2 Months Macro Economic Indicators: Inflation at 3.85 %; Remittance Upsurged by 15.2%; Foreign Reserve Sufficient to Cover 13.7 Months Import
Nepal Rastra Bank, the central bank of Nepal, has unveiled the current macroeconomic and financial situation of Nepal based on the two months' data for FY 2024/25.
Overall
Nepal Rastra Bank estimated that the inflation remained at 3.85 percent on a y-o-y basis. The gross foreign exchange reserves stood at USD 16.04 billion, whereas, the total imports increased 1.1 percent and exports decreased 5.1 percent.
NEPSE index stood at 2580.76 in mid-September 2024 compared to 1964.92 in mid-September 2023.
Inflation
The y-o-y consumer price inflation stood at 3.85 percent in mid-September 2024 compared to 8.19 percent a year ago.
The y-o-y wholesale price inflation stood at 2.75 percent in mid-September 2024 compared to 4.78 percent a year ago. The y-o-y wholesale price of consumption goods, intermediate goods, and capital goods increased by 1.39 percent, 3.56 percent, and 2.77 percent respectively. The y-o-y wholesale price of construction materials decreased by 4.22 percent in the review month.
Import and Export
During the two months of 2024/25, merchandise exports decreased 5.1 percent to Rs.25.09 billion compared to a decrease of 7.8 percent in the same period of the previous year. Destinationwise, exports to India, China, and other countries decreased by 4.5 percent, 45.3 percent, and 3.9 percent respectively. Exports of tea, particle board, oil cakes, shoes and sandals, and soyabean oil, among others, increased whereas exports of cardamom, zinc sheet, palm oil, readymade garments, and herbs, among others decreased in the review period.
During the two months of 2024/25, merchandise imports increased 1.1 percent to Rs.262.54 billion compared to a decrease of 5.1 percent a year ago. Destination-wise, imports from India and other countries decreased by 0.1 percent and 5.1 percent respectively while imports from China increased by 11.9 percent. Imports of transport equipment, vehicle and other vehicle spare parts, edible oil, chemical fertilizer, telecommunication equipment and parts, and garlic, among others increased whereas imports of gold, M.S. billet, rice/paddy, crude palm oil, electrical equipment, among others decreased in the review period.
The trade deficit trade deficit increased 1.8 percent to Rs.237.45 billion during the two months of 2024/25. Such a deficit had decreased 4.7 percent in the corresponding period of the previous year. The export-import ratio decreased to 9.6 percent in the review period from 10.2 percent in the corresponding period of the previous year.
Services and Remittance
Net services income remained at a deficit of Rs.28.20 billion in the review period compared to a deficit of Rs.25.23 billion in the same period of the previous year.
Remittance inflows increased 15.2 percent to Rs.263.14 billion in the review period compared to an increase of 18.7 percent in the same period of the previous year. In the US Dollar terms, remittance inflows reached 1.96 billion in the review period which was 1.73 billion in the same period of the previous year.
Inter-bank Transaction
In the review period, BFI inter-bank transactions amounted to Rs.193.70 billion on a turnover basis, including Rs.190.10 billion inter-bank transactions among commercial banks, and Rs.3.60 billion among other financial institutions (excluding transactions among commercial banks). In the corresponding period of the previous year, such transactions was Rs.1080.80 billion, including Rs. 924.42 billion among commercial banks, and Rs.156.38 billion among other financial institutions (excluding transactions among commercial banks).
Price of Oil and Gold
The price of oil (Crude Oil Brent) in the international market decreased 22.6 percent to US dollar 73.96 per barrel in mid-September 2024 from US dollar 95.55 per barrel a year ago. The price of gold increased 34.0 percent to US dollar 2584 per ounce in mid-September 2024 from US dollar 1927.70 per ounce a year ago.
