Current Macroeconomic and Financial Situation of Nepal
(Based on Annual Data of 2021/22)
Major Highlights
> Annual average Inflation remained 6.32 percent.
> Imports increased 24.7 percent and exports increased 41.7 percent. In the previous year, imports increased 28.7 percent and exports increased 44.4 percent.
> Remittances increased 4.8 percent in Nepalese rupee and 2.2 percent in USD
> Balance of Payments remained at a deficit of Rs.255.26 billion compared to a surplus of Rs.1.23 billion last year.
> Gross foreign exchange reserves stood at USD 9.54 billion. This level of foreign exchange reserve is sufficient to cover the merchandise and services imports for 6.94 months.
> Broad money (M2) expanded 6.8 percent.
> Deposits at Banks and Financial Institutions expanded 9.0 percent and private sector credit expanded 13.1 percent.
> Total deposits at BFIs stood at Rs.5083 billion and private sector credit amounted to Rs.4621 billion.
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Real Sector
> Central Bureau of Statistics has estimated economic growth of 5.84 percent for 2021/22. Agriculture, industry and service sectors are estimated to grow 2.30 percent, 10.19 percent and 5.93 percent respectively
> Share of agriculture, industry and service sectors in GDP stands 23.95 percent, 14.29 percent and 61.76 percent respectively in 2021/22.
> Gross domestic saving to GDP stands 9.27 percent in 2021/22. Ratio of gross fixed capital formation and gross national saving to GDP stands 29.37 percent and 31.95 percent respectively
> The installed capacity of electricity increased to 2189.6 Megawatt in 2021/22, which consists of 2075.4 Megawatt of hydro electricity, 54.8 Megawatt of solar, 6.0 Megawatt of cogeneration and 53.4 Megawatt of thermal electricity
> The total number of tourist arrivals increased significantly to 3,70,906 in 2021/22, which was 70,123 in the previous fiscal year.
Consumer Price Inflation
> The y-o-y consumer price inflation stood at 8.08 percent in mid-July 2022 compared to 4.19 percent a year ago.
> The annual average food and beverage inflation stood at 5.69 percent in 2021/22 compared to 5.00 percent a year ago. The y-o-y food and beverage inflation stood at 6.89 percent in mid-July 2022 compared to 5.81 percent a year ago.
> The annual average non-food and services inflation stood at 6.83 percent in 2021/22 compared to 2.51 percent a year ago. The y-o-y non-food and services inflation stood at 9.03 percent in midJuly 2022 compared to 2.94 percent a year ago.
> The y-o-y consumer price inflation in Nepal as of mid July 2021/22 remained 8.08 percent. Such inflation in India stood 6.71 percent in July 2022
Wholesale Price Inflation
> The average wholesale price inflation recorded at 9.51 percent in 2021/22 compared to 7.61 percent a year ago.
> The y-o-y wholesale price inflation stood at 12.74 percent as in the last month of 2021/22 compared to 8.21 percent a year ago.
Salary and Wage Rate Index National Salary and Wage Rate Index (SWRI)
Merchandise Trade
> During 2021/22, merchandise exports increased 41.7 percent to Rs.200.03 billion compared to an increase of 44.4 percent in the previous year.
> In the review year, merchandise imports increased 24.7 percent to Rs.1920.45 billion compared to an increase of 28.7 percent a year ago.
> Total trade deficit increased 23.0 percent to Rs.1720.42 billion in the review year. Such a deficit had increased 27.3 percent in the previous year. The export-import ratio increased to 10.4 percent in the review period from 9.2 percent in the previous year
Services
> Net services income remained at a deficit of Rs.108.12 billion during 2021/22 compared to a deficit of Rs.72.85 billion in the previous year.
> Under the service account, travel income increased 346.5 percent to Rs.32.45 billion in the review year which was Rs.7.27 billion in the previous year
> Under the service account, travel payments increased 196.7 percent to Rs.97.32 billion, including Rs.67.70 billion for education in the review year. Such payments were Rs.32.80 billion and Rs.24.96 billion respectively in the previous year
Remittances
> Remittance inflows increased 4.8 percent to Rs.1007.31 billion during 2021/22 compared to 9.8 percent in the previous year. In the US Dollar terms, remittance inflows increased 2.2 percent to 8.33 billion in the review year against an increase of 8.2 percent in the previous year
> Number of Nepali workers (institutional and individual-new and legalized) taking approval for foreign employment increased significantly to 354,660 in the review year. It had decreased 62.8 percent in the previous year. The number of Nepali workers (Renew entry) taking approval for foreign employment increased 198.5 percent to 282,453 in the review year. It had decreased 46.8 percent in the previous year
> Net transfer increased 4.3 percent to Rs.1117.88 billion in the review year. Such a transfer had increased 9.1 percent in the previous year.
