How Did We Perform As a Nation in First Month of Fiscal Year 2080/81? A Quick Macroeconomic Summary
Nepal Rastra Bank, the central bank of Nepal, has unveiled the current macroeconomic and financial situation of Nepal based on the first month's data of 2023/24.
Overall
Nepal Rastra Bank estimated that the inflation remained at 7.52 percent on a y-o-y basis. The gross foreign exchange reserves stood at USD 11.85 billion, whereas, the total imports and exports decreased by 1.6 percent and 8.7 percent and the trade deficit decreased by 0.7 percent.
As of mid-August 2023, the outstanding concessional loan remained at Rs.196.36 billion extended to 145,225 borrowers. Of this, Rs.135.77 billion has been extended to 59,919 borrowers for selected commercial agriculture and livestock businesses. Likewise, a Rs.57.57 billion loan has been extended to 82,627 women entrepreneurs. A total of 2,679 borrowers have availed Rs.3.02 billion concessional loans in other specified sectors.
NEPSE index stood at 2033.1 in mid-August 2023 compared to 2041.1 in mid-August 2022.
Inflation
The y-o-y consumer price inflation stood at 7.52 percent in mid-August 2023 compared to 8.26 percent a year ago.
The y-o-y wholesale price inflation stood at 4.34 percent in mid-August 2023 compared to 12.58 percent a year ago. The y-o-y wholesale price of consumption goods, intermediate goods, and capital goods increased by 8.00 percent, 2.55 percent, and 2.72 percent respectively. The y-o-y wholesale price of construction materials decreased by 0.05 percent in the review month.
Import and Export
During the first month of 2023/24, merchandise exports decreased 8.7 percent to Rs.13.53 billion compared to a decrease of 28.7 percent in the same period of the previous year. Destination-wise, exports to India decreased 20.8 percent whereas exports to China and other countries increased 527.2 percent and 15.4 percent respectively. Exports of cardamom, zinc sheet, particle board, juice, and ginger, among others increased whereas exports of palm oil, soyabean oil, medicine (ayurvedic), pashmina, silverware, and jewelry, among others, decreased in the review period.
During the first month of 2023/24, merchandise imports decreased 1.6 percent to Rs.129.24 billion compared to a decrease of 12.9 percent a year ago. Destination-wise, imports from India and China increased 3.3 percent and 17.0 percent respectively while imports from other countries decreased by 23.1 percent. Imports of rice/paddy, M.S. wire rods, bars, coils, and others, chemical fertilizer, hot rolled sheet incoil, and electrical goods, among others, increased whereas imports of petroleum products, crude soyabean oil, crude palm oil, medicine, M.S. billet, among others decreased in the review period.
The total trade deficit decreased 0.7 percent to Rs.115.71 billion during the first month of 2023/24. Such a deficit had decreased by 10.4 percent in the corresponding period of the previous year. The export-import ratio decreased to 10.5 percent in the review period from 11.3 percent in the corresponding period of the previous year.
Services and Remittance
Net services income remained at a deficit of Rs.11.27 billion in the review period compared to a deficit of Rs.10.71 billion in the same period of the previous year.
Remittance inflows increased 25.8 percent to Rs.116.02 billion in the review period compared to an increase of 20.3 percent in the same period of the previous year. In US Dollar terms, remittance inflows increased 21.5 percent to 879.8 million in the review period compared to an increase of 12.5 percent in the same period of the previous year.
Inter-bank Transaction
In the review period, BFI interbank transactions amounted to Rs.655.44 billion on a turnover basis including Rs. 561.67 billion inter-bank transactions among commercial banks and Rs.93.77 billion among other financial institutions (excluding transactions among commercial banks). In the corresponding period of the previous year, such transactions were Rs.356.46 billion including Rs.315.49 billion among commercial banks and Rs.40.97 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 decreased 10.6 percent to US dollar 85.24 per barrel in mid-August 2023 from US dollar 95.36 per barrel a year ago. The price of gold increased 6.8 percent to US dollar 1896.35 per ounce in mid-August 2023 from US dollar 1774.85 per ounce a year ago.
Foreign Exchange Reserves and Adequacy Indicators
Gross foreign exchange reserve increased 2.2 percent to Rs.1573.12 billion in mid-August 2023 from Rs.1539.36 billion in mid-July 2023. In US dollar terms, the gross foreign exchange reserves increased 1.2 percent to 11.85 billion in mid-August 2023 from 11.71 billion in mid-July 2023.
Of the total foreign exchange reserves, reserves held by NRB increased 2.9 percent to Rs.1385.24 billion in mid-August 2023 from Rs.1345.78 billion in mid-July 2023. Reserves held by banks and financial institutions (except NRB) decreased 2.9 percent to Rs.187.89 billion in mid-August 2023 from Rs.193.59 billion in mid-July 2023. The share of Indian currency in total reserves stood
at 21.9 percent in mid-August 2023.
Based on the imports of the first month of 2023/24, the foreign exchange reserves of the banking sector are sufficient to cover the prospective merchandise imports of 12.5 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 29.2 percent, 85.7 percent, and 26.3 percent respectively in mid-August 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 1.0 percent in mid-August 2023 from midJuly 2023. It had appreciated 0.3 percent in the same period of the previous year. The buying exchange rate per US dollar stood at Rs.132.43 in mid-August 2023 compared to Rs.131.17 in mid-July 2023.
According to Financial Comptroller General Office, the total expenditure of the Nepal government (FCGO), Ministry of Finance, amounted to Rs.35.04 billion during the first month of 2023/24. The recurrent expenditure, capital expenditure and financial expenditure amounted to Rs.12.14 billion, Rs.0.82 billion and Rs.22.08 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.78.87 billion. The tax revenue amounted to Rs.70.18 billion and the nontax revenue was Rs.8.70 billion in the review period.
Banking
Domestic credit decreased 2.3 percent in the review period compared to a decrease of 0.9 percent in the corresponding period of the previous year. Monetary Sector's claims on the private sector increased 0.3 percent in the review period compared to an increase of 0.5 percent in the corresponding period of the previous year.
Interest Rates
The average base rates of commercial banks, development banks and finance companies stood 10.11 percent, 11.87 percent and 13.28 percent respectively in the first month of 2023/24. The average base rate of commercial banks was 9.72 percent in the corresponding month a year ago.
Balance of Payments
Balance of Payments (BOP) remained at a surplus of Rs.32.90 billion in the review period against a deficit of Rs.19.76 billion in the same period of the previous year. In the US Dollar terms, the BOP remained at a surplus of 249.5 million in the review period against a deficit of 155.2 million in the same period of the previous year.
