Macroeconomic and Financial Situation of Nepal Updated as of 2020/21

Macroeconomic and Financial Situation of Nepal Update 

 Based on the Data of 2020/21 

Real Sector  

The average consumer price inflation stood 3.60 percent in 2020/21 compared to 6.15 percent a year ago. 

The installed capacity of hydro electricity increased to 1458 Megawatt in 2020/21.

The total number of tourist arrivals decreased 90.9 percent to 70123 in 2020/21.

External Sector 

Merchandise exports increased 44.4 percent to Rs.141.12 billion in 2020/21 compared to an increase of 0.6 percent in the previous year.

Merchandise imports increased 28.7 percent to Rs.1539.84 in 2020/21 billion against a decrease of 15.6 percent a year ago. 

Total trade deficit increased 27.3 percent to Rs.1398.71 billion in 2020/21. Such a deficit had decreased 16.8 percent in the previous year.

Net services income remained at a deficit of Rs.72.85 billion in 2020/21 year compared to a deficit of Rs.964.7 million in the previous year.

Remittance inflows increased 9.8 percent to Rs.961.05 billion in the review year against a decrease of 0.5 percent in the previous year.

Number of Nepali workers taking approval for foreign employment decreased by 62.8 percent in the review year compared to a decline of 20.5 percent in the previous year.

The current account remained at a deficit of Rs.333.67 billion in the review year compared to a deficit of Rs.33.76 billion in the previous year. 

Balance of Payments (BOP) registered a surplus of Rs.1.23 billion in the review year compared to a surplus of Rs.282.41 billion in the previous year.

Gross foreign exchange reserves decreased 0.2 percent to Rs.1399.03 billion in mid-July 2021 from Rs.1401.84 billion in mid-July 2020.

Foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 11.2 months, and merchandise and services imports of 10.2 months. 

Nepalese currency vis-à-vis the US Dollar appreciated 1.1 percent in mid-July 2021 from mid-July 2020. It had depreciated 9.1 percent in the previous year. 

Government  Sector 

Total expenditure of the federal government amounted to Rs.1180.95 billion in 2020/21 compared to Rs.1091.33  billion a year ago. The recurrent expenditure, capital expenditure and financing expenditure of the federal government amounted to Rs.851.68 billion, Rs.228.30 billion and Rs.100.97 billion respectively in 2020/21.

Revenue collection stood at Rs.938.32 billion in 2020/21. Total government revenue was Rs.793.75 a year ago.

The outstanding government debt amounted to Rs.1728.25 billion in mid-July 2021, which is 40.5 percent of GDP. Such a ratio was36.5 percent a year ago. 

Out of the total outstanding public debt, the amount of foreign and domestic debt stood at  Rs.927.93 billion and Rs.800.32 billion respectively

Monetary and Financial Sector 

Broad money (M2) expanded 21.8 percent in 2020/21 compared to the growth of 18.1 percent in the previous year.

Domestic credit increased 26.8 percent in the review year compared to a growth of 13.6 percent in the previous year. 

Deposits at Banks and Financial Institutions (BFIs) increased 21.4 percent in the review year compared to a growth of 18.7 percent in the previous year.

Private sector credit from BFIs increased 27.3 percent in the review year compared to a growth of 12 percent in the previous year.

NRB approved Rs. 148.75 billion refinance in 2020/21.The outstanding
amount of refinance provided by NRB remained Rs.122.70 billion in mid-July 2021.

Weighted average deposit rate and lending rate of commercial banks stood at 4.65 percent and 8.43 percent respectively in the mid-June-Mid-July 2021. Such rates were 6.01 percent and 10.11 percent respectively a year ago. 

The number of BFIs involved in this process reached 229 as of mid-July 2021. Out of which, the license of 171 BFIs was revoked thereby forming 58 BFIs. 

The total number of BFIs licensed by NRB remained 133 in mid-July 2021.

As of mid-July 2021, 27 commercial banks, 18 development banks, 17 finance companies, 70 microfinance financial institutions and 1 infrastructure development bank are in operation.