Foreign Exchange Reserves and Adequacy Indicator
Gross foreign exchange reserves increased 5.5 percent to Rs.2152.53 billion in mid-September 2024 from Rs.2041.10 billion in mid-July 2024. In US dollar terms, the gross foreign exchange reserves increased 5.0 percent to 16.04 billion in mid-September 2024 from 15.27 billion in mid-July 2024.
Of the total foreign exchange reserves, reserves held by NRB increased 4.4 percent to Rs.1928.99 billion in mid-September 2024 from Rs.1848.55 billion in mid-July 2024. Reserves held by banks and financial institutions (except NRB) increased 16.1 percent to Rs.223.53 billion in mid-September 2024 from Rs.192.55 billion in mid-July 2024. The share of Indian currency in total reserves stood at 22.1 percent in mid-September 2024.
Based on the imports of two months of 2024/25, the foreign exchange reserves of the banking sector are sufficient to cover the prospective merchandise imports of 16.8 months and merchandise and services imports of 13.7 months. The ratio of reserves-to-GDP, reserves-to-imports, and reserves-to-M2 stood at 37.7 percent, 114.4 percent, and 30.8 percent respectively in mid-September 2024. Such ratios were 35.8 percent, 108.6 percent, and 29.3 percent respectively in mid-July 2024.
Exchange Rate
Nepalese currency vis-à-vis the US dollar depreciated 0.5 percent in mid-August 2024 from mid-July 2024. It had depreciated 1 percent in the same period of the previous year. The buying exchange rate per US dollar stood at Rs.134.02 in mid-August 2024 compared to Rs.133.36 in mid-July 2024.
Nepal Government Expenditure and Revenue
According to the Ministry of Finance, Financial Comptroller General Office (FCGO), the total expenditure of the Nepal Government stood at Rs.137.55 billion during the second month of FY 2024/25. The recurrent expenditure, capital expenditure and financial expenditure amounted to 82.99 billion, Rs.14.89 billion, and Rs.39.67 billion respectively in the review period.
In the review period, the total revenue mobilization of the Nepal Government (including the amount to be transferred to provincial and local governments) stood at Rs.166.39 billion. The tax revenue amounted to Rs.145.19 billion and nontax revenue was Rs.21.19 billion in the review period.
Cash Balance of Government
Cash Balance at various accounts of the GoN maintained with NRB remained at Rs.269.53 billion (including Provincial Governments and Local Government Accounts) in mid-September 2024. Such balance was Rs.91.78 billion in mid-July 2024.
Banking
Domestic credit decreased 0.2 percent in the review period compared to a decrease of 0.4 percent in the corresponding period of the previous year. On a y-o-y basis, domestic credit increased by 6.3 percent in mid-September 2024.
Monetary Sector's claims on the private sector increased 2.3 percent in the review period compared to an increase of 1.7 percent in the corresponding period of the previous year. On a y-o-y basis, such claims increased by 6.8 percent in mid-September 2024.
Deposits at Banks and Financial Institutions (BFIs) increased Rs.35.03 billion (0.5 percent) in the review period in contrast to a decrease of Rs.7.56 billion (0.1 percent) in the corresponding period of the previous year.
Private sector credit from BFIs increased Rs.73.39 billion (1.4 percent) in the review period compared to an increase of Rs.33.60 billion (0.7 percent) in the corresponding period of the previous year. On a y-o-y basis, credit to the private sector from BFIs increased 6.6 percent in mid-September 2024.
Interest Rates
The average base rates of commercial banks, development banks, and finance companies stood at 7.49 percent, 9.15 percent, and 10.65 percent respectively in the second month of 2024/25. The average base rate of commercial banks, development banks, and finance companies was 10.14 percent, 12.12 percent, and 13.52 percent respectively in the corresponding month a year ago.
Balance of Payments
Balance of Payments (BOP) remained at a surplus of Rs. 101.77 billion in the review period compared to a surplus of Rs. 55.1 billion in the same period of the previous year. In US Dollar terms, the BOP remained at a surplus of 757.9 million in the review period compared to a surplus of 417 million in the same period of the previous year.
