Quick Summary: Nepal's Economic Performance in the First Four Months of Fiscal Year 2077/78

The central bank has published macro-economic data based on the first four month's data of FY 2077/78. The report covers major details on inflation, trade, services, remittance, BOP position, foreign exchange reserves, fiscal deficit, surplus, expenditure, revenue, money supply, deposit, credit liquidity, interest rates, and the capital market.

Some of the major highlights from the reports are:

Inflation: The y-o-y consumer price inflation stood at 4.05 percent in the fourth month of 2020/21 compared to 5.76 percent a year ago. Food and beverage inflation stood at 5.73 percent whereas non-food and service inflation stood at 2.75 percent in the review month.

Nonetheless, The price of the vegetable sub-group rose 20.88 percent, and the pulses and legumes sub-group rose 13.70 percent on a y-o-y basis.

Import and export: In four months of 2020/21, merchandise exports increased 10.8 percent to Rs.40.20 billion compared to an increase of 23.9 percent in the same period of the previous year. Destination-wise, exports to India and other countries increased 14.9 percent and 6.5 percent respectively whereas exports to China decreased 59.2 percent.

In four months of 2020/21, merchandise imports decreased 10.6 percent to Rs.402.49 billion compared to a decrease of 6.9 percent a year ago. Destination-wise, imports from India, China, and other countries decreased by 3.1 percent, 25.0 percent, and 19.8 percent respectively.

The total trade deficit narrowed down 12.5 percent to Rs.362.29 billion in four months of 2020/21. Such deficit had contracted 8.9 percent in the same period of the previous year. The export-import ratio increased to 10.0 percent in the review period from 8.1 percent in the same period of the previous year.

Services: Net services income remained at a deficit of Rs.15.64 billion in the review period compared to a deficit of Rs.2.49 billion in the same period of the previous year.

Remittance: Remittance inflows increased 11.2 percent to Rs.337.72 billion in the review period against a decrease of 2.8 percent in the same period of the previous year. In the US Dollar terms, remittance inflows increased 6.4 percent to 2.85 billion in the review period against a decrease of 1.9 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 decreased 75.8 percent to 19251 in the review period. It had increased by 5.6 percent in the same period of the previous year. The number of Nepali workers (Renew entry) taking approval for foreign employment decreased 67.9 percent to 25931 in the review period. It had increased by 9.1 percent in the same period of the previous year.

BOP position: Balance of Payments (BOP) registered a surplus of Rs.110.65 billion in the review period. Such surplus was Rs.27.29 billion in the same period of the previous year. In the US Dollar terms, the BOP recorded a surplus of 931.7 million in the review period compared to a surplus of 240.8 million in the same period of the previous year.

Exchange rate: Nepalese currency vis-à-vis the US Dollar appreciated 1.1 percent in mid-November 2020 from mid-July 2020. It had depreciated 4.5 percent in the same period of the previous year. The buying exchange rate per US Dollar stood at Rs.119.07 in mid-November 2020 compared to Rs.120.37 in mid-July 2020.

Government expenditure and revenue: In the review period, the total expenditure of the federal government based on banking transactions (excluding direct payments and unrealized cheques) stood at Rs.250.41 billion. Such expenditure was Rs.219.17 billion in the corresponding period of the previous year.

Similarly, in the review period, revenue collection based on banking transactions (including the amount to be transferred to provincial and local governments) stood at Rs.240.15 billion. Total government revenue was Rs.275.02 billion in the corresponding period of the previous year.

Fiscal Deficit/ Surplus: Fiscal position of the government, based on banking transactions, remained at a deficit of Rs.10.23
billion in the review period compared to a surplus of Rs.65.92 billion in the corresponding period of the previous year.

Banking:

-Deposit collection and Credit distribution: Deposits at Banks and Financial Institutions (BFIs) increased 5 percent in the review period compared to a growth of 3.1 percent in the corresponding period of the previous year. On a y-o-y basis, deposits
at BFIs expanded 20.8 percent in mid-November 2020.

Private sector credit from BFIs increased 4.9 percent in the review period compared to a growth of 5 percent in the corresponding period of the previous year. On a y-o-y basis, credit to the private sector from BFIs increased 11.8 percent in mid-November 2020.

-Liquidity management: In the review period, NRB mopped up Rs.90 billion liquidity including Rs.60 billion through reverse repo auction and Rs.30 billion through deposit collection instrument. Rs.30 billion liquidity was mopped up in the corresponding period of the previous year. Rs.90.07 billion liquidity was injected including Rs.39.52 billion through repo and Rs.50.55 billion through standing liquidity facility (SLF) in the corresponding period of the previous year.

In the review period, NRB injected liquidity of Rs.201.06 billion through the net purchase of USD 1.70 billion from the foreign exchange market. Liquidity of Rs.136.56 billion was injected through the net purchase of USD 1.20 billion in the corresponding period of the previous year.

The NRB purchased Indian currency (INR) equivalent to Rs.144.69 billion through the sale of USD 1.22 billion in the review period. INR equivalent to Rs.160.96 billion was purchased through the sale of USD 1.42 billion in the corresponding period of the previous year.

-Interest rates: The average base rate of commercial banks decreased to 7.57 percent in mid-November 2020 from 9.50 percent a year ago. Weighted average deposit rate and lending rate of commercial banks stood at 5.31 percent and 9.52 percent respectively in mid-November 2020. Such rates were 6.81 percent and 12.07 percent respectively a year ago.