 0.85 percent a year ago. In the review month, salary index and wage rate index increased 9.44 and 3.77 percent, respectively.
Inflation in Nepal and India
The y-o-y consumer price inflation in Nepal in the fourth month of 2020/21 remained 5.32 percent, while inflation in India was 4.91 percent in November 2021.
Merchandise Trade
> During the four months of 2021/22, merchandise exports increased 104.3 percent to Rs.82.12 billion compared to an increase of 10.8 percent in the same period of the previous year.
> During the four months of 2021/22, merchandise imports increased 61.6 percent to Rs.650.29 billion against a decrease of 10.6 percent a year ago.
> Total trade deficit increased 56.8 percent to Rs.568.17 billion during the four months of 2021/22. Such a deficit had contracted 12.5 percent in the corresponding period of the previous year. The export-import ratio increased to 12.6 percent in the review period from 10.0 percent in the corresponding period of the previous year.
Services
> Net services income remained at a deficit of Rs.31.20 billion in the review period compared to a deficit of Rs.17.51 billion in the same period of the previous year.
> Under the service account, travel income increased 223.5 percent to Rs.6.11 billion in the review period which was Rs.1.89 billion in the same period of the previous year.
> Under the service account, travel payments increased 137.2 percent to Rs.19.15 billion, including Rs.10.70 billion for education. Such payments were Rs.8.07 billion and Rs.6.85 billion respectively in the same period of the previous year.
Remittances
> Remittance inflows decreased 7.5 percent to Rs.312.42 billion in the review period against an increase of 11.2 percent in the same period of the previous year. In the US Dollar terms, remittance inflows decreased 7.8 percent to 2.63 billion in the review period against an increase of 6.4 percent in the same period of the previous year.
> Number of Nepali workers (institutional and individual-new and legalized) taking approval for foreign employment increased significantly to 96,382 in the review period. It had decreased 95.7 percent in the same period of the previous year. The number of Nepali workers (Renew entry) taking approval for foreign employment increased 249.1 percent to 59,723 in the review period. It had decreased 78.9 percent in the same period of the previous year.
Current Account and Balance of Payments
> The current account remained at a deficit of Rs.223.19 billion in the review period against a surplus of Rs.19.01 billion in the same period of the previous year.
> In the review period, capital transfer decreased 39.3 percent to Rs.2.52 billion and net foreign direct investment (FDI) increased 77.0 percent to Rs.6.63 billion. In the same period of the previous year, capital transfer and net FDI amounted to Rs.4.15 billion and Rs.3.75 billion respectively.
> Balance of Payments (BOP) remained at a deficit of Rs.150.38 billion in the review period against a surplus of Rs.110.65 billion in the same period of the previous year.
Foreign Exchange Reserves
Gross foreign exchange reserves decreased 11.0 percent to Rs.1244.85 billion in mid-November 2021 from Rs.1399.03 billion in mid-July 2021. In the US Dollar terms, the gross foreign exchange reserves decreased 10.9 percent to 10.47 billion in mid-November 2021 from 11.75 billion in mid-July 2021.
Foreign Exchange Adequacy Indicators
Based on the imports of four months of 2021/22, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 7.9 months, and merchandise and services imports of 7.2 months.
Price of Oil and Gold
The price of oil (Crude Oil Brent) in the international market increased 99.6 percent to US Dollar 82.85 per barrel in mid-November 2021 from US Dollar 41.51 per barrel a year ago. The price of gold decreased 1.7 percent to US Dollar 1859.20 per ounce in mid-November 2021 from US Dollar 1890.90 per ounce a year ago.
Expenditure and Revenue
In the review period, total expenditure of the federal government according to data of Financial Comptroller General Office (FCGO), Ministry of Finance, stood at Rs.287.54 billion. The recurrent expenditure, capital expenditure and financing expenditure amounted to Rs.233.51 billion, Rs.20.79 billion and Rs.33.24 billion respectively in the review period
Money Supply
Broad money (M2) increased 1.4 percent in the review period compared to the growth of 6.4 percent in the corresponding period of the previous year. On y-o-y basis, M2 expanded 16.1 percent in mid-November 2021.
Domestic Credit
Domestic credit increased 5.7 percent in the review period compared to an increase of 4.4 percent in the corresponding period of the previous year. On y-o-y basis, domestic credit increased 28.5 percent in mid-November 2021.
Deposit Mobilization
Deposits at Banks and Financial Institutions (BFIs) increased 1.3 percent in the review period compared to an increase of 5.0 percent in the corresponding period of the previous year. On y-o-y basis, deposits at BFIs expanded 17.2 percent in mid-November 2021.
Credit Disbursement
Private sector credit from BFIs increased 8.9 percent in the review period compared to an increase of 4.9 percent in the corresponding period of previous year. On y-o-y basis, credit to the private sector from BFIs increased 32.2 percent in mid-November 2021.
Liquidity Management
> In the review period, NRB mopped up Rs.60 billion liquidity of which Rs.28.35 billion was through reverse repo auction and Rs.31.65 billion through deposit collection. In the corresponding period of the previous year, it was Rs.90 billion liquidity of which Rs. 60 billion was through reverse repo and Rs. 30 billion through deposit collection auction.
> In the review period, NRB injected Rs. 1796.84 billion liquidity of which Rs.249.79 billion was through repo and Rs. 1547.05 billion through standing liquidity facility (SLF).
Refinance, Concessional Loan and Business Continuity Loan
> The outstanding amount of refinance provided by NRB remained Rs.120.11 billion in midNovember 2021.
> As of mid-November 2021, the outstanding concessional loan is Rs.205.02 billion extended to 1,33,930 borrowers. Of which, Rs.130.23 billion has been extended to 55,116 borrowers for selected commercial agriculture and livestock businesses. Likewise, Rs. 71.15 billion loan has been extended to 76,020 women entrepreneurs. Total of 2,794 borrwers have been availed Rs. 3.64 billion concessional loan to other sectors.
Inter-bank Transaction
In the review period, BFIs interbank transactions amounted Rs.1201.62 billion including Rs.1043.22 billion inter-bank transactions among commercial banks and Rs.158.40 billion among other financial institutions (excluding transactions among commercial banks)
Interest Rates
The weighted average 91-day treasury bills rate remained at 4.81 percent in fourth month of 2021/22, which was 0.79 percent in the corresponding month a year ago. The weighted average inter-bank transaction rate among commercial banks, which was 0.14 percent a year ago, increased to 4.96 percent in the review month.
Financial Access
> Of the total 753 local levels, commercial banks extended their branches at 750 levels as of mid-November 2021. The number of local levels having commercial bank branches was 748 a year ago .
> The total number of BFIs licensed by NRB remained 129 in mid-November 2021. As of mid-November 2021, 27 commercial banks, 17 development banks, 17 finance companies, 67 microfinance financial institutions and 1 infrastructure development bank are in operation. The number of BFIs branches reached 11,127 in mid-November 2021 from 10,683 in mid-July 2021.
(Source: NRB, 2021)
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