3 Months Macro Economic Indicators of FY 2024/25: Remittance Inflows Risen by 11.5%, Inflation at 4.82%

Nepal Rastra Bank, the central bank of Nepal, has unveiled the current macroeconomic and financial situation of Nepal based on the three months' data for FY 2024/25.

Overall

Nepal Rastra Bank estimated that the inflation remained at 4.82 percent on a y-o-y basis. The gross foreign exchange reserves stood at USD 16.60 billion, whereas, the total imports decreased 4.2 percent and exports decreased 6.1 percent.

NEPSE index stood at 2742.89 in mid-October 2024 compared to 1864.62 in mid-October 2023.

Inflation

The y-o-y consumer price inflation stood at 4.82 percent in mid-October 2024 compared to 7.50 percent a year ago.

The y-o-y wholesale price inflation stood at 5.51 percent in mid-October 2024 compared to 2.78 percent a year ago. The y-o-y wholesale price of consumption goods, intermediate goods, and capital goods increased 8.22 percent, 4.36 percent, and 2.63 percent respectively. The y-o-y wholesale price of construction materials decreased by 4.58 percent in the review month.

Import and Export

During the three months of 2024/25, merchandise exports decreased 6.1 percent to Rs.38.38 billion compared to a decrease of 2.3 percent in the same period of the previous year. Destinationwise, exports to India, China, and other countries decreased by 5.3 percent, 24.8 percent, and 6.6 percent respectively. Exports of soyabean oil, tea, particle board, shoes and sandals, and oil cakes, among others, increased whereas exports of zinc sheet, palm oil, cardamom, juice, and readymade garments, among others decreased in the review period.

During the three months of 2024/25, merchandise imports decreased 4.2 percent to Rs.390.75 billion compared to an increase of 1.7 percent a year ago. Destination-wise, imports from India, China, and other countries decreased by 3.9 percent, 1.5 percent, and 7.9 percent respectively. Imports of transport equipment, vehicle and other vehicle spare parts, edible oil, sponge iron, garlic, and oilseeds, among others increased whereas imports of gold, petroleum products, electrical equipment, crude palm oil, and M.S. billet, among others decreased in the review period.

The total trade deficit decreased 4.0 percent to Rs.352.37 billion during the three months of 2024/25. Such a deficit had increased by 2.1 percent in the corresponding period of the previous year. The export-import ratio decreased to 9.8 percent in the review period from 10.0 percent in the corresponding period of the previous year.

Services and Remittance

Net services income remained at a deficit of Rs.23.29 billion in the review period compared to a deficit of Rs.29.39 billion in the same period of the previous year.

Remittance inflows increased 11.5 percent to Rs.407.31 billion in the review period compared to an increase of 25.8 percent in the same period of the previous year. In the US Dollar terms, remittance inflows reached 3.04 billion in the review period which was 2.76 billion in the same period of the previous year.

Inter-bank Transaction

In the review period, BFIs inter-bank transactions amounted Rs.402.45 billion on a turnover basis, including Rs.371.25 billion inter-bank transactions among commercial banks, and Rs.31.20 billion among other financial institutions (excluding transactions among commercial banks). In the corresponding period of the previous year, such transactions was Rs.1494.08 billion, including Rs. 1309.73 billion among commercial banks, and Rs.184.35 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 20.4 percent to US dollar 73.65 per barrel in mid-October 2024 from US dollar 92.52 per barrel a year ago. The price of gold increased 38.7 percent to US dollar 2675.25 per ounce in mid-October 2024 from US dollar 1928.20 per ounce a year ago.

Foreign Exchange Reserves and Adequacy Indicator

Gross foreign exchange reserves increased 9.4 percent to Rs.2232.28 billion in mid-October 2024 from Rs.2041.10 billion in mid-July 2024. In US dollar terms, the gross foreign exchange reserves increased 8.7 percent to 16.60 billion in mid-October 2024 from 15.27 billion in mid-July 2024.

Of the total foreign exchange reserves, reserves held by NRB increased 7.5 percent to Rs.1988 billion in mid-October 2024 from Rs.1848.55 billion in mid-July 2024. Reserves held by banks and financial institutions (except NRB) increased 26.9 percent to Rs.244.27 billion in mid-October 2024 from Rs.192.55 billion in mid-July 2024. The share of Indian currency in total reserves stood at 21.9 percent in mid-October 2024.

Based on the imports of three months of 2024/25, the foreign exchange reserves of the banking sector are sufficient to cover the prospective merchandise imports of 17.6 months and merchandise and services imports of 14.6 months. The ratio of reserves-to-GDP, reserves-to-imports, and reserves-to-M2 stood at 39.1 percent, 121.9 percent, and 30.9 percent respectively in mid-October 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 0.6 percent in mid-October 2024 from mid-July 2024. It had depreciated 1.3 percent in the same period of the previous year. The buying exchange rate per US dollar stood at Rs.134.17 in mid-October 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 Government of Nepal stood at Rs.329.20 billion during three months of FY 2024/25. The recurrent expenditure, capital expenditure and financial expenditure amounted to 229.85 billion, Rs.29.37 billion and Rs.69.97 billion respectively in the review period.

In the review period, the total revenue mobilization of the Government of Nepal (including the amount to be transferred to provincial and local governments) stood at Rs.248.26 billion. The tax revenue amounted to Rs.219.68 billion and the nontax revenue was Rs.28.58 billion in the review period.

Cash Balance of Government

Cash Balance at various accounts of the GoN maintained with NRB remained at Rs.175.66 billion (including Provincial Governments and Local Government Accounts) in mid-October 2024. Such balance was Rs.91.78 billion in mid-July 2024.

Banking

Domestic credit increased by 1.7 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, domestic credit increased by 6.1 percent in mid-October 2024.

Monetary Sector's claims on the private sector increased by 2.8 percent in the review period compared to an increase of 2.7 percent in the corresponding period of the previous year. On a y-o-y basis, such claims increased by 6.2 percent in mid-October 2024.

Deposits at Banks and Financial Institutions (BFIs) increased by Rs.170 billion (2.6 percent) in the review period compared to an increase of Rs.158.50 billion (2.8 percent) in the corresponding period of the previous year. On a y-o-y basis, deposits at BFIs expanded 12.8 percent in mid-October 2024.

Private sector credit from BFIs increased Rs.128.65 billion (2.5 percent) in the review period compared to an increase of Rs.109.03 billion (2.3 percent) in the corresponding period of the previous year. On a y-o-y basis, credit to the private sector from BFIs increased by 6.0 percent in mid-October 2024.

Interest Rates

The average base rates of commercial banks, development banks and finance companies stood 7.29 percent, 9.13 percent and 10.35 percent respectively in the third month of 2024/25. The average base rate of commercial banks, development banks and finance companies were 9.94 percent, 12.30 percent and 13.65 percent respectively in the corresponding month a year ago.

Balance of Payments

Balance of Payments (BOP) remained at a surplus of Rs. 184.99 billion in the review period compared to a surplus of Rs. 101.66 billion in the same period of the previous year. In the US Dollar terms, the BOP remained at a surplus of 1.38 billion in the review period compared to a surplus of 766.80 million in the same period of the previous year.