Inflation Rises in Fifth Month of Current Fiscal Year, Trade Deficit Up 54.7%

Nepal Rastra Bank, the central bank of Nepal, has unveiled the current macroeconomic and financial situation of Nepal based on the first five month's data of 2021/22.

Inflation

The y-o-y consumer price inflation stood at 7.11 percent in the fifth month of 2021/22 compared to 2.93 percent a year ago. In comparison, the y-o-y consumer price inflation was at 5.32 percent in the fourth month of 2021/22. Food and beverage inflation stood at 5.67 percent whereas non-food and service inflation stood at 8.25 percent in the review month.

Import and Export

During the five months of 2021/22, merchandise exports increased 105.6 percent to Rs.102.92 billion compared to an increase of 5.1 percent in the same period of the previous year. Destination-wise, exports to India and other countries increased 138.0 percent and 28.5 respectively whereas exports to China decreased 1.4 percent. Exports of palm oil, soyabean oil, oil cakes, polyster yarn & thread, jute goods, among others, increased whereas exports of cardamom, tea, zinc sheet, wire, copper wire rod, among others, decreased in the review period.

During the five months of 2021/22, merchandise imports increased 59.5 percent to Rs.838.41 billion against a decrease of 9.6 percent a year ago. Destination-wise, imports from India, China, and other countries increased 44.6 percent, 57.8 percent, and 111.2 percent respectively. Imports of petroleum products, crude palm oil, medicine, transport equipment, vehicle and other parts, crude soyabean oil, among others, increased whereas imports of cement, pulses, molasses sugar, insecticides, tobacco, among others, decreased in the review period.

The total trade deficit increased 54.7 percent to Rs.735.49 billion during the five months of 2021/22. Such a deficit had contracted 10.9 percent in the corresponding period of the previous year. The export-import ratio increased to 12.3 percent in the review period from 9.5 percent in the corresponding period of the previous year.

Services and Remittance

Net services income remained at a deficit of Rs.38.52 billion in the review period compared to a deficit of Rs.23.55 billion in the same period of the previous year.

Remittance inflows decreased 6.8 percent to Rs.388.58 billion in the review period against an increase of 11.0 percent in the same period of the previous year. In the US Dollar terms, remittance inflows decreased 7.3 percent to 3.26 billion in the review period against an increase of 6.4 percent in the same period of the previous year.

Price of Oil and Gold

The price of oil (Crude Oil Brent) in the international market increased 45.2 percent to US Dollar 73.71 per barrel in mid-December 2021 from US Dollar 50.77 per barrel a year ago. The price of gold decreased 4.4 percent to US Dollar 1768.65 per ounce in mid-December 2021 from US Dollar 1850.65 per ounce a year ago.

Exchange Rate

Nepalese currency vis-à-vis the US Dollar depreciated 1.72 percent in mid-December 2021 from mid-July 2021. It had appreciated 2.36 percent in the same period of the previous year. The buying exchange rate per US Dollar stood at Rs.121.09 in mid-December 2021 compared to Rs.119.04 in mid-July 2021.

Government Fiscal Situation

In the review period, the total expenditure of the federal government according to data of the Financial Comptroller General Office (FCGO), Ministry of Finance, stood at Rs.387.03 billion. The recurrent expenditure, capital expenditure and financing expenditure amounted to Rs.317.33 billion, Rs.28.40 billion and Rs.41.30 billion respectively in the review period

Meanwhile, revenue mobilization (including the amount to be transferred to provincial and local governments) stood at Rs.412.40 billion. The tax revenue and non-tax revenue amounted to Rs.380.23 billion and Rs.32.17 billion respectively in the review period.

In the review period, the total resource mobilization of provincial governments remained Rs.58.84 billion. The federal government transferred Rs.41.34 billion as grants and revenue from federal divisible funds to provincial governments and the provincial governments mobilized Rs.17.50 billion in terms of revenue and other receipts in the review period. In the review period, the total expenditure of provincial governments stood at Rs.27.61 billion.

Banking

Deposits at Banks and Financial Institutions (BFIs) increased 1.7 percent in the review period compared to an increase of 6.5 percent in the corresponding period of the previous year. On a y-o-y basis, deposits at BFIs expanded 15.9 percent in mid-December 2021.

Meanwhile, the private sector credit from BFIs increased 10.4 percent in the review period compared to an increase of 7.1 percent in the corresponding period of the previous year. On y-o-y basis, credit to the private sector from BFIs increased 31.2 percent in mid-December 2021.

Interest Rates

The average base rate of commercial banks stood 8.25 percent in the fifth month of 2021/22 which was 7.36 percent a year ago. The weighted average deposit rate and lending rate of commercial banks stood at 6.24 percent and 9.29 percent respectively in the review month. Such rates were 5.14 percent and 9.37 percent respectively a year ago.