How Did We Perform As a Nation in First Month of Fiscal Year 2079/80? A Quick Macroeconomic Summary

Nepal Rastra Bank, the central bank of Nepal, has unveiled the current macroeconomic and financial situation of Nepal based on the first month's data of 2022/23.

Overalls

The Nepal Rastra Bank estimated that the inflation remained at 8.26 percent on a y-o-y basis. The gross foreign exchange reserves stood at USD 9.42 billion and the imports decreased 12.9 percent whereas, exports decreased 28.7 percent.

As of mid-August 2022, the outstanding concessional loan is Rs.213.66 billion extended to 147,023 borrowers. Of which, Rs.139.48 billion has been extended to 59,879 borrowers for selected commercial agriculture and livestock businesses. Likewise, Rs. 70.52 billion loan has been extended to 84,305 women entrepreneurs. Total 2,839 borrowers have availed Rs.3.66 billion concessional loan in other sectors.

NEPSE index stood 2041.1 in mid-August 2022 compared to 3160.1 in mid-August 2021.

Inflation

The average consumer price inflation stood at 8.26 percent in 2022/23 compared to 4.35 percent a year ago. The y-o-y wholesale price inflation stood at 12.58 percent in mid-August 2022 compared to 4.25 percent a year ago.

The y-o-y consumer price inflation in Nepal as of mid August 2022/23 remained 8.26 percent. Such inflation in India stood at 7.00 percent in August 2022.

Import and Export

During the first month of 2022/23, merchandise exports decreased 28.7 percent to to Rs.14.81 billion against an increase of 115.9 percent in the same period of the previous year. Destination- wise, exports to India and China decreased 36.5 percent and 24.4 percent respectively whereas exports to other countries increased 5.7 percent. Exports of palm oil, zinc sheet, readymade garments, medicine (ayurvedic), particle board, among others, increased whereas exports of soyabean oil, oil cakes, jute goods, juice, cardamom, among others, decreased in the review period.

During the first month of 2022/23, merchandise imports decreased 12.9 percent to Rs.131.29 billion against an increase of 75.7 percent a year ago. Destination-wise, imports from India, China and other countries decreased 12.1 percent, 10.5 percent, and 15.9 percent respectively. Imports of petroleum products, sponge iron, medicine, chemical fertilizer, crude palm oil, among others, increased whereas imports of transport equipment & parts, M.S. billet, telecommunication equipments and parts, crude soyabean oil, hot rolled sheet in coil, among others, decreased in the review period.

The total trade deficit decreased 10.4 percent to Rs.116.48 billion in the first month of 2022/23. Such a deficit had increased 70.6 percent in the corresponding period of the previous year. The export-import ratio decreased to 11.3 percent in the review period from 13.8 percent in the previous year.

Services and Remittance

Net services income remained at a deficit of Rs. 11.06 billion in the review year compared to a deficit of Rs. 10.13 billion in the previous year. Under the service account, travel income increased 56 percent to Rs. 2.60 billion in the review year which was Rs. Rs. 1.67 billion in the previous year.

Remittance inflows increased 20.3 percent to Rs.92.21 billion in the review period against a decrease of 17.4 percent in the same period of the previous year. In the US Dollar terms, remittance inflows increased 12.5 percent to 724.05 million in the review period against an decrease of 16.8 percent in the same period of the previous year. The number of Nepali workers (institutional and individual-new and legalized) taking approval for foreign employment increased significantly 222.8 percent to 44,540 in the review year. The number of Nepali workers (Renew entry) taking approval for foreign employment increased 75.4 percent to 20,390 in the review period. It had increased 286.1 percent in the same period of the previous year.

Inter-bank Transaction

The BFI’S interbank transactions amounted to Rs. 356.46 billion including Rs. 315.49 billion interbank transactions among commercial banks and Rs. 40.97 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 increased 36.1 percent to US dollar 95.36 per barrel in mid-August 2022 from US dollar 70.07 per barrel a year ago. The price of gold decreased 0.6 percent to US dollar 1774.85 per ounce in mid-August 2022 from US dollar 1786.35 per ounce a year ago.

Foreign Exchange Reserves and Adequacy Indicators

Gross foreign exchange reserves decreased 1.5 percent to Rs.1197.85 billion in mid-August 2022 from Rs.1215.80 billion in mid-July 2022. In the US dollar terms, the gross foreign exchange reserves decreased 1.2 percent to 9.42 billion in mid-August 2022 from 9.54 billion in mid-July 2022.

Of the total foreign exchange reserves, reserves held by NRB decreased 0.7 percent to Rs.1049.11 billion in mid-August 2022 from Rs.1056.39 billion in mid-July 2022. Reserves held by banks and financial institutions (except NRB) decreased 6.7 percent to Rs.148.74 billion in mid-August 2022 from Rs.159.41 billion in mid-July 2022. The share of Indian currency in total reserves stood at 22.9 percent in mid-August 2022.

Based on the imports of first month of 2022/23, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 9.4 months, and merchandise and services imports of 8.0 months. The ratio of reserves-to-GDP, reserves-to-imports and reserves-to-M2 stood at 24.7 percent, 66.8 percent and 22.2 percent respectively in mid-August 2022. Such ratios were 25.1 percent, 57.8 percent and 22.1 percent respectively in mid-July 2022.

Exchange Rate

Nepalese currency vis-à-vis the US dollar appreciated 0.3 percent in mid-August 2022 from mid-July 2022. It had appreciated 0.5 percent in the same period of the previous year. The buying exchange rate per US dollar stood at Rs.127.16 in mid-August 2022 compared to Rs.127.51 in mid-July 2022.

According to Financial Comptroller General Office (FCGO), the total expenditure of the federal government amounted to Rs.22.26 billion in 2022/23 compared to Rs. 10.49 billion a year ago. The recurrent expenditure, capital expenditure and financing expenditure of the federal government amounted to Rs.5.66 billion, Rs.1.48 billion and Rs.15.12 billion respectively in 2022/23.

Revenue collection (including the amount to be transferred to provincial and local governments) stood at Rs.79.72 billion in 2022/23. Total government revenue was Rs. 93.26 billion a year ago.

Banking

Domestic credit decreased 0.9 percent in the review year compared to decrease of 0.3 percent in the previous year. Deposits at Banks and Financial Institutions (BFIs) decreased 2 percent in the review year compared to decrease of 1.6 percent in the corresponding period of the previous year.

Private sector credit from BFIs decreased 0.05 percent in the review year compared to an increase of 1.2 percent in the previous year.

Interest Rates

The average base rate of commercial banks increased to 9.72 percent in the first month of 2022/23 from 6.71 percent a year ago. The weighted average deposit rate and lending rate of commercial banks stood at 7.64 percent and 11.94 percent respectively in the review month. Such rates were 4.76 percent and 8.48 percent respectively a year ago.