First 5 Months Macro Economic Indicators of FY 2022/23: Remittance Inflows Increased by 23% To Rs 480 Billion, Total Foreign Exchange Reserves Cover Almost 10 Months of Import

Nepal Rastra Bank (NRB), the central bank of Nepal, has unveiled the current macroeconomic and financial situation of Nepal based on five months’ data ending mid-December, 2022/23)

Overall

The Nepal Rastra Bank estimated that the inflation remained at 7.38 percent on a y-o-y basis. The gross foreign exchange reserves stood at USD 9.82 billion, whereas, the total imports and exports decreased by 20.7 percent and 34.6 percent respectively during the mentioned period.

As of mid-December 2022, the outstanding concessional loan is Rs.209.32 billion extended to 148,550 borrowers. Of this, Rs.138.71 billion has been extended to 60,851 borrowers for selected commercial agriculture and livestock businesses. Likewise, Rs. 67.33 billion loan has been extended to 84,865 women entrepreneurs. A total of 2,834 borrowers have availed of Rs.3.27 billion in concessional loans in other specified sectors.

NEPSE index stood at 1882.6 in mid-December 2022 compared to 2414.6 in mid-December 2021.

Inflation

The y-o-y consumer price inflation remained at 7.38 percent in mid-December 2022 compared to 7.11 percent a year ago.

The y-o-y wholesale price index increased 9.15 percent in the review month compared to 7.22 percent a year ago. The y-o-y wholesale price of consumption goods, intermediate goods, and capital goods increased by 3.49 percent, 13.14 percent, and 4.69 percent respectively. The wholesale price of construction materials increased by 10.51 percent in the review month.

Import and Export

During the five months of 2022/23, merchandise exports decreased 34.6 percent to Rs.67.30 billion against an increase of 105.6 percent in the same period of the previous year. Destination-wise, exports to India and China decreased by 43.7 percent and 35.9 percent respectively whereas exports to other countries increased by 7.1 percent. Exports of zinc sheets, particle boards, woolen carpets, cardamom, and tea, among others, increased whereas exports of soybean oil, palm oil, oil cakes, textiles, silverware, and jewelry, among others, decreased in the review period.

During the five months of 2022/23, merchandise imports decreased 20.7 percent to Rs.664.75 billion against an increase of 59.5 percent a year ago. Destination-wise, imports from India, China, and other countries decreased by 20.0 percent, 22.6 percent, and 21.4 percent respectively. Imports of petroleum products, sponge iron, gold, chemical fertilizer, and aircraft spare parts, among others, increased whereas imports of transport equipment & parts, M.S. billet, silver, medicine, and crude soyabean oil, among others, decreased in the review period.

The total trade deficit decreased 18.8 percent to Rs.597.44 billion during the five months of 2022/23. Such a deficit had increased by 54.7 percent in the corresponding period of the previous year. The export-import ratio decreased to 10.1 percent in the review period from 12.3 percent in the corresponding period of the previous year.

Services and Remittance

Net services income remained at a deficit of Rs.26.68 billion in the review period compared to a deficit of Rs.38.13 billion in the same period of the previous year.

Remittance inflows increased 23.0 percent to Rs. 480.50 billion in the review period against a decrease of 6.3 percent in the same period of the previous year. In US Dollar terms, remittance inflows increased 13.1 percent to 3.71 billion in the review period against a decrease of 6.8 percent in the same period of the previous year.

Inter-bank Transaction

In the review period, BFIs interbank transactions amounted to Rs.1653.86 billion including Rs.1500.26 billion inter-bank transactions among commercial banks and Rs.153.60 billion among other financial institutions (excluding transactions among commercial banks). In the corresponding period of the previous year, such transactions were Rs.1419.80 billion including Rs.1235.72 billion among commercial banks and Rs. 184.08 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 11.7 percent to US dollar 82.34 per barrel in mid-December 2022 from US dollar 73.71 per barrel a year ago. The price of gold increased 0.8 percent to US dollar 1783.55 per ounce in mid-December 2022 from US dollar 1768.65 per ounce a year ago.

Foreign Exchange Reserves and Adequacy Indicators

Gross foreign exchange reserves increased 6.3 percent to Rs.1292.56 billion in mid-December 2022 from Rs.1215.80 billion in mid-July 2022. In US dollar terms, the gross foreign exchange reserves increased 3.0 percent to 9.82 billion in mid-December 2022 from 9.54 billion in mid-July 2022.

Of the total foreign exchange reserves, reserves held by NRB increased 7.8 percent to Rs.1139.22 billion in mid-December 2022 from Rs.1056.39 billion in mid-July 2022. Reserves held by banks and financial institutions (except NRB) decreased 3.8 percent to Rs.153.34 billion in mid-December 2022 from Rs.159.41 billion in mid-July 2022. The share of Indian currency in total reserves stood at 22.9 percent in mid-December 2022.

Based on the imports of five months of 2022/23, the foreign exchange reserves of the banking sector are sufficient to cover the prospective merchandise imports of 10.0 months, and merchandise and services imports of 8.7 months. The ratio of reserves-to-GDP, reserves-to-imports, and reserves-to-M2 stood at 26.6 percent, 72.6 percent, and 23.0 percent respectively in mid-December 2022. Such ratios were 25.1 percent, 57.8 percent, and 22.1 percent respectively in mid-July 2022.

Exchange Rate

Nepalese currency vis-à-vis the US dollar depreciated 3.14 percent in mid-December 2022 from mid-July 2022. It had depreciated by 1.69 percent in the same period of the previous year. The buying exchange rate per US dollar stood at Rs.131.64 in mid-December 2022 compared to Rs.127.51 in mid-July 2022.

According to data from the Financial Comptroller General Office (FCGO), the Ministry of Finance stood at Rs. 435.21 billion. The recurrent expenditure, capital expenditure, and financial management expenditure amounted to Rs.354.26 billion, Rs. 33.99 billion, and Rs. 46.96 billion respectively in the review period.

In the review period, the total revenue mobilization of the Federal Government (including the amount to be transferred to provincial and local governments) stood at Rs. 326.89 billion. The tax revenue amounted to Rs. 301.46 billion and non-tax revenue Rs. 25.43 billion in the review period.

Banking

Domestic credit increased by 3.0 percent in the review period compared to an increase of 7.2 percent in the corresponding period of the previous year. On a y-o-y basis, domestic credit increased by 10.1 percent in mid-December 2022.

Monetary Sector's claims on the private sector increased by 3.1 percent in the review period compared to an increase of 11.1 percent in the corresponding period of the previous year. On a y-o-y basis, such claims increased by 5.0 percent in mid-December 2022.

Interest Rates

The average base rate of commercial banks increased to 10.69 percent in the fifth month of 2022/23 from 8.25 percent a year ago. The weighted average deposit rate and lending rate of commercial banks stood at 8.46 percent and 12.74 percent respectively in the review month. Such rates were 6.24 percent and 9.29 percent respectively a year ago.

Balance of Payments:

Balance of Payments remained at a surplus of Rs.45.87 billion in the fifth month of 2022/23 from a deficit of Rs. 195.01 Billion in the fifth month of 2021/22. Balance of Payments is the difference in total value between payments into and out of a country over a period.