The number of BFIs branches reached 10,683 in mid-July 2021 from 9765 in mid-July 2020.

NEPSE index stood at 2883.4 in mid-July 2021 compared to 1362.4 in mid-July 2020. Stock market capitalization in mid-July 2021 stood Rs.4010.96 billion compared to Rs.1792.76 billion in mid-July 2020.

Number of companies listed at NEPSE reached 219 in mid-July 2021 .

Share of BFIs and insurance companies in stock market capitalization is 68.9 percent. Such a share for hydropower companies is 8.4 percent, investment companies 8.1 percent, manufacturing and processing industries 3.7 percent, hotels 1.5 percent, trading companies 0.5 percent and the share of other companies is 8.9 percent.

Full Report is available here.

The author can be reached at : siddhabhatta@gmail.com

 

   

 

Common Minimum Program of the Government of Nepal

Common Minimum Program of the Government of Nepal

August 8, 2021

Major Points

Nepal's five-party coalition government unveiled its 'Common Minimum Policy and Program' (CMP), on August 8, 2021. Here is a brief summary:

 

Priorities of the Government

1. Protect the life of the citizens from COVID-19.
2. Ensure constitutional supremacy, rule of law and good governance.
3. Implement the pending agreements to conclude the peace process.
4. Try to amend the provisions in the constitutions with the consent of other parties.
5. Formulate new laws for implementing federalism and strengthening the province and local level governments. Conclude the bills registered at the parliament.
6. Emphasize high and equitable economic development by building the foundations of socio-economic transformation.
7. Bring forward a new economic package to revive the hard-hit sectors from COVID such as tourism, transport, party palace, cinema halls etc. and give relief to COVID affected labors, the deprived and the unemployed.
8. Focus on supply management, building production-based economy, inflation and corruption control.
9. Provide relief to the people affected from natural disasters such as landslides, flood and fire.
10. Adopt an independent and balanced foreign policy for promoting national interest and prosperity.
11. Promote national harmony through mutual coordination.

Policy and Programs

Relief from the COVID-19

1. Vaccine one third of the population against COVID-19 by mid-October 2021 and vaccinate all eligible citizens by Mid-April 2022.
2. Encourage for establishing the COVID vaccine production lab in Nepal.
3. Provide incentives and personal safety equipment to the frontline health workers including ambulance drivers, security personnel.
4. Prioritize the development of infrastructures including hospitals for the containment of COVID-19.
5. Inspect for any irregularities in health purchases.

Promotion of National Interest

1. Amend the National Security Policy and implement effectively.
2. Settle the border issues with the neighboring countries through dialogues.
3. Implement the Water Resource Policy effectively.
4. Mobilize the foreign aid in the national priority sectors through budgetary mechanism.
5. Review the treaties that are against the national interest.

Implementation of Federalism and Strengthening the Financial System

1. Transfer the remaining institutions to be under the provincial government as per the constitutions to provinces from the federal level.
2. Formulate the laws regarding the common right of federal and province level with high priority.
3. Increase the federal grant to the provinces and distribute it equitably.
4. Complete immediately the provincial level police force adjustment process in coordination with the provinces.
5. Make efforts to provide voting rights to the Nepali citizens living abroad.

 Ensuring Peace and Good Governance

1. Initiate steps to make all government mechanisms impartial and responsible.
2. Ensure efficiency, unbiasedness, transparency and responsibility in government employees including Nepal police, Nepal army and Nepal Armed force.
3. Adopt a transparent system based of efficiency, ability, seniority and performance evaluation while appointing or promoting manpower in public sector including health and education.
4. Make effective the institutions working in the area of anti-corruption. Empower the CIAA with enough resources.
5. Reduce the time to deliver public services by one third through appropriate administrative reforms.
6. Implement national identity system nationwide and provide driving license and passport from all provinces in a more effective way.

