Current Macroeconomic and Financial Situation of Nepal | Mid May 2020/21

Major Highlights of Macroeconomic situation and Financial situation of Nepal issued by Nepal Rastra Bank on 14th June 2021 are as follows:

Inflation

CPI-based Inflation remained 3.65 percent on y-o-y basis. The y-o-y consumer price inflation stood at 3.65 percent in the tenth month of 2020/21 compared to 5.83 percent a year ago. This shows that the inflation is in decreasing trend.

The y-o-y wholesale price inflation stood at 8.05 percent in the review month compared to 5.16 percent a year ago. The wholesale price of construction materials increased 8.44 percent in the review month.

Import & Export
Imports increased 22.3 percent and exports increased 32.2 percent. Imports of transport equipment & parts, crude soyabean oil, M.S. billet, rice, telecommunication equipment and parts, among others, increased whereas imports of aircraft spare parts, crude palm oil, petroleum products, video television and parts, silver, among others, decreased in the review period.

Total trade deficit increased by 21.5 percent to Rs.1145.63 billion during the ten months of 2020/21. Such a deficit had decreased 14.2 percent in the same period of the previous year.

Net services income remained at a deficit of Rs.54.71 billion in the review period compared to a surplus of Rs.788.2 million in the same period of the previous year. Under the service account, travel income decreased by 89.2 percent to Rs.6.20 billion in the review period which was Rs.57.57 billion in the same period of the previous year.

Remittances

Remittance inflows increased 19.2 percent to Rs.809.89 billion in the review period against a decrease of 6.3 percent in the same period of the previous year. In the US Dollar terms, remittance inflows increased 16.1 percent to 6.87 billion in the review period against a decrease of 7.6 percent in the same period of the previous year. 

Current Account & Balance of Payments

The current account remained at a deficit of Rs.247.08 billion in the review period compared to a deficit of Rs.96.18 billion in the same period of the previous year. 

Balance of Payments (BOP) registered a surplus of Rs.7.75 billion in the review period as compared to a surplus of Rs.120.90 billion in the same period of the previous year.

Foreign Exchange Reserve

Gross foreign exchange reserves stood at USD 11.87 billion. Federal Government spending amounted to Rs.824.81 billion and revenue collection Rs.761.00 billion. 
Broad money (M2) expanded 15.4 percent. On y-o-y basis, M2 expanded 23.4 percent. 
Deposits at BFIs increased 14.3 percent and claims on the private sector increased 23.6 percent. On y-o-y basis, deposits increased 22.2 percent and claims on the private sector 23.1 percent.

Deposit Mobilization

Deposits at Banks and Financial Institutions (BFIs) increased 14.3 percent in the review period compared to a growth of 11.0 percent in the corresponding period of the previous year. On y-o-y basis, deposits at BFIs expanded 22.2 percent in mid-May 2021.

Credit Disbursement

Private sector credit from BFIs increased 23.8 percent in the review period compared to a growth of 11.1 percent in the corresponding period of previous year. On y-o-y basis, credit to the private sector from BFIs increased 24.8 percent in mid May 2021.

In the review period, term loan extended by BFIs increased 24.6 percent, overdraft 27.7 percent, demand and working capital loan 20.8 percent, real estate loan (including residential personal home loan) 11.4 percent, margin nature loan 87.2 percent and trust receipt (import) loan 46.5 percent while that of hire purchase loan decreased 5.4 percent.

Liquidity Management

In the review period, NRB mopped up Rs.303.29 billion liquidity of which Rs.109.54 billion was through reverse repo auction and Rs.193.75 billion through deposit collection. In the corresponding period of the previous year, Rs.58 billion liquidity was mopped up consisting of Rs.28 billion through reverse repo auction and Rs.30 billion through deposit collection.

In the review period, NRB injected Rs. 100.37 billion liquidity of which Rs.25.68 billion was through repo and Rs. 74.69 billion through standing liquidity facility (SLF). In the corresponding period of the previous year, Rs.216.45 billion liquidity was injected of which Rs.115.87 billion was through repo and Rs.100.58 billion through standing liquidity facility (SLF).

In the review period, NRB injected liquidity of Rs.356.93 billion through the net purchase of USD 3.02 billion from foreign exchange market. Liquidity of Rs.346.65 billion was injected through the net purchase of USD 3 billion in the corresponding period of the previous year.

The NRB purchased Indian currency (INR) equivalent to Rs.464.34 billion through the sale of USD 3.94 billion in the review period. INR equivalent to Rs.364.74 billion was purchased through the sale of USD 3.18 billion in the corresponding period of previous year.

Capital Market

NEPSE index stood at 2684.1 in mid-May 2021 compared to 1201.6 in mid-May 2020. Such an index was 1362.4 in mid-July 2020. Stock market capitalization stood Rs.3724.55 billion in mid-May 2021 compared to Rs.1792.76 billion in mid-July 2020.

Securities worth Rs.327.40 billion were listed at NEPSE during the ten months of 2020/21. Such securities comprise government development bond worth Rs.219.95 billion, ordinary share worth Rs.41.33 billion, bonus shares worth Rs.43.20 billion, debenture worth Rs.14.55 billion, right share worth Rs.5.52 billion and mutual fund worth Rs.2.85 billion.