Eight Months Macro Economic Indicators of FY 2023/24: Remittance Inflows Risen by 21%, Inflation at 4.82%

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

Overall

Nepal Rastra Bank estimated that the inflation remained at 4.82 percent on a y-o-y basis. The gross foreign exchange reserves stood at USD 14.14 billion, whereas, the total imports decreased 2.7 percent, exports decreased 4.0 percent and trade deficit decreased 2.5 percent.

As of mid-March 2024, the outstanding concessional loan remained Rs. 149.30 billion extended to 130,844 borrowers. Of this, Rs.100.77 billion has been extended to 51,405 borrowers for selected commercial agriculture and livestock businesses. Likewise, a Rs.46.48 billion loan has been extended to 76,975 women entrepreneurs. A total of 2,464 borrowers have availed of Rs.2.05 billion in concessional loans in other specified sectors.

NEPSE index stood at 2108.73 in mid-March 2024 compared to 1953.06 in mid-March 2023.

Inflation

The y-o-y consumer price inflation moderated to 4.82 percent in mid-March 2024 compared to 7.44 percent a year ago

The y-o-y wholesale price inflation stood at 3.69 percent in mid-March 2024 compared to 7.10 percent a year ago. The y-o-y wholesale price index of consumption goods, intermediate goods, and capital goods increased by 7.44 percent, 1.97 percent, and 1.63 percent respectively. The y-o-y wholesale price index of construction materials decreased by 5.69 percent in the review month.

Import and Export

During the review period, merchandise exports decreased 4.0 percent to Rs.100.62 billion compared to a decrease of 29.1 percent in the same period of the previous year. Destination-wise, exports to India decreased by 7.7 percent whereas exports to China and other countries increased by 275.5 percent and 0.3 percent respectively. Exports of zinc sheet, particle board, juice, readymade garments, polyester, and thread among others increased whereas exports of palm oil, soyabean oil, cardamom, woolen carpet, and brans among others decreased.

During the eight months of 2023/24, merchandise imports decreased 2.7 percent to Rs.1030.22 billion compared to a decrease of 19.1 percent a year ago. Destination-wise, imports from India and other countries decreased by 2.8 percent and 22.9 percent respectively while imports from China increased by 33.7 percent. Imports of readymade garments, transport equipment, vehicles, and other vehicle spare

The total trade deficit decreased by 2.5 percent to Rs.929.61 billion during the review period. Such a deficit had decreased by 17.9 percent in the corresponding period of the previous year. The export-import ratio decreased to 9.8 percent in the review period from 9.9 percent in the corresponding period of the previous year.

Services and Remittance

Net services income remained at a deficit of Rs.44.82 billion in the review period compared to a deficit of Rs.55.91 billion in the same period of the previous year.

Remittance inflows increased 21.0 percent to Rs.961.22 billion in the review period compared to an increase of 25.3 percent in the same period of the previous year. In the US Dollar terms, remittance inflows increased 18.8 percent to 7.24 billion in the review period compared to an increase of 14.8 percent in the same period of the previous year.

Inter-bank Transaction

BFIs inter-bank transactions amounted Rs.3189.35 billion on a turnover basis including Rs.2894.94 billion inter-bank transactions among commercial banks and Rs.294.41 billion among other financial institutions (excluding transactions among commercial banks). In the corresponding period of the previous year, such transactions were Rs.2608.92 billion including Rs. 2371.67 billion among commercial banks and Rs.237.25 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 9.4 percent to US dollar 83.95 per barrel in mid-March 2024 from US dollar 76.77 per barrel a year ago. The price of gold increased 13.7 percent to US dollar 2168.40 per ounce in mid-March 2024 from US dollar 1907.55 per ounce a year ago. 

Foreign Exchange Reserves and Adequacy Indicator

Gross foreign exchange reserves increased 21.7 percent to Rs.1872.82 billion in mid-March 2024 from Rs.1539.36 billion in mid-July 2023. In US dollar terms, the gross foreign exchange reserves increased 20.8 percent to 14.14 billion in mid-March 2024 from 11.71 billion in mid-July 2023.

Based on the imports of eight months of 2023/24, the foreign exchange reserves of the banking sector are sufficient to cover the prospective merchandise imports of 14.8 months and merchandise and services imports of 12.4 months. The ratio of reserves-to-GDP, reserves-to-imports, and reserves-to-M2 stood at 34.8 percent, 103.1 percent, and 28.2 percent respectively in mid-March 2024. Such ratios were 28.6 percent, 83.0 percent, and 25.0 percent respectively in mid-July 2023.

Exchange Rate

Nepalese currency vis-à-vis the US dollar depreciated 0.73 percent in mid-March 2024 from mid-July 2023. It had depreciated 2.74 percent in the same period of the previous year. The buying exchange rate per US dollar stood at Rs.132.14 in mid-March 2024 compared to Rs.131.17 in mid-July 2023.

Nepal Government Expenditure and Revenue

According to the Ministry of Finance, Financial Comptroller General Office (FCGO), the total expenditure of the Nepal Government stood at Rs.801.58 billion during the eight months of 2023/24. Compared to the growth of 15.4 percent in the last fiscal year, government expenditure increased by 2.9 percent in the review period. The recurrent expenditure, capital expenditure and financial expenditure amounted to Rs.582.11 billion, Rs.81.21 billion, and Rs.138.26 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.639.05 billion. Revenue mobilization recorded a growth of 9.7 percent in the review period in contrast to a decrease of 14.9 percent in the same period of last fiscal year. The tax revenue amounted to Rs.578.67 billion and the nontax revenue was Rs.60.37 billion in the review period.

Cash Balance of Government

Cash Balance at various accounts of the GoN maintained with NRB remained at Rs.204.96 billion (including Provincial Governments and Local Government Accounts) in mid-March 2024. Such balance was Rs.65.36 billion in mid-July 2023.

Banking

Domestic credit increased 4.0 percent in the review period compared to an increase of 4.5 percent in the corresponding period of the previous year. On a y-o-y basis, domestic credit increased 8.4 percent in mid-March 2024.

The Monetary Sector's claims on the private sector increased by 5.6 percent in the review period compared to an increase of 4.6 percent in the corresponding period of the previous year. On y-o-y basis, such claims increased 5.7 percent in mid-March 2024.

Deposits at Banks and Financial Institutions (BFIs) increased Rs.435.87 billion (7.6 percent) in the review period compared to an increase of Rs.280.57 billion (5.5 percent) in the corresponding period of the previous year. On a y-o-y basis, deposits at BFIs expanded 14.6 percent in mid-March 2024.

Private sector credit from BFIs increased Rs.199.50 billion (4.2 percent) in the review period compared to an increment of Rs.128.18 billion (2.8 percent) in the corresponding period of the previous year. On a y-o-y basis, credit to the private sector from BFIs increased 5.2 percent in mid-March 2024.

Interest Rates

The average base rates of commercial banks, development banks, and finance companies stood at 8.77 percent, 10.71 percent, and 12.33 percent respectively in the eighth month of 2023/24. The average base rate of commercial banks was 10.64 percent in the corresponding month a year ago.

Balance of Payments

Balance of Payments (BOP) remained at a surplus of Rs.327.55 billion in the review period against a surplus of Rs.142 billion in the same period of the previous year. In the US Dollar terms, the BOP remained at a surplus of 2.46 billion in the review period against a surplus of 1.08 billion in the same period of the previous year.