Current Macroeconomic Situation of Nepal Feb 2021

Current Macroeconomic and Financial Situation of Nepal

(Based on Seven Month’s Data Ending Mid-Feb, 2020/21)

Consumer Price Inflation

• The y-o-y consumer price inflation stood at 2.70 percent in the seven month of 2020/21 compared to 6.87 percent a year ago.
• Food and beverage inflation stood at 3.02 percent whereas non-food and service inflation stood at 2.44 percent in the review month.

External Sector

• In seven months of 2020/21, merchandise exports increased 7.6 percent to Rs.69.92 billion compared to an increase of 22.4 percent
• in the same period of the previous year.
• Destination-wise, exports to India and other countries increased 10.0 percent and 4.9 percent respectively whereas exports to China decreased 47.7 percent.
• In seven months of 2020/21, merchandise imports increased 0.01 percent to Rs.803.64 billion against a decrease of 3.6 percent a year ago.
• Destination-wise, imports from India, increased 7.1 percent whereas imports from China and other countries decreased 12.4 percent, and 10.8 percent respectively.
• Total trade deficit narrowed down 0.7 percent to Rs.733.73 billion in seven months of 2020/21. Such deficit had decreased 5.3 percent in the same period of the previous year.
• Remittance inflows increased 10.9 percent to Rs.567.70 billion in the review period against a decrease of 0.7 percent in the same period of the previous year. In US Dollar terms, remittance inflows increased 6.7 percent to 4.81 billion in the review period against a decrease of 0.5 percent in the same period of previous year.
• Number of Nepali workers taking approval for foreign employment decreased 75.9 percent in the review period. It had increased 21.7 percent in the same period of the previous year.
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• The current account remained at a deficit of Rs.101.90 billion in the review period compared to a deficit of Rs.106.0 billion in the same period of previous year.
• Net foreign direct investment (FDI) decreased 37.3 percent to Rs.9.02 billion. In the same period of previous year, net FDI amounted to Rs.14.38 billion respectively.
• Balance of Payments (BOP) registered a surplus of Rs.97.36 billion in the review period as compared to a surplus of Rs.21.61 billion in the same period of previous year.
• Gross foreign exchange reserves increased 4.3 percent to Rs.1462.03 billion in mid-February 2021 from Rs.1401.84 billion in mid-July 2020.
• In the US Dollar terms, the gross foreign exchange reserves increased 8.0 percent to 12.57 billion in mid-February 2021 from 11.65 billion in mid-July 2020.
• Based on the imports of seven months of 2020/21, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 13.1 months, and merchandise and services imports of 11.9 months.

 Fiscal Situation

• In the review period, total expenditure of the federal government according to Financial Comptroller General Office (FCGO), Ministry of Finance, stood at Rs.499.68 billion. The recurrent expenditure, capital expenditure and financing expenditure stood at Rs.406.73 billion, Rs. 62.84 billion and Rs. 30.11 billion respectively in the review period.
• In the review period, revenue mobilization (including the amount to be transferred to provincial and local governments) stood at Rs.498.52billion. The tax revenue and non-tax revenue amounted Rs.458.10 billion and Rs.40.42 billion in the review period.
• In the review period, domestic debt mobilization of federal government amounted Rs.90.5 billion, including Rs.20.5 billion through treasury bills and Rs.70 billion through development bonds.

Monetary Situation

• Broad money (M2) expanded 10.3 percent in the review period compared to the growth of 5.6 percent in the corresponding period of the previous year. On y-o-y basis, M2 expanded 23.3 percent in mid-February 2021.
• Domestic credit increased 10.5 percent in the review period compared to a growth of 3.1 percent in the corresponding period of the previous year. On y-o-y basis, domestic credit increased 21.8 percent in mid-February 2021.
• Deposits at Banks and Financial Institutions (BFIs) increased 9.8 percent in the review period compared to a growth of 6.4 percent in the corresponding period of the previous year. On y-o-y basis, deposits at BFIs expanded 22.4 percent in mid-February 2021.
• Private sector credit from BFIs increased 14.1 percent in the review period compared to a growth of 8.9 percent in the corresponding period of previous year. On y-o-y basis, credit to the private sector from BFIs increased 17.3 percent in mid-February 2021.
• The outstanding amount of refinance provided by NRB is Rs.82.29 billion in mid-February 2021.
• As of mid-February 2021, the outstanding concessional loan is Rs.112.03 billion extended to 68,206 borrowers.
• The weighted average 91-day treasury bills rate remained at 1.13 percent in mid-February 2021, which was 3.91 percent in the corresponding month a year ago. The weighted average inter-bank transaction rate among commercial banks, which was 4.59 percent a year ago, decreased to 0.58 percent in mid-February 2021. The average inter-bank rate of BFIs which is considered as operating target of monetary policy, stood 0.59 percent in mid-February 2021.
• The average base rate of commercial banks decreased to 6.97percent in mid-February 2021 from 9.45 percent a year ago.
• Weighted average deposit rate and lending rate of commercial banks stood at 4.86 percent and 8.89 percent respectively in mid-February 2021. Such rates were 6.78 percent and 11.94 percent respectively a year ago.
• After introduction of merger and acquisition policy aimed at strengthening financial stability, the number of BFIs involved in this process reached 213. Out of which, the license of 161 BFIs was revoked thereby forming 52 BFIs.
• Of the total 753 local levels, commercial banks extended their branches at 749 levels as of mid-February 2021.
• 52. The total number of BFIs licensed by NRB decreased to 143 in mid-February 2021 (Table 4). As of mid-February 2021, 27 commercial banks, 19 development banks, 20 finance companies, 76 microfinance financial institutions and 1 infrastructure development bank are in operation. The number of BFIs branches reached 10,366 in mid-February 2021 from 9765 in mid-July 2020.

Capital Market

• NEPSE index stood 2526.9 in mid-Feb2021 compared to 1346 in mid-Feb 2020. Such index was 1362.4 in mid-July 2020.
• Stock market capitalization in mid-Feb2021 stood Rs. 3406.17 billion compared to Rs. 1792.76 billion in mid-Jul2020.
• Number of companies listed at NEPSE stood 216, out of which 145 are Bank and Financial Institutions(BFIs) and insurance companies, 37 hydropower companies, 19 manufacturing and processing industries, 4 hotels, 4 trading companies and 7 others. The number of companies listed at NEPSE was 212 in mid-July2020.
• Share of BFIs and insurance companies in stock market capitalization is 72.1 percent. Such share for hydropower companies is 6.2 percent, manufacturing and processing industries 4.1 percent, hotels 0.8 percent, trading companies 0.5 percent and the share of other sector companies is 16.2 percent.

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