Central Bank Unveils Current Macroeconomic and Financial Situation of Nepal Based on Annual Data of 2020/21

Nepal Rastra Bank, the central bank of Nepal, has unveiled the current macroeconomic and financial situation of Nepal based on annual data of 2020/21.

Overalls

The Central Bureau of Statistics has estimated the Gross Domestic Product growth of 4.01 percent for 2020/21. Agriculture, industry, and service sectors are estimated to have grown 2.64 percent, 5.05 percent, and 4.43 percent respectively. The share of agriculture, industry, and service sectors in GDP stands 25.83 percent, 13.11 percent, and 61.06 percent respectively in 2020/21

The installed capacity of hydroelectricity increased to 1458 Megawatt in 2020/21. According to National Reconstruction Authority, reconstruction of 74.2 percent and 93.5 percent of private houses and government buildings, respectively, have been completed by the end of 2020/21.

Meanwhile, the total number of tourist arrivals decreased 90.9 percent to 70123 in 2020/21.

Inflation

The average consumer price inflation stood at 3.60 percent in 2020/21 compared to 6.15 percent a year ago. The y-o-y consumer price inflation stood at 4.19 percent in mid-July 2021 compared to 4.78 percent a year ago. The y-o-y consumer price inflation in Nepal in the twelfth month of 2020/21 remained 4.19 percent. Such inflation in India was 5.59 percent in July 2021.

Import and Export

During 2020/ 21, merchandise exports increased 44.4 percent to Rs.141.12 billion compared to an increase of 0.6 percent in the previous year. Destination-wise, exports to India and other countries increased 51.7 percent and 27.7 percent respectively whereas exports to China decreased 14.7 percent. Exports of soyabean oil, cardamom, polyester yarn and threads, jute goods, woollen carpet, among others, increased whereas exports of palm oil, pulses, zinc sheet, wire, cattle feed, among others, decreased in the review period.

During 2020/21, merchandise imports increased 28.7 percent to Rs.1539.84 billion against a decrease of 15.6 percent a year ago. Destination-wise, imports from India, China, and other countries increased 32.1 percent, 28.6 percent, and 19.6 percent respectively. Imports of transport equipment & parts, crude soyabean oil, M.S. billet, rice, gold, among others, increased whereas imports of aircraft spare parts, crude palm oil, video television and parts, cold-rolled sheet in coil, betelnut, among others, decreased in the review period.

The total trade deficit increased 27.3 percent to Rs.1398.71 billion during 2020/21. Such a deficit had decreased 16.8 percent in the previous year. The export-import ratio increased to 9.2 percent in the review period from 8.2 percent in the previous year.

Services and Remittance

Net services income remained at a deficit of Rs.72.85 billion in the review year compared to a deficit of Rs.964.7 million in the previous year. Under the service account, travel income decreased 88.1 percent to Rs.7.27 billion in the review year which was Rs.60.89 billion in the previous year.

Remittance inflows increased 9.8 percent to Rs.961.05 billion in the review year against a decrease of 0.5 percent in the previous year. In the US Dollar terms, remittance inflows increased 8.2 percent to 8.15 billion in the review year against a decrease of 3.3 percent in the previous year. The number of Nepali workers (institutional and individual-new and legalized) taking approval for foreign employment decreased 62.8 percent in the review year. It had decreased 20.5 percent in the previous year. The number of Nepali workers (Renew entry) taking approval for foreign employment decreased 46.8 percent in the review year. It had decreased 34.7 percent in the previous year.

International Investment Position (IIP)

Foreign assets and liabilities of the country stood at Rs.1481.12 billion and Rs.1395.04 billion respectively in mid-July 2021. Accordingly, net IIP remained at a surplus of Rs.86.08 billion in mid-July 2021. Such a surplus was Rs.248.67 billion in mid-July 2020.

Price of Oil and Gold

The price of oil (Crude Oil Brent) in the international market increased 69.5 percent to US Dollar 74.53 per barrel in mid-July 2021 from US Dollar 43.96 per barrel a year ago. The price of gold increased 1.1 percent to US Dollar 1823.75 per ounce in mid-July 2021 from US Dollar 1804.60 per ounce a year ago.

Exchange Rate

Nepalese currency vis-à-vis the US Dollar appreciated 1.1 percent in mid-July 2021 from mid-July 2020. It had depreciated 9.1 percent in the previous year. The buying exchange rate per US Dollar stood at Rs.119.04 in mid-July 2021 compared to Rs.120.37 in mid-July 2020.

Fiscal Situation (Based on data reported by Banking Department of NRB and Commercial Banks conducting government transactions and report released from 81 DTCOs and payment centers.)

The fiscal position of the Government, based on banking transactions, remained at a deficit of Rs.267.97 billion in 2020/21 compared to a deficit of Rs.267.45 billion a year ago. The total expenditure of the federal government according to Financial Comptroller General Office (FCGO), Ministry of Finance amounted to Rs.1180.95 billion in 2020/21 compared to Rs.1091.33 billion a year ago. The recurrent expenditure, capital expenditure, and financing expenditure of the federal government amounted to Rs.851.68 billion, Rs.228.30 billion, and Rs.100.97 billion respectively in 2020/21.

Revenue collection (including the amount to be transferred to provincial and local governments) stood at Rs.938.32 billion in 2020/21. Total government revenue was Rs.793.75 a year ago. Total resource mobilization (including revenue and other receipts) of the federal government stood at Rs.978.74 billion in 2020/21.

Banking

Domestic credit increased 26.8 percent in the review year compared to a growth of 13.6 percent in the previous year. Deposits at Banks and Financial Institutions (BFIs) increased 21.4 percent in the review year compared to a growth of 18.7 percent in the previous year. Private sector credit from BFIs increased 27.3 percent in the review year compared to a growth of 12 percent in the previous year.

Interest Rates

The average base rate of commercial banks decreased to 6.86 percent in the review month (mid-June to mid-July) of 2021from 8.50 percent a year ago. The weighted average deposit rate and lending rate of commercial banks stood at 4.65 percent and 8.43 percent respectively in the review month. Such rates were 6.01 percent and 10.11 percent respectively a year ago.