Macroeconomic and Financial Update of Nepal as of May 2021
Inflation
Consumer inflation is on a slight increasing trend from February 2021. However, it is lower than the previous year inflation. In mid-May 2021, the y-o-y inflation stood 3.7 percent compared to 5.8 percent in mid-May 2020.
External Sector
During the ten months of 2020/21, merchandise exports increased 32.2 percent to Rs.108.48 billion compared to an increase of 4.5 percent in the same period of the previous year.
Merchandise imports increased 22.3 percent to Rs.1254.11 billion against a decrease of 13.0 percent a year ago.
Total trade deficit increased 21.5 percent to Rs.1145.63 billion during the ten months of 2020/21. Such a deficit had decreased 14.2 percent in the same period of the previous year.
Net services income remained at a deficit of Rs.54.71 billion in the review period compared to a surplus of Rs.788.2 million in the same period of the previous year.
Remittance inflows increased 19.2 percent to Rs.809.89 billion in the review period against a decrease of 6.3 percent in the same period of the previous year.
Number of Nepali workers (institutional and individual-new and legalized) taking approval for foreign employment decreased 60.3 percent in the review period. It had decreased2.7 percent in the same period of the previous year.
The current account remained at a deficit of Rs.247.08 billion in the review period compared to a deficit of Rs.96.18 billion in the same period of the previous year.
Balance of Payments (BOP) registered a surplus of Rs.7.75 billion in the review period as compared to a surplus of Rs.120.90 billion in the same period of the previous year.
Gross foreign exchange reserves decreased 0.8 percent to Rs.1390.84 billion in mid-May 2021 from Rs.1401.84 billion in mid-July 2020.
Based on the imports during the ten months of 2020/21, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 11.4 months, and merchandise and services imports of 10.3 months.
Nepalese currency vis-à-vis the US Dollar appreciated 2.7 percent in mid-May 2021 from mid-July 2020.
In the review period, total expenditure of the federal government stood at Rs.824.81billion.The recurrent expenditure, capital expenditure and financing expenditure amounted to Rs.630.20billion, Rs.125.88billion and Rs.68.72billion respectively in the review period.
Government Sector
Revenue mobilization(including the amount to be transferred to provincial and local governments) stood at Rs.761.00 billion and domestic debt mobilization of federal government amounted Rs.112.52 billion.
Monetary and Financial Sector
Broad money (M2) expanded 15.4percent in the review period compared to the growth of 10.5percent in the corresponding period of the previous year. On y-o-y basis, M2 expanded 23.4percent in mid-May 2021.
Domestic credit increased 18.9percent in the review period compared to a growthof 10.5percent in the corresponding period of the previous year. On y-o-y basis, domestic credit increased 22.2percent in mid-May 2021.
Deposits at Banks and Financial Institutions (BFIs) increased 14.3percent in the review period compared to a growthof 11.0percent in the corresponding period of the previous year. On y-o-y basis, deposits at BFIs expanded 22.2percent in mid-May 2021.
Private sector credit from BFIs increased 23.8percent in the review period compared to a growth of 11.1percent in the corresponding period of previous year. On y-o-y basis, credit to the private sector fromBFIs increased 24.8percent in mid-May 2021.
In the review period, term loan extended by BFIs increased 24.6percent, overdraft 27.7 percent, demand and working capital loan 20.8 percent, real estate loan (including residential personal home loan) 11.4percent, margin nature loan 87.2percentand trust receipt (import) loan 46.5percent while that of hire purchase loan decreased5.4percent.
The outstanding amount of refinance provided by NRB remained Rs.128.44billion in mid-May2021. As of mid-April2021, the outstanding concessional loan is Rs.149.76 billion extended to 95,806 borrowers.
The average base rate of commercial banks decreased to 6.83 percent in the tenth month of 2020/21 from 8.96percent a year ago. Weighted average deposit rate and lending rate of commercial banks stood at 4.81percent and 8.53percent respectively in the review month compared to 6.44 percent and 10.99 percent respectively a year ago.
The total number of BFIs licensed by NRB remained 138 in mid-May 2021 (Table 4). As of mid-May2021, 27 commercial banks, 18development banks, 20 finance companies, 72microfinance financial institutions and 1 infrastructure development bank were in operation. The number of BFI branches reached 10598 in mid-May 2021 from 9765 in mid-July 2020.
NEPSE index stood at 2684.1 in mid-May2021compared to 1201.6 in mid-May 2020.Such an index was 1362.4 in mid-July 2020.58.
Stock market capitalization stood Rs.3724.55 billion in mid-May2021compared to Rs.1792.76billion in mid-July2020.
Number of companies listed at NEPSE reached 220, out of which 145are Bank and Financial Institutions(BFIs) and insurance companies, 40hydropower companies, 19 manufacturing and processing industries, 5 hotels, 4 trading companies, 4 investment companies and 3others. The share of BFIs and insurance companies in stock market capitalization is 68.3percent.
