Current Macroeconomic and Financial Situation of Nepal
(Based on Three Month’s Data Ending Mid-October, 2020/21)
Source : https://www.nrb.org.np/contents/uploads/2020/11/Current-Macroeconomic-and-Financial-Situation-English_Based-on_Three_Months_data_2020.21.pdf
Inflation
Consumer Price Inflation
1. The y-o-y consumer price inflation stood at 3.79 percent in the third month of 2020/21 compared to 6.21 percent a year ago. Food and beverage inflation stood at 5.50 percent whereas non-food and service inflation stood at 2.46 percent in the review month.
External Sector
Merchandise Trade
2. In three months of 2020/21, merchandise exports increased 14.3 percent to Rs.31.05 billion compared to an increase of 14.4 percent in the same period of the previous year. Destination-wise, exports to India and other countries increased 19.4 percent and 7.4 percent respectively whereas exports to China decreased 53.2 percent. Exports of jute goods, polyster yarn and threads, noodles, cardamom, and pashmina among others increased whereas exports of palm oil, pulses, zinc sheet, handicrafts, and skin among others decreased in the review period.
3. In three months of 2020/21, merchandise imports decreased 12.7 percent to Rs.292.27 billion compared to a decrease of 10.3 percent a year ago. Destination-wise, imports from India, China and other countries decreased 6.6 percent, 26.9 percent, and 19.0 percent respectively. Imports of rice, crude soyabean oil, telecommunication equipment and parts, edible oil, and coal among others increased whereas imports of petroleum products, transport equipment and parts, aircraft spareparts, other machinery and parts, and crude palm oil among others decreased in the review period.
4. Total trade deficit narrowed down 15.1 percent to Rs.261.22 billion in three months of 2020/21. Such deficit had contracted 12.0 percent in the same period of the previous year. The export-import ratio increased to 10.6 percent in the review period from 8.1 percent in the same period of the previous year.
Services
5. Net services income remained at a deficit of Rs.10.59 billion in the review period compared to a deficit of Rs.6.05 billion in the same period of the previous year.
6. Under the service account, travel income decreased 91.5 percent to Rs.1.47 billion in the review period which was Rs.17.33 billion in the same period of the previous year.
7. Under the service account, travel payments decreased 74.8 percent to Rs.5.29 billion, including Rs.4.40 billion for education. Such payments were Rs.21.0 billion and Rs.10.18 billion respectively in the same period of the previous year.
Remittances
8. Remittance inflows increased 12.6 percent to Rs.258.86 billion in the review period against a decrease of 5.1 percent in the same period of the previous year. In the US Dollar terms, remittance inflows increased 7.6 percent to 2.18 billion in the review period against a decrease of 4.7 percent in the same period of the previous year.
9. Number of Nepali workers (institutional and individual-new and legalized) taking approval for foreign employment decreased 96.8 percent in the review period. It had decreased 3.7 percent in the same period of the previous year. The number of Nepali workers (Renew entry) taking approval for foreign employment decreased 78.6 percent in the review period. It had decreased 0.9 percent in the same period of the previous year.
Current Account and Balance of Payments
10. The current account remained at a surplus of Rs.34.36 billion in the review period against a deficit of Rs.22.47 billion in the same period of the previous year. In the US Dollar terms, the current account recorded a surplus of 288.2 million in the review period against a deficit of 198.4 million in the same period last year.
11. Balance of Payments (BOP) registered a surplus of Rs.101.09 billion in the review period. Such surplus was Rs.14.43 billion in the same period of the previous year. In the US Dollar terms, the BOP recorded a surplus of 851.0 million in the review period compared to a surplus of 127.8 million in the same period of the previous year.
Foreign Exchange Reserves
12. Gross foreign exchange reserves increased 4.9 percent to Rs.1470.26 billion in mid-October 2020 from Rs.1401.84 billion in mid-July 2020. In the US Dollar terms, the gross foreign exchange reserves increased 7.8 percent to 12.55 billion in mid-October 2020 from 11.65 billion in mid-July 2020.
13. The share of Indian currency in total reserves stood at 23.1 percent in mid-October 2020.
Foreign Exchange Adequacy Indicators
14. Based on the imports of three months of 2020/21, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 15.6 months, and merchandise and services imports of 14.1 months.
Exchange Rate
15. Nepalese currency vis-à-vis the US Dollar appreciated 2.8 percent in mid-October 2020 from mid-July 2020. It had depreciated 4.1 percent in the same period of the previous year. The buying exchange rate per US Dollar stood at Rs.117.12 in mid-October 2020 compared to Rs.120.37 in mid-July 2020.
Fiscal Situation
Federal Government
Fiscal Deficit/Surplus
16. Fiscal position of the government, based on banking transactions, remained at a surplus of Rs.316.8 million in the review period compared to a surplus of Rs.46.38 billion in the corresponding period of the previous year.
Expenditure and Revenue
17. In review period, total expenditure of the federal government based on banking transactions (excluding direct payments and unrealized cheques) stood at Rs.176.99 billion. Such expenditure was Rs.172.33 billion in the corresponding period of the previous year.
18. In review period, revenue collection based on banking transactions (including the amount to be transferred to provincial and local governments) stood at Rs.172.36 billion. Total government revenue was Rs.211.28 billion in the corresponding period of the previous year.
Cash Balance
19. Balance at various accounts of the GoN maintained with NRB remained Rs.213.39 billion (including Provincial government and Local Authorities Account) in mid-October 2020.
