Macroeconomic Summary of First 6 Months: Inflation at 5.41%, Remittances Rises by 4.1%, Foreign Currency Enough to Cover 14.4 Months Import
Nepal Rastra Bank, the central bank of Nepal, has unveiled the current macroeconomic and financial situation of Nepal based on the six months' data for FY 2024/25.
Overall
Nepal Rastra Bank estimated that the inflation remained at 5.41 percent on a y-o-y basis. The gross foreign exchange reserves stood at 16.84 billion in USD terms, whereas, the total imports and exports increased 7.1 percent and 31.8 percent respectively.
NEPSE index stood at 2594.13 in mid-January 2025 compared to 2120.62 in mid-January 2024.
Inflation
The y-o-y consumer price inflation stood at 5.41 percent in mid-January 2025 compared to 5.26 percent a year ago.
The y-o-y wholesale price inflation stood at 4.01 percent in mid-January 2025 compared to 3.36 percent a year ago. The y-o-y wholesale price of consumption goods, intermediate goods, and capital goods increased 6.92 percent, 2.55 percent, and 3.14 percent respectively. The y-o-y wholesale price of construction materials decreased by 4.28 percent in the review month.
Import and Export
During the six months of 2024/25, merchandise exports increased 31.8 percent to Rs.98.79 billion against a decrease of 7.2 percent in the same period of the previous year. Destination-wise, exports to India, China and other countries increased 46.1 percent, 19.7 percent and 1.0 percent respectively. Exports of soyabean oil, tea, polyster yarn and thread, particle board, cardamom, among others increased whereas exports of palm oil, zinc sheet, ginger, readymade garments, herbs, among others decreased in the review period.
During the six months of 2024/25, merchandise imports increased 7.1 percent to Rs.822.37 billion against a decline of 3.1 percent a year ago. Destination-wise, imports from India, China and other countries increased 5.9 percent, 8.9 percent and 9.0 percent respectively. Imports of crude soyabean oil, rice/paddy, transport equipment, vehicle and other vehicle spare parts, sponge iron, edible oil, among others increased whereas imports of petroleum products, crude palm oil, gold, chemical fertilizer, peas, among others decreased in the review period.
The total trade deficit increased 4.4 percent to Rs.723.58 billion during the six months of 2024/25. Such a deficit had decreased 2.6 percent in the corresponding period of the previous year. The export-import ratio increased to 12.0 percent in the review period from 9.8 percent in the corresponding period of the previous year.
Services and Remittance
Net services income remained at a deficit of Rs.43.53 billion in the review period compared to a deficit of Rs.35.43 billion in the same period of the previous year.
Remittance inflows increased 4.1 percent to Rs.763.08 billion in the review period compared to an increase of 22.2 percent in the same period of the previous year. In the US Dollar terms, remittance inflows increased 1.1 percent to 5.58 billion in the review period compared to an increase of 19.5 percent in the same period of the previous year.
Inter-bank Transaction
In the review period, BFIs inter-bank transactions amounted Rs. 837.98 billion on a turnover basis, including Rs. 745.91 billion inter-bank transactions among commercial banks, and Rs.92.07 billion among other financial institutions (excluding transactions among commercial banks). In the corresponding period of the previous year, such transaction was Rs.2574.20 billion, including Rs.2316.98 billion among commercial banks and Rs.257.22 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 3.5 percent to US dollar 82.69 per barrel in mid-January 2025 from US dollar 79.89 per barrel a year ago. The price of gold increased 29.86 percent to US dollar 2669.50 per ounce in mid-January 2025 from US dollar 2055.65 per ounce a year ago.
Foreign Exchange Reserves and Adequacy Indicator
Gross foreign exchange reserves increased 13.5 percent to Rs.2316.84 billion in mid-January 2025 from Rs.2041.10 billion in mid-July 2024. In the US dollar terms, the gross foreign exchange reserves increased 10.3 percent to 16.84 billion in mid-January 2025 from 15.27 billion in mid-July 2024.
Of the total foreign exchange reserves, the reserves held by NRB increased 12.1 percent to Rs. 2072.34 billion in mid-January 2025 from Rs.1848.55 billion in mid- July 2024. Reserves held by banks and financial institutions (except NRB) increased 27.0 percent to Rs.244.50 billion in mid-January 2025 from Rs.192.55 billion in mid-July 2024. The share of Indian currency in total reserves stood at 24.3 percent in mid-January 2025.
Based on the imports of six months of 2024/25, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 17.3 months, and merchandise and services imports of 14.4 months. The ratio of reserves-to-GDP, reserves-to-imports and reserves- to-M2 stood at 40.6 percent, 120.3 percent and 32.0 percent respectively in mid-January 2025. 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 2.83 percent in mid-January 2025 from mid- July 2024. It had depreciated 0.91 percent in the same period of the previous year. The buying exchange rate per US dollar stood at Rs.137.25 in mid-January 2025 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.667.60 billion during six months of FY 2024/25. The recurrent expenditure, capital expenditure and financial expenditure amounted to Rs.452 billion, Rs.56.94 billion and
Rs.158.66 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.399.60 billion. The total revenue comprises of tax revenue amounting Rs.362.58 billion and non tax revenue Rs.37.02 billion in the review period.
Cash Balance of Government
Cash Balance at various accounts of the GoN maintained with NRB remained Rs.297.70 billion (including Provincial Governments and Local Government Account) in mid-January 2025. Such balance was Rs.83.99 billion in mid-July 2024.
Banking
Domestic credit increased 1.2 percent in the review period compared to an increase of 2.6 percent in the corresponding period of the previous year. On y-o-y basis, domestic credit increased 4.8 percent in mid-January 2025.
Monetary Sector's claims on the private sector increased 5.4 percent in the review period compared to an increase of 4.5 percent in the corresponding period of the previous year. On y-o-y basis, such claims increased 6.9 percent in mid-January 2025.
Deposits at Banks and Financial Institutions (BFIs) increased Rs.239.06 billion (3.7 percent) in the review period compared to an increase of Rs.377.07 billion (6.6 percent) in the corresponding period of the previous year. On y-o-y basis, deposits at BFIs expanded 9.9 percent in mid-January 2025.
Private sector credit from BFIs increased Rs.265.56 billion (5.2 percent) in the review period compared to an increase of Rs.192.64 billion (4.0 percent) in the corresponding period of previous year. On y-o-y basis, credit to the private sector from BFIs increased 7.0 percent in mid-January 2025.
Interest Rates
The average base rates of commercial banks, development banks and finance companies stood 6.65 percent, 8.61 percent and 9.50 percent respectively in the sixth month of 2024/25. The average base rate of commercial banks, development banks and finance companies were 9.35 percent, 11.49 percent and 12.77 percent respectively in the corresponding month a year ago.
Balance of Payments
Balance of Payments (BOP) remained at a surplus of Rs. 249.26 billion in the review period compared to a surplus of Rs. 273.52 billion in the same period of the previous year. In the US Dollar terms, the BOP remained at a surplus of 1.82 billion in the review period compared to a surplus of 2.06 billion in the same period of the previous year.
