Inflation in control and Fiscal Surplus improves in the third month of the fiscal year 2077/78

The central bank has published macro-economic data based on the first three month's data of FY 2077/78. The report covers major details on inflation, trade, services, remittance, BOP position, foreign exchange reserves, fiscal deficit, surplus, expenditure, revenue, money supply, deposit, credit liquidity, interest rates, and the capital market.

Some of the major highlights from the reports are:

Inflation: The y-o-y consumer price inflation stood at 3.79% in the third month of 2020/21 compared to 6.21% a year ago. Food and beverage inflation stood at 5.50% whereas non-food and service inflation stood at 2.46% in the review month.

Import and export: Exports to India and other countries increased 19.4 percent and 7.4 percent respectively whereas exports to China decreased 53.2 percent. Exports of jute goods, polyester yarn and threads, noodles, cardamom, and pashmina among others increased whereas exports of palm oil, pulses, zinc sheet, handicrafts, and skin among others decreased in the review period.

Destination-wise, imports from India, China, and other countries decreased by 6.6 percent, 26.9 percent, and 19.0 percent respectively. Imports of rice, crude soyabean oil, telecommunication equipment, and parts, edible oil, and coal among others increased, whereas imports of petroleum products, transport equipment, and parts, aircraft spare parts, other machinery, and parts, and crude palm oil among others decreased in the review period.

The total trade deficit narrowed down 15.1 percent to Rs.261.22 billion in three months of 2020/21. Such deficit had contracted 12.0 percent in the same period of the previous year. The export-import ratio increased to 10.6 percent in the review period from 8.1 percent in the same period of the previous year.

Services: Net services income remained at a deficit of Rs.10.59 billion in the review period compared to a deficit of Rs.6.05 billion in the same period of the previous year.

Remittance: Remittance inflows increased 12.6 percent to Rs.258.86 billion in the review period against a decrease of 5.1 percent in the same period of the previous year. Because of travel restrictions during the pandemic, the number of Nepali workers (institutional and individual-new and legalized) taking approval for foreign employment decreased by 96.8 percent in the review period.

BOP position: BalBalance of Payments (BOP) registered a surplus of Rs.101.09 billion in the review period. Such surplus was Rs.14.43 billion in the same period of the previous year.

Exchange rate: Nepalese currency vis-à-vis the US Dollar appreciated 2.8 percent in mid-October 2020 from mid-July 2020. It had depreciated 4.1 percent in the same period of the previous year. T

The buying exchange rate per US Dollar stood at Rs.117.12 in mid-October 2020 compared to Rs.120.37 in mid-July 2020.

Government expenditure and revenue: In the review period, the total expenditure of the federal government based on banking transactions (excluding direct payments and unrealized cheques) stood at Rs.176.99 billion. Such expenditure was Rs.172.33 billion in the corresponding period of the previous year.

Similarly, in the review period, revenue collection based on banking transactions (including the amount to be transferred to provincial and local governments) stood at Rs.172.36 billion. Total government revenue was Rs.211.28 billion in the corresponding period of the previous year.

Fiscal Deficit/ Surplus: Fiscal position of the government, based on banking transactions, remained at a surplus of Rs.316.8 million in the review period compared to a surplus of Rs.46.38 billion in the corresponding period of the previous year.

Banking:

-Deposit collection and Credit distribution: Deposits at Banks and Financial Institutions (BFIs) increased 4.9 percent in the review period compared to a growth of 3 percent in the corresponding period of the previous year. On a y-o-y basis, deposits at BFIs expanded 20.9 percent in mid-October 2020.

Private sector credit from BFIs increased 4 percent in the review period compared to a growth of 4.3 percent in the corresponding period of the previous year. On a y-o-y basis, credit to the private sector from BFIs increased 11.7 percent in mid--October 2020

-Liquidity management: In the review period, NRB mopped up Rs.90 billion liquidity including Rs.60 billion through reverse repo auction and Rs.30 billion through deposit collection instrument. Rs.30 billion liquidity was mopped up in the corresponding period of the previous year. Rs.89.32 billion liquidity was injected including Rs.39.52 billion through repo and Rs.49.80 billion through standing liquidity facility (SLF) in the corresponding period of the previous year.

Also, NRB injected liquidity of Rs.147.43 billion through the net purchase of USD
1.24 billion from the foreign exchange market. Liquidity of Rs.102.22 billion was injected through the net purchase of USD 898.5 million in the corresponding period of the previous year.

The NRB purchased Indian currency (INR) equivalent to Rs.99.64 billion through the sale of USD 840 million in the review period. INR equivalent to Rs.119.98 billion was purchased through the sale of USD 1.06 billion in the corresponding period of the previous year.

-Interest rates: The average base rate of commercial banks decreased to 7.73 percent in mid-October 2020 from 9.56 percent a year ago. Weighted average deposit rate and lending rate of commercial banks stood at 5.45 percent and 9.83 percent respectively in mid-October 2020. Such rates were 6.75 percent and 11.98 percent respectively a year ago.

Lastly, it is worth noting that the electronic payment transaction has increased significantly due to the development of payment infrastructure, the policy of encouraging electronic payments, and the gradual adoption of electronic payment instruments.