First 4-Month Macroeconomic Highlights: 9.1% Surge in Remittances, Foreign Currency Reserves Secure 15.1 Months of Imports

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

Overall

Nepal Rastra Bank estimated that the inflation remained at 5.60 percent on a y-o-y basis. The gross foreign exchange reserves stood at USD 16.70 billion, whereas, the total imports and exports increased 0.2 percent and 4.2 percent respectively.

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 5.60 percent in mid-November 2024 compared to 5.38 percent a year ago.

The y-o-y wholesale price inflation stood at 5.16 percent in mid-November 2024 compared to 2.09 percent a year ago. The y-o-y wholesale price of consumption goods, intermediate goods, and capital goods increased by 9.02 percent, 3.39 percent, and 2.86 percent respectively. The y-o-y wholesale price of construction materials decreased by 4.62 percent in the review month.

Import and Export

During the four months of 2024/25, merchandise exports increased 4.2 percent to Rs.52.67 billion against a decrease of 7.7 percent in the same period of the previous year. Destination-wise, exports to India increased by 8.4 percent, whereas exports to China and other countries decreased by 18.3 percent and 3.0 percent respectively. Exports of soyabean oil, tea, polyester yarn and threads, particle board, and oil cakes, among others, increased whereas exports of palm oil, zinc sheet, readymade garments, juice, and ginger among others decreased in the review period.

During the four months of 2024/25, merchandise imports increased 0.2 percent to Rs.513.39 billion against a decline of 3.8 percent a year ago. Destination-wise, imports from India and China increased by 0.9 and 2.9 percent respectively, while imports from other countries decreased 5.0 percent. Imports of transport equipment, vehicle and other vehicle spare parts, edible oil, sponge iron, garlic, telecommunication equipment, and parts, among others increased. However, imports of petroleum products, gold, crude palm oil, aircraft spare parts, and electrical equipment, among others decreased in the review period.

The total trade deficit decreased 0.3 percent to Rs.460.72 billion during four months of 2024/25. Such a deficit had decreased 3.3 percent in the corresponding period of the previous year. The export-import ratio increased to 10.3 percent in the review period from 9.9 percent in the corresponding period of the previous year.

Services and Remittance

Net services income remained at a deficit of Rs.22.95 billion in the review period compared to a deficit of Rs.27.89 billion in the same period of the previous year.

Remittance inflows increased 9.1 percent to Rs.521.63 billion in the review period compared to an increase of 22.5 percent in the same period of the previous year. In the US Dollar terms, remittance inflows reached 3.87 billion in the review period which was 3.60 billion in the same period of the previous year.

Inter-bank Transaction

In the review period, BFI inter-bank transactions amounted to Rs.532.10 billion on a turnover basis, including Rs.470.30 billion in inter-bank transactions among commercial banks, and Rs.61.80 billion among other financial institutions (excluding transactions among commercial banks). In the corresponding period of the previous year, such transaction was Rs.1958.87 billion, including Rs. 1743.94 billion among commercial banks and Rs.214.93 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 5.5 percent to US dollar 73.45 per barrel in mid-November 2024 from US dollar 77.73 per barrel a year ago. The price of gold increased 29.9 percent to US dollar 2571.80 per ounce in mid-November 2024 from US dollar 1980.10 per ounce a year ago.

Foreign Exchange Reserves and Adequacy Indicator

Gross foreign exchange reserves increased 10.5 percent to Rs.2255.35 billion in mid-November 2024 from Rs.2041.10 billion in mid-July 2024. In US dollar terms, the gross foreign exchange reserves increased 9.4 percent to 16.70 billion in mid-November 2024 from 15.27 billion in mid-July 2024.

Of the total foreign exchange reserves, reserves held by NRB increased 8.6 percent to Rs.2008.15 billion in mid-November 2024 from Rs.1848.55 billion in mid-July 2024. Reserves held by banks and financial institutions (except NRB) increased 28.4 percent to Rs.247.20 billion in mid-November 2024 from Rs.192.55 billion in mid-July 2024. The share of Indian currency in total reserves stood at 22 percent in mid-November 2024.

Based on the imports of four months of 2024/25, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 18 months and merchandise and services imports of 15.1 months. The ratio of reserves-to-GDP, reserves-to-imports and reserves-to-M2 stood at 39.5 percent, 126 percent, and 31.4 percent respectively in mid-November 2024. Such ratios were 35.8 percent, 108.6 percent, and 29.3 percent respectively in mid-July 2024.

Exchange Rate

Nepali currency vis-à-vis the US dollar depreciated 1.02 percent in mid-November 2024 from midJuly 2024. It had depreciated 1.18 percent in the same period of the previous year. The buying exchange rate per US dollar stood at Rs.134.74 in mid-November 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.415.02 billion during four months of FY 2024/25. The recurrent expenditure, capital expenditure and financial expenditure amounted to Rs.292.53 billion, Rs.34.53 billion and Rs.87.96 billion respectively in the review period.

In the review period, total revenue mobilization of the Government of Nepal (including the amount to be transferred to provincial and local governments) stood at Rs.323.24 billion. The tax revenue amounted Rs.289.90 billion and non tax revenue Rs.33.34 billion in the review period.

Cash Balance of Government

Cash Balance at various accounts of the GoN maintained with NRB remained Rs.214.14 billion (including Provincial Governments and Local Government Account) in mid-November 2024. Such balance was Rs.91.78 billion in mid-July 2024.

Banking

Domestic credit increased 1.3 percent in the review period compared to an increase of 2.2 percent in the corresponding period of the previous year. On y-o-y basis, domestic credit increased 5.1 percent in mid-November 2024.

Monetary Sector's claims on the private sector increased 3.1 percent in the review period compared to an increase of 3.0 percent in the corresponding period of the previous year. On y-o-y basis, such claims increased 6.2 percent in mid-November 2024.

Deposits at Banks and Financial Institutions (BFIs) increased Rs.149.84 billion (2.3 percent) in the review period compared to an increase of Rs.154.61 billion (2.7 percent) in the corresponding period of the previous year. On y-o-y basis, deposits at BFIs expanded 12.6 percent in mid-November 2024.

Private sector credit from BFIs increased Rs.128.47 billion (2.5 percent) in the review period compared to an increase of Rs.99.40 billion (2.1 percent) in the corresponding period of previous year. On y-o-y basis, credit to the private sector from BFIs increased 6.2 percent in mid-November 2024.

Interest Rates

The average base rates of commercial banks, development banks and finance companies stood 7.02 percent, 8.96 percent and 10.03 percent respectively in the fourth month of 2024/25. The average base rate of commercial banks, development banks and finance companies were 9.74 percent, 12.00 percent and 13.33 percent respectively in the corresponding month a year ago.

Balance of Payments

Balance of Payments (BOP) remained at a surplus of Rs. 205.83 billion in the review period compared to a surplus of Rs. 150.24 billion in the same period of the previous year. In the US Dollar terms, the BOP remained at a surplus of 1.53 billion in the review period compared to a surplus of 1.13 billion in the same period of the previous year.