Macroeconomic Snapshot of 9 Months: Inflation at 4.61%; Foreign Reserves Reach USD 14.36 Billion; Remittance Surges 19.8%
Nepal Rastra Bank, the central bank of Nepal, has unveiled the current macroeconomic and financial situation of Nepal based on the first nine month's data ending mid-April of 2023/24.
Overall
Nepal Rastra Bank estimated that the inflation remained at 4.61 percent on a y-o-y basis. The gross foreign exchange reserves stood at USD 14.36 billion, whereas, the total imports decreased 2.8 percent, exports decreased 3.7 percent and trade deficit decreased 2.8 percent.
As of mid-April 2024, the outstanding concessional loan remained at Rs.140.50 billion extended to 127,212 borrowers. Of which, Rs.94.85 billion has been extended to 49,648 borrowers for selected commercial agriculture and livestock businesses. Likewise, a Rs. 43.79 billion loan has been extended to 75,333 women entrepreneurs. A total of 2,231 borrowers have availed of Rs.1.85 billion in concessional loans in other specified sectors.
NEPSE index stood at 2025.71 in mid-April 2024 compared to 1934.48 in mid-April 2023.
Inflation
The y-o-y consumer price inflation moderated to 4.61 percent in mid-April 2024 compared to 7.76 percent a year ago.
The y-o-y wholesale price inflation stood at 4.94 percent in mid-April 2024 compared to 5.59 percent a year ago. The y-o-y wholesale price index of consumption goods, intermediate goods, and capital goods increased 9.64 percent, 2.88 percent, and 1.56 percent respectively. The y-o-y wholesale price index of construction materials decreased by 7.20 percent in the review month.
Import and Export
During the review period, merchandise exports decreased 3.7 percent to Rs.113.95 billion compared to a decrease of 26.3 percent in the same period of the previous year. Destination-wise, exports to India and other countries decreased 6.2 percent and 2.0 percent respectively, whereas exports to China increased 232 percent. Exports of zinc sheet, particle board, juice, polyester yarn and thread, and readymade garments among others increased whereas exports of palm oil, soyabean oil, woolen carpet, tea, and jute goods among others decreased.
During the nine months of 2023/24, merchandise imports decreased 2.8 percent to Rs.1167.37 billion compared to a decrease of 18.1 percent a year ago. Destination-wise, imports from India and other countries decreased by 3.2 percent and 22.6 percent respectively while imports from China increased by 33.4 percent. Imports of transport equipment, vehicle and other vehicle spare parts, readymade garments, aircraft spare parts, electrical equipment, and textiles among others have increased whereas imports of gold, crude soyabean oil, crude palm oil, petroleum products, and rice/paddy among others have decreased.
The total trade deficit decreased by 2.8 percent to Rs.1053.42 billion during the review period. Such a deficit had decreased by 17.1 percent in the corresponding period of the previous year. The export-import ratio remained at 9.8 percent in the review period same as in the corresponding period of the previous year.
Services and Remittance
Net services income remained at a deficit of Rs.52.23 billion in the review period compared to a deficit of Rs.63.91 billion in the same period of the previous year.
Remittance inflows increased 19.8 percent to Rs.1082.62 billion in the review period compared to an increase of 24.2 percent in the same period of the previous year. In US Dollar terms, remittance inflows increased 17.7 percent to 8.15 billion in the review period compared to an increase of 13.9 percent in the same period of the previous year.
Inter-bank Transaction
BFIs inter-bank transactions amounted to Rs.3508.04 billion on a turnover basis including Rs.3186.44 billion inter-bank transactions among commercial banks and Rs.321.60 billion among other financial institutions (excluding transactions among commercial banks). In the corresponding period of the previous year, such transactions was Rs.2982.69 billion including Rs. 2715.90 billion among commercial banks and Rs.266.79 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 7.6 percent to US dollar 93.12 per barrel in mid-April 2024 from US dollar 86.51 per barrel a year ago. The price of gold increased 17.2 percent to US dollar 2401.50 per ounce in mid-April 2024 from US dollar 2048.45 per ounce a year ago.