Conclusion of the Peace Process

1. Implement the agreements with the UCPN Maoists and other parties.
2. Release the people convicted during the armed movement as per the peace process agreements.
3. Amend the acts for the commissions working in the areas of peace settlement.

Economic Policy and Program

1. Pass all the bills related to economic sector within three months.
2. Adopt economic policy based on equitable distribution while focusing on output and productivity.
3. Distribute resources among the provinces as per the principles of fiscal federalism.
4. Promote domestic and foreign investment by improving investment environment in cooperation with the private sector. Amend existing laws to redirect foreign aid in the national priority sector.
5. Focus on the modernization and mechanization of traditional agricultural sector.
6. Construct the middle, large and reservoir based hydro-power projects from domestic investment. Attract foreign investment in export oriented projects. Reduce the electricity bills for the poor and deprived and increase their access. Arrange for the exports of excess electricity to neighboring countries.
7. Focus on tourism infrastructure and bring a relief package immediately for the COVID affected tourism sector.
8. Construct sustainable and quality physical infrastructure. Focus on the completion of the projects such as Upgradation of East West Highway, extension of Kathmandu Ring Road, Postal Highway and North West Corridors.
9. Give high priority to industrialization to increase the role of manufacturing sector in the economy. Focus on export promoting and import substituting industries so as to reduce trade deficit.
10. Formulate policy and program to realize the concept of Digital Nepal.
11. Provide land to the landless as per the spirit of the constitution.
12. Develop financial sector through appropriate reforms in fiscal as well as monetary policy. Ensure industrial security.
13. Make public enterprises efficient, professional and competitive.
14. Provide sustainable irrigation facilities for the land with no irrigation facility through river diversion, groundwater and lift system.
15. Use digital technology for early warning of the natural disasters.
16. Economize the government activities and increase capital expenditure. Utilize foreign loan in infrastructure.
17. Provide financial access and market access to the SMEs and ease the registration and tax system for them.

Social Transformation

1. Provide social security to the poor and deprived. Implement Integrated Social Security Framework.
2. Focus on balanced development of all provinces. Poor household card for the poor families to provide them necessary goods at subsidized price. Introduce public distribution mechanism for all citizens.
3. Make the public education system effective as per the spirit of federalism and ensure access of all to education.
4. Make basic health services free for all. Expand the access of health insurance. Expand the network of health centers and hospitals to ensure easy access to health services.
5. Address the unemployment situation due to COVID crisis. Promote cooperative sector for poverty reduction and unemployment generation. 
6. Link the development process with technology and make optimum use of science and technology for social transformation and modernization of the economy. Focus on the study and research of science and technology.
7. Extend the coverage of social security being provided to aged population, single women, handicapped, marginalized people and others.
8. Focus on the society with gender equality.

Immediate Relief, Reconstruction and Rehabilitation

1. Provide relief to the people affected by COVID-19, flood, landslides and other disasters.
2. Provide necessary treatment to the people involved in various political movements that have not yet received any treatment. Provide one employment opportunity to the family whose member were maimed in such movements.
3. Ensure supply of daily necessary goods and services for consumption. Make easy availability of the daily necessities in the rural area.
4. Provide relief and rehabilitate the citizens of the districts that have been affected from flood and landslides   
5. Provide air ambulance services in the rural area in case of natural disasters.
6. Complete the remaining reconstruction works under National Reconstruction Authority.

Environmental Balance

1. Prioritize the control of deterioration of forest, river and environment.
2. Stop using natural resources for profit purpose.
3. Implement policy for multi-use and integrated development of large rivers.
4. Make coordination with the international community for managing the risk of natural disasters.
5. Take necessary precautions to minimize the risks of climate change on the life of the citizens.

International Relation

1. Protect national sovereignty and national interest.
2. Foster national unity for international relations.
3. Strengthen the relations with other nations. Promote cooperation among the countries in new areas.
4. Implement foreign policy on the basis of UN charter, non-interference and other international laws and conventions. 

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The formal document in Nepali medium can be found here.