Inflation at 7.28% in Nine Month of FY, Average Base Rate Stands 9.17 %

Nepal Rastra Bank, the central bank of Nepal, has unveiled the current macroeconomic and financial situation of Nepal based on the nine months' data of the fiscal year 2021/22.

Inflation

The y-o-y consumer price inflation stood at 7.28 percent in the ninth month of 2021/22 compared to 3.10 percent a year ago. Food and beverage inflation stood at 7.40 percent whereas non-food and service inflation stood at 7.18 percent in the review month.

Import and Export

During the nine months of 2021/22, merchandise exports increased 69.4 percent to Rs. 160.57 billion compared to an increase of 20.2 percent in the same period of the previous year. Destination-wise, exports to India and other countries increased by 86.9 and 25.5percent respectively whereas exports to China decreased by 21.8 percent. Exports of palm oil, soyabean oil, oil cakes, polyester yarn and thread, and woollen carpets among others, increased whereas exports of cardamom, tea, herbs, wire, copper wire rod, among others, decreased in the review period.

During the nine months of 2021/22, merchandise imports increased 32 percent to Rs.1466.66 billion compared to an increase of 13.1 percent a year ago. Destination-wise, imports from India, China, and other countries increased by 24.4 percent, 28.6 percent, and 59.2 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 28.5 percent to Rs.1306.09 billion during the nine months of 2021/22. Such a deficit had increased 12.5 percent in the corresponding period of the previous year. The export-import ratio increased to 10.9 percent in the review period from 8.5 percent in the corresponding period of the previous year.

Services and Remittance

Net services income remained at a deficit of Rs. 80.35 billion in the review period compared to a deficit of Rs. 53.26 billion in the same period of the previous year.

Remittance inflows decreased 0.6 percent to Rs. 724.74 billion in the review period against an increase of 16.5 percent in the same period of the previous year. In the US Dollar terms, remittance inflows decreased 2.2 percent to 6.05 billion in the review period against an increase of 13.1 percent in the same period of the previous year.

Foreign Exchange Reserves

Gross foreign exchange reserves decreased 16.5 percent to Rs.1167.92 billion in mid-April 2022 from Rs.1399.03 billion in mid-July 2021. In the US dollar terms, the gross foreign exchange reserves decreased 18.2 percent to 9.61 billion in mid-April 2022 from 11.75 billion in mid-July 2021.

Of the total foreign exchange reserves, reserves held by NRB decreased 17.9 percent to Rs. 1021.45 billion in mid-April 2022 from Rs.1244.63 billion in mid-July 2021. Reserves held by banks and financial institutions (except NRB) decreased 5.1 percent to Rs. 146.48 billion in mid-April 2022 from Rs.154.39 billion in mid-July 2021. The share of Indian currency in total reserves stood at 24.23 percent in mid-April 2022.

Price of Oil and Gold

The price of oil (Crude Oil Brent) in the international market increased 72.7 percent to US dollar 108.49 per barrel in mid-April 2022 from US dollar 62.83 per barrel a year ago. The price of gold increased 13.1 percent to US dollar 1976.75 per ounce in mid-April 2022 from US dollar 1747.95 per ounce a year ago.

Exchange Rate

Nepalese currency vis-à-vis the US dollar depreciated 2.04 percent in mid-April 2022 from mid-July 2021. It had appreciated 0.48 percent in the same period of the previous year. The buying exchange rate per US dollar stood at Rs. 121.52 in mid-April 2022 compared to Rs.119.04 in mid-July 2021.

Government Fiscal Situation

During the nine 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. 794.26 billion. The recurrent expenditure, capital expenditure, and financial expenditure amounted to Rs. 625.50 billion, Rs. 103.79 billion and Rs. 64.97 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. 789.26 billion. The tax revenue and non tax revenue amounted Rs. 727.79 billion and Rs. 61.47 billion respectively in the review period.

In the review period, total resource mobilization of provincial governments remained Rs. 125.53 billion. The federal government transferred Rs. 90.04 billion as grants and revenue from federal divisible fund to provincial governments and the provincial governments mobilized Rs. 35.48 billion in terms of revenue and other receipts in the review period. In the review period, total expenditure of provincial governments stood at Rs. 80.62 billion.

Banking

Deposits at Banks and Financial Institutions (BFIs) increased 5.1 percent in the review period compared to an increase of 13.7 percent in the corresponding period of the previous year. On y-o-y basis, deposits at BFIs expanded 12.2 percent in mid-April 2022.

Interest Rates

The average base rate of commercial banks stood 9.17 percent in the ninth month of 2021/22 which was 6.90 percent a year ago. Weighted average deposit rate and lending rate of commercial banks stood at 7.11 percent and 10.78 percent respectively in the review month. Such rates were 4.79 percent and 8.61 percent respectively a year ago.