Foreign Exchange Reserves and Adequacy Indicator
Of the total foreign exchange reserves, reserves held by NRB increased 25.4 percent to Rs.1688.21 billion in mid-April 2024 from Rs.1345.78 billion in mid-July 2023. Reserves held by banks and financial institutions (except NRB) increased 15.5 percent to Rs.223.65 billion in mid-April 2024 from Rs.193.59 billion in mid-July 2023. The share of Indian currency in total reserves stood at 21.6 percent in mid-April 2024.
Based on the imports of nine months of 2023/24, the foreign exchange reserves of the banking sector are sufficient to cover the prospective merchandise imports of 15 months and merchandise and services imports of 12.5 months. The ratio of reserves-to-GDP, reserves-to-imports, and reserves-to-M2 stood at 33.5 percent, 104 percent, and 28.9 percent respectively in mid-April 2024. Such ratios were 28.8 percent, 83.0 percent, and 25.0 percent respectively in mid-July 2023.
Exchange Rate
Nepalese currency vis-à-vis the US dollar depreciated 1.23 percent in mid-April 2024 from mid-July 2023. It had depreciated 2.69 percent in the same period of the previous year. The buying exchange rate per US dollar stood at Rs.132.80 in mid-April 2024 compared to Rs.131.17 in mid-July 2023.
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.909.39 billion during the nine months of 2023/24. Compared to the growth of 18.7 percent in the last fiscal year, government expenditure decreased by 3.6 percent in the review period. The recurrent expenditure, capital expenditure and financial expenditure amounted to Rs.644.03 billion, Rs.97.38 billion, and Rs.167.99 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.748.04 billion. Revenue mobilization recorded a growth of 9.4 percent in the review period in contrast to a decrease of 13.4 percent in the same period of last fiscal year. The tax revenue amounted to Rs.671.12 billion and non-tax revenue Rs.76.93 billion in the review period.
Cash Balance of Government
Cash Balance at various accounts of the GoN maintained with NRB remained at Rs.313.72 billion (including Provincial Governments and Local Government Accounts) in mid-April 2024. Such balance was Rs.65.36 billion in mid-July 2023.
Banking
Domestic credit increased by 1.8 percent in the review period compared to an increase of 5.0 percent in the corresponding period of the previous year. On a y-o-y basis, domestic credit increased by 5.5 percent in mid-April 2024.
The Monetary Sector's claims on the private sector increased 5.2 percent in the review period compared to an increase of 4.3 percent in the corresponding period of the previous year. On a y-o-y basis, such claims increased by 5.4 percent in mid-April 2024.
Deposits at Banks and Financial Institutions (BFIs) increased Rs.409.04 billion (7.2 percent) in the review period compared to an increase of Rs.355.89 billion (7.0 percent) in the corresponding period of the previous year. On a y-o-y basis, deposits at BFIs expanded 12.5 percent in mid-April 2024.
Private sector credit from BFIs increased Rs.222.21 billion (4.6 percent) in the review period compared to an increment of Rs.161.98 billion (3.5 percent) in the corresponding period of the previous year. On a y-o-y basis, credit to the private sector from BFIs increased 4.9 percent in mid-April 2024.
Interest Rates
The average base rates of commercial banks, development banks, and finance companies stood at 8.51 percent, 10.41 percent, and 12.02 percent respectively in the ninth month of 2023/24. The average base rate of commercial banks was 10.48 percent in the corresponding month a year ago.
Balance of Payments
Balance of Payments (BOP) remained at a surplus of Rs.365.16 billion in the review period against a surplus of Rs.174.28 billion in the same period of the previous year. In the US Dollar terms, the BOP remained at a surplus of 2.75 billion in the review period against a surplus of 1.32 billion in the same period of the previous year.