Provincial Government
20. In the review period, total resource mobilization of provincial governments wasRs.27.38 billion. The federal government has transferred Rs.18.44 billion as grants and revenue from divisible fund to provincial governments and the provincial governments have mobilized the resource of Rs.8.95 billion from revenue and other receipts in the review period.
Monetary Situation
Money Supply
21. Broad money (M2) expanded 5.6 percent in the review period compared to the growth of 3.2 percent in the corresponding period of the previous year. On y-o-y basis, M2 expanded 20.9 percent in mid-October 2020.
22. The net foreign assets (NFA after adjusting foreign exchange valuation gain/loss) increased Rs. 101.09 billion (7.6 percent) in the review period compared to an increase of Rs.14.43 billion (1.5 percent) in the corresponding period of the previous year.
23. Reserve money increased 1.7 percent in the review period compared to the growth of 2.7 percent in the corresponding period of the previous year. On y-o-y basis, reserve money increased 25.6 percent in mid-October 2020..
Domestic Credit
24. Domestic credit increased 2.8 percent in the re view period compared to the growth of 2.2 percent in the corresponding period of the previous year. On y-o-y basis, domestic credit increased 14.3 percent in mid-October 2020.
Deposit Mobilization
25. Deposits at Banks and Financial Institutions (BFIs) increased 4.9 percent in the review period compared to a growth of 3 percent in the corresponding period of the previous year. On y-o-y basis, deposits at BFIs expanded 20.9 percent in mid-October 2020.
26. The share of demand, saving, and fixed deposits in total deposits stands at 9.1 percent, 32.8 percent and 49.4 percent respectively in mid-October 2020. Such shares were 8.2 percent, 33 percent and 47.8 percent respectively a year ago.
27. The share of institutional deposits in total deposit of BFIs stands at 43.2 percent in mid- October 2020. Such share was 44.8 percent in mid- October 2019.
Credit Disbursement
28. Private sector credit from BFIs increased 4 percent in the review period compared to a growth of 4.3 percent in the corresponding period of previous year. On y-o-y basis, credit to the private sector from BFIs increased 11.7 percent in mid- October 2020.
29. In the review period, private sector credit from commercial banks and development banks increased 4 percent and 5.2 percent respectively while that of finance companies decreased 0.5 percent.
30. Outstanding loan of BFIs to agriculture sector increased 6 percent, industrial production sector increased 1 percent, construction sector increased 1.8 percent, transportation, communication and public sector increased 5.1 percent, wholesale and retail sector increased 4.7 percent and service industry sector increased 6.7 percent in the review period.
31. In the review period, term loan extended by BFIs increased 3.9 percent, overdraft increased 3.7 percent, demand and working capital loan increased 9.6 percent, real estate loan (including residential personal home loan) increased 0.6 percent and margin nature loan increased 17.8 percent while that of trust receipt (import) loan decreased 6.6 percent and hire purchase loan decreased 2.7 percent.
Liquidity Management
32. In the review period, NRB mopped up Rs. 90 billion liquidity including Rs. 60 billion through reverse repo auction and Rs. 30 billion through deposit collection instrument. Rs.30 billion liquidity was mopped up in the corresponding period of the previous year. Rs. 89.32 billion liquidity was injected including Rs. 39.52 billion through repo and Rs. 49.80 billion through standing liquidity facility (SLF) in the corresponding period of the previous year.
Interest Rates
33. The average base rate of commercial banks decreased to 7.73 percent in mid-October 2020 from 9.56 percent a year ago. Weighted average deposit rate and lending rate of commercial banks stood at 5.45 percent and 9.83 percent respectively in mid- October 2020. Such rates were 6.75 percent and 11.98 percent respectively a year ago.
Merger and Acquisition
34. After introduction of merger and acquisition policy aimed at strengthening financial stability, the number of BFIs involved in this process reached 207. Out of which, the license of 157 BFIs was revoked thereby forming 50 BFIs.
Financial Access
35. Of the total 753 local levels, commercial banks extended their
branches at 748 levels as of mid-October 2020. The number of local levels
having commercial bank branches was 741 a year ago
(Table 3).
36. The total number of BFIs licensed by NRB decreased to 146 in mid- October 2020 (Table 4). As of mid-October 2020, 27 commercial banks, 19 development banks, 21 finance companies, 78 microfinance financial institutions and 1 infrastructure development bank are in operation. The number of BFIs branches reached 9903 in mid-October 2020 from 9765 in mid-July 2020.
Capital Market
37. NEPSE index stood at 1562.5 points in mid-Oct 2020 compared to 1137.8 points in mid-Oct 2019. Such index was 1362.4 in mid-July 2020.
38. Stock market capitalization in mid-Oct 2020 stood Rs. 2082.58 billion compared to Rs. 1792.76 billion in mid-Jul 2020.
39. Number of companies listed at NEPSE stood 209, out of which 143 are Bank and Financial Institutions (BFIs) and insurance companies, 33 hydropower companies, 19 manufacturing and processing industries, 4 hotels, 4 trading companies and 6 others. The number of companies listed at NEPSE was 212 in mid-July 2020.
40. Share of BFIs and insurance companies in stock market capitalization is 75.4 percent. Such share for hydropower companies is 6.6 percent, manufacturing and processing industries 3.5 percent, hotels 1.1 percent, trading companies 0.3 percent and the share of other sector companies is 13.1 percent.
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