3 Months Macro Economic Indicators of FY 2023/24: Remittance Inflows Risen by 30%, Inflation at 7.5%

Nepal Rastra Bank, the central bank of Nepal, has unveiled the current macroeconomic and financial situation of Nepal based on the first three month's data ending mid-October of 2023/24.

Overall

Nepal Rastra Bank estimated that the inflation remained at 7.50 percent on a y-o-y basis. The gross foreign exchange reserves stood at USD 12.33 billion, whereas, the total imports increased 1.7 percent, exports decreased 2.3 percent and trade deficit increased 2.1 percent.

As of mid-October 2023, the outstanding concessional loan remained at Rs.187.88 billion extended to 142,305 borrowers. Of this, Rs.131.1 billion has been extended to 58,570 borrowers for selected commercial agriculture and livestock businesses. Likewise, a Rs.54.03 billion loan has been extended to 81,121 women entrepreneurs. A total of 2,614 borrowers have availed of Rs.2.76 billion in concessional loans in other specified sectors.

NEPSE index stood at 1864.62 in mid-October 2023 compared to 1858.33 in mid-October 2022.

Inflation

The y-o-y consumer price inflation stood at 7.50 percent in mid-October 2023 compared to 8.50 percent a year ago.

The y-o-y wholesale price inflation stood at 2.78 percent in mid-October 2023 compared to 13.73 percent a year ago. The y-o-y wholesale price index of consumption goods, intermediate goods, and capital goods increased 5.30 percent, 1.32 percent, and 2.97 percent respectively. The y-o-y wholesale price of construction materials decreased by 0.34 percent in the review month.

Import and Export

During the review period, merchandise exports decreased 2.3 percent to Rs.40.87 billion compared to a decrease of 35.7 percent in the same period of the previous year. Destination-wise, exports to India decreased by 9.4 percent whereas exports to China and other countries increased by 345.9 percent and 9.5 percent respectively. Exports of zinc sheet, particle board, juice, cardamom, polyester yarn & thread, among others increased whereas exports of palm oil, soyabean oil, jute goods, woolen carpet, and rosin, among others decreased.

During the three months of 2023/24, merchandise imports increased 1.7 percent to Rs.407.76 billion compared to a decrease of 16.2 percent a year ago. Destination-wise, imports from India and China increased by 2.4 percent and 42.4 percent respectively while imports from other countries decreased by 22.8 percent. Imports of readymade garments, M.S. wire rods, bars, and coils, chemical fertilizer, electrical equipment, and textiles, among others, increased whereas imports of crude soyabean oil, crude palm oil, petroleum products, gold, M.S. billet, among others decreased.

The total trade deficit increased 2.1 percent to Rs.366.88 billion during the review period. Such a deficit had decreased by 13.1 percent in the corresponding period of the previous year. The export-import ratio decreased to 10.0 percent in the review period from 10.4 percent in the corresponding period of the previous year.

Services and Remittance

Net services income remained at a deficit of Rs.29.56 billion in the review period compared to a deficit of Rs.23.74 billion in the same period of the previous year.

Remittance inflows increased 30.0 percent to Rs.365.34 billion in the review period compared to an increase of 16.8 percent in the same period of the previous year. In US Dollar terms, remittance inflows increased 25.9 percent to 2.76 billion in the review period compared to an increase of 7.9 percent in the same period of the previous year.

Inter-bank Transaction

BFI interbank transactions amounted to Rs.1494.08 billion on a turnover basis including Rs. 1309.73 billion inter-bank transactions among commercial banks and Rs.184.35 billion among other financial institutions (excluding transactions among commercial banks). In the corresponding period of the previous year, such transactions were Rs.941.61 billion including Rs.856.02 billion among commercial banks and Rs.85.58 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 1.6 percent to US dollar 92.52 per barrel in mid-October 2023 from US dollar 91.04 per barrel a year ago. The price of gold increased 15.8 percent to US dollar 1928.20 per ounce in mid-October 2023 from US dollar 1664.75 per ounce a year ago.

Foreign Exchange Reserves and Adequacy Indicators

Gross foreign exchange reserves increased 6.7 percent to Rs.1643.09 billion in mid-October 2023 from Rs.1539.36 billion in mid-July 2023. In US dollar terms, the gross foreign exchange reserves increased 5.3 percent to 12.33 billion in mid-October 2023 from 11.71 billion in mid-July 2023.

Of the total foreign exchange reserves, reserves held by NRB increased 6.5 percent to Rs.1433.36 billion in mid-October 2023 from Rs.1345.78 billion in mid-July 2023. Reserves held by banks and financial institutions (except NRB) increased 8.3 percent to Rs.209.73 billion in mid-October 2023 from Rs.193.59 billion in mid-July 2023. The share of Indian currency in total reserves stood at 22.0 percent in mid-October 2023.

Based on the imports of three months of 2023/24, the foreign exchange reserves of the banking sector are sufficient to cover the prospective merchandise imports of 12.4 months and merchandise and services imports of 10.3 months. The ratio of reserves to-GDP, reserves-to-imports, and reserves-to-M2 stood at 30.5 percent, 85.7 percent, and 26.0 percent respectively in mid-October 2023. Such ratios were 28.6 percent, 83.0 percent, and 25.1 percent respectively in mid-July 2023.

Exchange Rate

Nepalese currency vis-à-vis the US dollar depreciated 1.34 percent in mid-October 2023 from mid-July 2023. It had depreciated 3.01 percent in the same period of the previous year. The buying exchange rate per US dollar stood at Rs.132.95 in mid-October 2023 compared to Rs.131.17 in mid-July 2023.

According to the Financial Comptroller General Office, the total expenditure of the Nepal Government stood at Rs.280.57 billion during the three months of 2023/24. The recurrent expenditure, capital expenditure, and financial expenditure amounted to Rs.213.39 billion, Rs.17.83 billion, and Rs.49.35 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.219.12 billion. The tax revenue amounted to Rs.199.46 billion and the nontax revenue was Rs.19.65 billion.

Banking

Domestic credit increased 1.7 percent in the review period compared to an increase of 1.5 percent in the corresponding period of the previous year. On a y-o-y basis, domestic credit increased 8.9 percent in mid-October 2023.

Monetary Sector's claims on the private sector increased by 2.7 percent in the review period compared to an increment of 1.6 percent in the corresponding period of the previous year. On a y-o-y basis, such claims increased by 5.6 percent in mid-October 2023.

Interest Rates

The average base rates of commercial banks, development banks, and finance companies stood at 9.94 percent, 12.30 percent, and 13.65 percent respectively in the third month of 2023/24. The average base rate of commercial banks was 10.34 percent in the corresponding month a year ago.

Balance of Payments

Balance of Payments (BOP) remained at a surplus of Rs.99.07 billion in the review period against a surplus of Rs.12.43 billion in the same period of the previous year. In US Dollar terms, the BOP remained at a surplus of 747.2 million in the review period against a surplus of 91.8 million in the same period of the previous year.