Lowest Inflation rate since 2004/05 at 2.70%, gesture of enhancement to Nepalese economy (See the macroeconomic & financial situation of Nepal 2073/74)

Fixed rate corridor introduced by the newly monetary policy and rise in capital level in the market once again gave the support to the macroeconomic sector making the financial sector more strong and stable for upward momentum. Drastic fall in inflation rate is another major progress made in the year 2073/74 but it also contains demerits as well. Inflation rate stands at 2.70% only which is lowest rate since 2004/05 which shows that the purchasing capacity of the people is declining. But the recent floods and landslides in various districts of the country may results higher price level in coming months as these natural calamities might push the price of all the commodities upward and hike cost of production. It may also restrict the growth in year 2074/75.

Moreover, the behavior of rain during the remaining period of monsoon, the pace of implementation of national pride projects and the reconstruction of national heritages destroyed by the earthquakes of 2072 may be barriers for the growth in upcoming year. Inflation Central bank attempts to limit inflation, and avoid deflation, in order to keep the economy running smoothly. Here, central bank achieved target to control inflation as it drops to 2.70% which is lowest rate since 2004/05. But the recent flood and landslides may be risk for the rise in inflation in upcoming year. If we go back to past, there was an excess liquidity last year. The inflation was above 10%. The monetary policy put forward by the central bank was a contractionary policy so as to absorb the excessive liquidity and control the inflation. As a result, the inflation has continuously dropped and come down to 2.7% by the end of Ashad this fiscal year. The inflation is likely to undershoot the annual target of 7.50% this year. See Nepal’s full inflation scenario in Sharesansar’s new economy section Government Revenue & Expenditure The Government of Nepal has expected to earn a revenue of Rs 565.90 billion and to spend Rs 1048.92 billion in the FY 2073/74. At the end of Ashad, 2074 the government revenue collection increased by 26.4 % to Rs 609.17 billion. Such revenue had increased by 18.8% to Rs 481.98 in the previous year 2015/16. Higher growth rate of major tax heads such as value added tax, income tax, customs, excise duty and others tax heads contributed to the overall rise in revenue collection in the review period. On the other hand, the total government expenditure on a cash basis increased 36.5 percent to Rs 793.91 billion. Such expenditure had increased just 14.2 percent to Rs 581.7 billion in the year 2015/16. The government currently holds Rs 127.69 billion in cash balance. The government had earned 7.8% more revenue of its targeted revenue and spent only 75.68 % of the budgeted expenditure, here around 25% of the budgeted expenditure are not utilized in the year 2016/17. See Nepal’s Government full revenue and expenditure in Sharesansar’s new economy section Capital Expenditure These are the expenditure made on fixed assets. Capital expenditure is funds used to acquire physical assets to improve its value or increase its long-term productivity. The government had targeted to spend Rs 311.95 billion as capital expenditure. At the end of Ashad, 2074 only 60.7% of the budgeted capital expenditure of Rs 189.56 billion was made which seems to be utilized ineffectively and it notifies slow growth of development activities. This shows that developmental works are not going as per the target made by the government pushing the country’s backward as well. See Nepal’s Capital Expenditure in Sharesansar’s new Economy section Remittance Remittance is one of the major sources strengthening the Nepalese GDP since many years as money sent from abroad by Nepalese are comparatively higher than the income generated from production of goods in the country. In the review year, Nepal’s workers’ remittance increased 4.6% to Rs 695.45 billion. The growth in the previous year was 7.7%. But the amount of remittances has declined due to restrictions and new policies introduced in the gulf country like Qatar. Likewise, tightening in rules under student visa by Australian, American & British government also pulls back the remittance. See Nepal’s Remittance in Sharesansar’s new Economy section BFIs Deposit & Lending BFIs somehow succeed to reduce the load of liquidity crunch in the market by increasing interest rates and by introducing strict rules and regulations to float loans. Real estate loans and auto loans has diminished due to reduction of loan with respect to collateral. Due to which, deposits collection is in growing trend. Deposits at Banks and Financial Institutions (BFIs) increased by 14 percent in the review year compared to an increase of 19.4 percent in the previous year. Credit to the private sector from BFIs increased 18.2 percent in the review year compared to a rise of 23.7 percent in the previous year. In the review year, private sector credit from commercial banks and development banks increased 25percent and 13.7 percent respectively, while that of finance companies decreased 13.7 percent. See Nepal’s BFIs Deposits & Lendings in Share Sansar’s new Economy section Interest Rates The weighted average 91-day Treasury Bill rate increased to 0.71 percent in twelve month of 2016/17 from 0.05 percent a year ago. Likewise, the weighted average inter-bank transaction rate among commercial banks, which was 0.69 percent a year ago, decreased to 0.64 percent in the review month. The weighted average inter-bank rate among other financial institutions increased to 4.47 percent from 3.35 percent a year ago. See Nepal’s Interest rates in Sharesansar’s new Economy section Budget Deficit / Surplus In the review year, the Government of Nepal (GoN) was at a deficit of Rs 125.61 billion from Rs 49.83 billion in 2015/16. The ratio of budget deficit-to-GDP stood at 4.8 percent in the review year. See Nepal's Budget Deficit / Surplus at Sharesansar's new Economy section  

• Sijan Bajracharya