How Did We Perform As a Nation in First Month of Fiscal Year 2081/82? 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 data for FY 2024/25.
Overall
Nepal Rastra Bank estimated that the inflation remained at 4.10 percent on a y-o-y basis. The gross foreign exchange reserves stood at USD 15.58 billion, whereas, the total imports decreased by 0.6 percent and exports decreased by 9.6 percent respectively.
NEPSE index stood at 3000.81 in mid-August 2024 compared to 2033.14 in mid-August 2023.
Inflation
The y-o-y consumer price inflation stood at 4.10 percent in mid-August 2024 compared to 7.52 percent a year ago.
The y-o-y wholesale price inflation stood at 3.66 percent in mid-August 2024 compared to 4.34 percent a year ago. The y-o-y wholesale price of consumption goods, intermediate goods, and capital goods increased by 1.51 percent, 5.18 percent, and 2.08 percent respectively. The y-o-y wholesale price of construction materials decreased by 4.21 percent in the review month.
Update of the base year of the Consumer Price Index
Nepal Rastra Bank has updated the base year of the Consumer Price Index (CPI) to 2023/24. Prior to this, such base year was 2014/15.
The household expenditure weights used for this index are derived from the fourth Nepal Living Standards Survey (NLSS-IV), conducted by the National Statistics Office in the fiscal year 2022/23. In the updated Consumer Price Index, the weight for the food and beverage group is 35.49 percent and for the non-food and services group is 64.51 percent. Previously, alcoholic drinks, tobacco products, and restaurants and hotels were included in the food and beverages group. However, in the updated index, these items have been reclassified under the non-food and services group in accordance with the COICOP (Classification of Individual Consumption by Purpose) 2018 standard.
Import and Export
During the first month of 2024/25, merchandise exports decreased 9.6 percent to Rs.12.23 billion compared to a decrease of 8.7 percent in the same period of the previous year. Destination-wise, exports to India, China and other countries decreased by 10.6 percent, 59.8 percent and 3.5 percent respectively. Exports of particle board, oil cakes, tea, woolen carpet, shoes and sandals, among others increased whereas exports of cardamom, palm oil, zinc sheet, jutegoods, readymade garments, among others decreased in the review period.
Merchandise imports decreased 0.6 percent to Rs.128.38 billion compared to a decrease of 1.6 percent a year ago. Destination-wise, imports from India decreased 4.4 percent while imports from China and other countries increased 12.0 percent and 0.4 percent. Imports of chemical fertilizer, transport equipment, vehicle and other vehicle spare parts, other machinery and parts, readymade garments, edible oil, among others increased whereas imports of rice/paddy, aircraft spareparts, hot rolled sheet in coil, M.S. wire rod, bars, coils and others, M.S. billet, among others decreased in the review period
The trade deficit trade deficit increased 0.4 percent to Rs.116.15 billion during the first month of 2024/25. Such a deficit had decreased 0.7 percent in the corresponding period of the previous year. The export-import ratio decreased to 9.5 percent in the review period from 10.5 percent in the corresponding period of the previous year.
Services and Remittance
Net services income remained at a deficit of Rs.15.26 billion in the review period compared to a deficit of Rs.11.25 billion in the same period of the previous year.
Remittance inflows increased 18.0 percent to Rs.136.93 billion in the review period compared to an increase of 22.8 percent in the same period of the previous year. In the US Dollar terms, remittance inflows reached 1.02 billion in the review period which was 879.8 million in the same period of the previous year.
Inter-bank Transaction
In the review period, BFI inter-bank transactions amounted to Rs.52.15 billion on a turnover basis, including Rs.51.5 billion in inter-bank transactions among commercial banks, and Rs.650 million among other financial institutions (excluding transactions among commercial banks). In the corresponding period of the previous year, such transactions was Rs.655.44 billion, including Rs. 561.67 billion among commercial banks, and Rs.93.77 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 4.3 percent to US dollar 81.56 per barrel in mid-August 2024 from US dollar 85.24 per barrel a year ago. The price of gold increased 31.1 percent to US dollar 2485.80 per ounce in mid-August 2024 from US dollar 1896.35 per ounce a year ago.
Foreign Exchange Reserves and Adequacy Indicator
Gross foreign exchange reserves increased 2.5 percent to Rs.2092.22 billion in mid-August 2024 from Rs.2041.10 billion in mid-July 2024. In the US dollar terms, the gross foreign exchange reserves increased 2.0 percent to 15.58 billion in mid-August 2024 from 15.27 billion in mid-July 2024.
Of the total foreign exchange reserves, reserves held by NRB increased 1.9 percent to Rs.1883.42 billion in mid-August 2024 from Rs.1848.55 billion in mid-July 2024. Reserves held by banks and financial institutions (except NRB) increased 8.4 percent to Rs.208.79 billion in mid-August 2024 from Rs.192.55 billion in mid-July 2024. The share of Indian currency in total reserves stood at 22.6 percent in mid-August 2024
Based on the imports of first month of 2024/25, the foreign exchange reserves of the banking sectoris sufficient to cover the prospective merchandise imports of 16.7 months, and merchandise and services imports of 13.5 months. The ratio of reserves-to-GDP, reserves-to-imports and reservesto-M2 stood at 36.7 percent, 112.5 percent and 30.3 percent respectively in mid-August 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 midJuly 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.40.21 billion during the first month of FY 2024/25. The recurrent expenditure, capital expenditure and financial expenditure amounted to 12.38 billion, Rs.8.55 billion, and Rs.19.27 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.94.74 billion. The tax revenue amounted to Rs.77.41 billion and non-tax revenue Rs.17.33 billion in the review period.
Cash Balance of Government
Cash Balance at various accounts of the GoN maintained with NRB remained at Rs.197.82 billion (including Provincial Governments and Local Government Accounts) in mid-August 2024. Such balance was Rs.99.27 billion in mid-July 2024.
Banking
Domestic credit decreased 0.8 percent in the review period compared to a decrease of 2.3 percent in the corresponding period of the previous year. On a y-o-y basis, domestic credit increased by 7.7 percent in mid-August 2024.
Monetary Sector's claims on the private sector increased by 0.7 percent in the review period compared to an increase of 0.3 percent in the corresponding period of the previous year.
Deposits at Banks and financial institutions (BFIs) decreased by Rs.43.45 billion (0.7 percent) in the review period compared to a decrease of Rs.133.24 billion (2.3 percent) in the corresponding period of the previous year.
Private sector credit from BFIs increased Rs.14.11 billion (0.3 percent) in the review period compared to a decrease of Rs.4.35 billion (0.1 percent) in the corresponding period of the previous year.
Interest Rates
The average base rates of commercial banks, development banks and finance companies stood 7.61 percent, 9.28 percent and 10.75 percent respectively in the first month of 2024/25. The average base rate of commercial banks, development banks and finance companies were 10.11 percent, 11.87 percent and 13.28 percent respectively in the corresponding month a year ago.
Balance of Payments
Balance of Payments (BOP) remained at a surplus of Rs. 40.90 billion in the review period compared to a surplus of Rs. 36.43 billion in the same period of the previous year. In the US Dollar terms, the BOP remained at a surplus of 305.1 million in the review period compared to a surplus of 276.3 million in the same period of the previous year.
