Inflation at 7.14% in Eighth Month of FY, Average Base Rate Up 8.98%
Nepal Rastra Bank, the central bank of Nepal, has unveiled the current macroeconomic and financial situation of Nepal based on the first eight months' data of the fiscal year 2021/22.
Inflation
The y-o-y consumer price inflation stood at 7.14 percent in the eighth month of 2021/22 compared to 3.03 percent a year ago. Food and beverage inflation stood at 7.51 percent whereas non-food and service inflation stood at 6.84 percent in the review month.
Import and Export
During the eight months of 2021/22, merchandise exports increased 82.9 percent to Rs.147.75 billion compared to an increase of 7.8 percent in the same period of the previous year. Destination-wise, exports to India and other countries increased by 104.2 percent and 29.1 respectively whereas exports to China decreased by 11.0 percent. Exports of palm oil, soyabean oil, oil cakes, polyester yarn and thread, and woolen carpets among others, increased whereas exports of cardamom, tea, herbs, wire, copper wire rod, among others, decreased in the review period.
During the eight months of 2021/22, merchandise imports increased 38.6 percent to Rs.1308.73 billion compared to an increase of 2.1 percent a year ago. Destination-wise, imports from India, China, and other countries increased by 28.1 percent, 36.7 percent, and 75.4 percent respectively. Imports of petroleum products, medicine, crude palm oil, crude soyabean oil, and gold, among others, increased whereas imports of M.S. billet, cement, chemical fertilizer, pulses, and molasses sugar, among others, decreased in the review period.
The total trade deficit increased 34.5 percent to Rs.1160.99 billion during the eight months of 2021/22. Such a deficit had increased 1.6 percent in the corresponding period of the previous year. The export-import ratio increased to 11.3 percent in the review period from 8.6 percent in the corresponding period of the previous year.
Services and Remittance
Net services income remained at a deficit of Rs.67.02 billion in the review period compared to a deficit of Rs.43.36 billion in the same period of the previous year.
Remittance inflows decreased 1.7 percent to Rs.631.19 billion in the review period against an increase of 8.7 percent in the same period of the previous year. In the US Dollar terms, remittance inflows decreased 3.0 percent to 5.28 billion in the review period against an increase of 5.0 percent in the same period of the previous year.
Foreign Exchange Reserves
Gross foreign exchange reserves decreased 16.3 percent to Rs.1171 billion in mid-March 2022 from Rs.1399.03 billion in mid-July 2021. In the US dollar terms, the gross foreign exchange reserves decreased 18.5 percent to 9.58 billion in mid-March 2022 from 11.75 billion in mid-July 2021.
Of the total foreign exchange reserves, reserves held by NRB decreased 18.2 percent to Rs.1018.05 billion in mid-March 2022 from Rs.1244.63 billion in mid-July 2021. Reserves held by banks and financial institutions (except NRB) decreased 0.9 percent to Rs.152.95 billion in mid-March 2022 from Rs.154.39 billion in mid-July 2021. The share of Indian currency in total reserves stood at 24.2 percent in mid-March 2022.
Price of Oil and Gold
The price of oil (Crude Oil Brent) in the international market increased 60.3 percent to US dollar 110.39 per barrel in mid-March 2022 from US dollar 68.87 per barrel a year ago. The price of gold increased 14.6 percent to US dollar 1954.05 per ounce in mid-March 2022 from US dollar 1704.80 per ounce a year ago.
Exchange Rate
Nepalese currency vis-à-vis the US dollar depreciated 2.63 percent in mid-March 2022 from mid-July 2021. It had appreciated 3.62 percent in the same period of the previous year. The buying exchange rate per US dollar stood at Rs.122.25 in mid-March 2022 compared to Rs.119.04 in mid-July 2021.
Government Fiscal Situation
During the eight months of 2021/22, the total expenditure of the federal government according to data of the Financial Comptroller General Office (FCGO), Ministry of Finance, stood at Rs.675.30 billion. The recurrent expenditure, capital expenditure, and financial expenditure amounted to Rs.538.44 billion, Rs.77.15 billion and Rs.59.71 billion respectively in the review period.
In the review period, revenue mobilization (including the amount to be transferred to provincial and local governments) stood at Rs.684.70 billion. The tax revenue and non tax revenue amounted Rs.627.90 billion and Rs.56.80 billion respectively in the review period.
In the review period, total resource mobilization of provincial governments remained Rs.109.24 billion. The federal government transferred Rs.77.99 billion as grants and revenue from federal divisible fund to provincial governments and the provincial governments mobilized Rs.31.24 billion in terms of revenue and other receipts in the review period. In the review period, total expenditure of provincial governments stood at Rs.63.79 billion.
Banking
Deposits at Banks and Financial Institutions (BFIs) increased 4.1 percent in the review period compared to an increase of 11.0 percent in the corresponding period of the previous year. On y-o-y basis, deposits at BFIs expanded 14.0 percent in mid-March 2022.
Interest Rates
The average base rate of commercial banks stood 8.98 percent in the eighth month of 2021/22 which was 6.84 percent a year ago. Weighted average deposit rate and lending rate of commercial banks stood at 6.93 percent and 10.60 percent respectively in the review month. Such rates were 4.76 percent and 8.73 percent respectively a year ago.