Current Account and Balance of Payments
> The current account remained at a deficit of Rs.623.33 billion during 2021/22 compared to a deficit of Rs.333.67 billion in the previous year. In the US Dollar terms, the current account registered a deficit of 5.17 billion in the review year compared to deficit of 2.84 billion in the previous year.
> In the review year, capital transfer decreased 34.5 percent to Rs.9.99 billion and net foreign direct investment (FDI) decreased 4.9 percent to Rs.18.56 billion. In the previous year, capital transfer and net FDI amounted to Rs.15.26 billion and Rs.19.51 billion respectively
> Balance of Payments (BOP) remained at a deficit of Rs.255.26 billion in the review year against a surplus of Rs.1.23 billion in the previous year. In the US Dollar terms, the BOP remained at a deficit of 2.14 billion in the review year compared to a deficit of 3.1 million in the previous year
Foreign Exchange Reserves
Gross foreign exchange reserves decreased 13.1 percent to Rs.1215.80 billion in mid-July 2022 from Rs.1399.03 billion in mid-July 2021. In the US dollar terms, the gross foreign exchange reserves decreased 18.9 percent to 9.54 billion in mid-July 2022 from 11.75 billion in mid-July 2021.
Foreign Exchange Adequacy Indicators
Based on the imports of 2021/22, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 7.8 months, and merchandise and services imports of 6.9 months. The ratio of reserves-to-GDP, reserves-to-imports and reserves-to-M2 stood at 25.1 percent, 57.8 percent and 22.1 percent respectively in mid-July 2022. Such ratios were 32.7 percent, 84.7 percent and 27.1 percent respectively in mid-July 2021.
International Investment Position (IIP)
Foreign assets and liabilities of the country stood at Rs.1330.65 billion and Rs.1588.27 billion respectively in mid-July 2022. Accordingly, net IIP remained at a deficit of Rs.257.62 billion in mid-July 2022. Net IIP was in surplus of Rs.80.12 billion in mid-July 2021.
Price of Oil and Gold
The price of oil (Crude Oil Brent) in the international market increased 50.6 percent to US dollar 112.26 per barrel in mid-July 2022 from US dollar 74.53 per barrel a year ago. The price of gold decreased 6.4 percent to US dollar 1706.15 per ounce in mid-July 2022 from US dollar 1823.75 per ounce a year ago.
Exchange Rate
Nepalese currency vis-à-vis the US dollar depreciated 6.64 percent in mid-July 2022 from midJuly 2021. It had appreciated 1.1 percent in the previous year. The buying exchange rate per US dollar stood at Rs.127.51 in mid-July 2022 compared to Rs.119.04 in mid-July 2021.
Expenditure and Revenue
> Total expenditure of the federal government according to Financial Comptroller General Office (FCGO), Ministry of Finance, amounted to Rs.1296.24 billion in 2021/22 compared to Rs.1196.68 billion a year ago. The recurrent expenditure, capital expenditure and financing expenditure of the federal government amounted to Rs.961.47 billion, Rs.216.37 billion and Rs.118.39 billion respectively in 2021/22
> Revenue collection (including the amount to be transferred to provincial and local governments) stood at Rs.1067.96 billion in 2021/22. Total government revenue was Rs.935.89 billion a year ago. Total resource mobilization (including revenue and other reciepts) of the federal government stood at Rs.1116.42 billion in 2021/22
> GoN mobilized domestic debt of Rs.231.03 billion and made principal repayment of Rs.47.33 billion thereby mobilizing net domestic debt of Rs.183.97 billion in 2021/22. Net domestic debt mobilization stands at 3.8 percent of GDP. GoN mobilized external loan of Rs.122.02 billion in the review period.
Cash Balance
Balance at various accounts of the GoN maintained with NRB remained Rs.227.69 billion (including Provincial government and Local Authorities Account) in mid-July 2022.
Money Supply
Broad money (M2) expanded 6.8 percent in 2021/22 compared to the growth of 21.8 percent in the previous year
Domestic Credit
Domestic credit increased 14.5 percent in the review year compared to a growth of 27.1 percent in the previous year. Monetary sector's claims on the private sector increased 13.3 percent in the review year compared to a growth of 26.3 percent in the previous year.
Deposit Mobilization
Deposits at banks and financial institutions (BFIs) increased 9 percent in the review year compared to a growth of 21.4 percent in the previous year.
The share of demand, saving, and fixed deposits in total deposits stands at 8.9 percent, 27.6 percent and 55.8 percent respectively in mid-July 2022. Such shares were 10.4 percent, 34.2 percent and 47 percent respectively a year ago.
The share of institutional deposits in total deposit of BFIs stands at 38.3 percent in mid-July 2022. Such a share was 42.7 percent in mid-July 2021.
Credit Disbursement
Private sector credit from BFIs increased 13.1 percent in the review year compared to a growth of 27.3 percent in the previous year.
The shares of private sector credit from BFIs to non-financial corporation and household stand at 63.3 percent and 36.7 percent respectively in mid-July 2022. Such shares were 63.6 percent and 36.4 percent in mid-July 2021.
Liquidity Management
> In the review year, 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 previous year, Rs.303.29 billion liquidity was mopped up.
> In the review year, NRB injected Rs. 9702.41 billion liquidity of which Rs.476.39 billion was through repo, Rs.55.92 through ourtright purchase and Rs.9170.11 billion through standing liquidity facility (SLF). In the previous year, Rs.438.28 billion liquidity was injected
Refinance, Concessional Loan and Business Continuity Loan
> The outstanding amount of refinance provided by NRB remained Rs.111.96 billion in mid-July 2022.
> As of mid-July 2022, the outstanding concessional loan amounted Rs.213.89 billion which was extended to 147,393 borrowers. Of which, Rs.139.23 billion has been extended to 60,545 borrowers for commercial agriculture and livestock businesses. Likewise, Rs.71 billion loan has been extended to 84,001 women entrepreneurs. Remaining Rs.3.66 billion loan has been extended to 2,847 borrwers of other categories of concessional loans.
> Business continuity loan has been extended to the Covid-19 affected tourism, cottage, small and medium industries for payment of salaries to workers and employees in line with 'Business Continuity Loan Procedure, 2020'.Under this provision, Rs.974 million loan has been approved as of mid-July 2022
Inter-bank Transaction
> . In the review year, BFIs interbank transactions amounted Rs.3100.35 billion including Rs.2784.10 billion inter-bank transactions among commercial banks and Rs.316.25 billion among other financial institutions (excluding transactions among commercial banks). In the previous year, such transactions was Rs.1996.58 billion including Rs.1782.96 billion among commercial banks and Rs.213.62 billion among other financial institutions (excluding transactions among commercial banks)
Interest Rates
> The weighted average 91-day treasury bills rate has remained 10.66 percent the last month of 2021/2022, which was 4.55 percent a year ago. The weighted average inter-bank transaction rate among commercial banks, which was 4.12 percent a year ago, increased to 6.99 percent during mid-June to mid-July 2022. The average inter-bank rate of BFIs which is considered as an operating target of monetary policy, stood 7.01 percent in the review month (mid-June to mid-July) of 2022.
> The average base rate of commercial banks increased to 9.54 percent in the review month (midJune to mid-July) of 2022 from 6.86 percent a year ago. Weighted average deposit rate and lending rate of commercial banks stood at 7.41 percent and 11.62 percent respectively in the review month. Such rates were 4.65 percent and 8.43 percent respectively a year ago.
Merger and Acquisition
After introduction of merger and acquisition policy aimed at strengthening financial stability, the number of BFIs involved in this process reached 245 as of mid-July 2022. Out of which, the license of 178 BFIs was revoked thereby forming 67 BFIs
Financial Access
> Of the total 753 local levels, commercial banks extended their branches at 752 levels as of midJuly 2022. The number of local levels having commercial bank branches was 750 a year ago.
> The total number of BFIs licensed by NRB remained 126 in mid-July 2022. As of mid-July 2022, 26 commercial banks, 17 development banks, 17 finance companies, 65 microfinance financial institutions and 1 infrastructure development bank are in operation. The number of BFIs branches reached 11,528 in mid-July 2022 from 10,683 in mid-July 2021
(Source: NRB, August 2022)
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