Nepal's Macro-economic Indicators and Impact of COVID-19 in the last Eleven Months

The central bank published macro-economic data based on 11 months of data of 2019/20. 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 4.54% in mid-June 2020 compared to 6.16% a year ago. Food and beverage inflation stood at 5.41% whereas non-food and service inflation stood at 3.87% in the review month.

Import and export: Exports of palm oil, medicine (ayurvedic), herbs, plastic utensils, M.S. pipe, among others increased whereas exports of zinc sheet, wire, polyester yarn and threads, woolen carpet, readymade garment among others decreased in the review period.

Meanwhile, imports of crude palm oil, crude soyabean oil, chemical fertilizer, computer, and parts, edible oil, increased whereas imports of gold, M.S. billet, petroleum products, transport equipment and parts, other machinery and parts among others decreased

Imports of the nation 15.3% to Rs.1100.81 billion against an increase of 17.3% in the same period of the previous year. On the other hand, the export has increased by 0.2% to Rs.88 billion compared to an increase of 19.4% a year ago. As a result, the trade deficit narrowed down 16.4% to Rs.1012.81 billion in the eleven months of 2019/20. Such deficit had expanded 17.2% in the same period of the previous year.

Services: Net services income remained at a deficit of Rs.4.89 billion in the review period compared to a deficit of Rs.9.27 billion in the same period of the previous year.

Under the service account, travel income decreased by 17.6% and travel payments decreased 35.8% to Rs.51.83 billion, including Rs.25.16 billion for education.

Remittance: Remittance inflows decreased by 3.0% to Rs.774.87 billion in the review period. It had increased by 17.5% in the same period of the previous year.

Current account: The current account deficit decreased to 71.2% to Rs. 71.64 billion in the review period. Such deficit was Rs.249.08 billion in the same period of the previous year.

BOP position: Balance of Payments (BOP) remained at a surplus of Rs.179.37 billion in the review period against a deficit of Rs.90.83 billion in the same period of the previous year.

FDI inflows: Capital transfer and net foreign direct investment (FDI) in Nepal amounted to Rs.13.05 billion and Rs.18.72 billion respectively.

Exchange rate: Nepalese currency vis-à-vis US Dollar depreciated 9.66% in mid-June 2020 from mid-July 2019. It had depreciated 1.8% in the same period of the previous year. The buying exchange rate per US Dollar stood at Rs.121.05 in mid-June 2020 compared to Rs.109.36 in mid-July 2019.

As of writing this article, the US Dollar is valued at 120.48 Nepalese Rupee.

Government expenditure: Total expenditure of the federal government based on banking transactions (excluding direct payments and unrealized cheques) stood at Rs.843.94 billion.

Such expenditure was Rs.792.63 billion in the corresponding period of the previous year.

Government revenue: It decreased to Rs. 606.82 Billion which was Rs.665.91 Billion in the corresponding period the previous year.

Fiscal Deficit/ Surplus: During eleven months of 2019/20, the fiscal position of the Government, based on banking transactions remained at a deficit of Rs.210.55 billion compared to a deficit of Rs.35.77 billion in the corresponding period of the previous year.

Banking:

-Deposit collection: Deposits at Banks and Financial Institutions (BFIs) increased by 13.3% in the review period.

-Credit distribution: Credit to the private sector from BFIs increased by 10.7% in the review period compared to a growth of 18.2% in the corresponding period of the previous year.

-Liquidity management: In the review period, Rs.219.15 billion liquidity was injected including Rs.115.87 billion through repo and Rs.103.28 billion through standing liquidity facility (SLF).

Also, NRB mopped up Rs.78 billion liquidity through open market operations. Liquidity of Rs.100.35 billion was mopped up in the corresponding period of the previous year. In the review period, NRB injected liquidity of Rs.417.33 billion through the net purchase of USD 3.59 billion from the foreign exchange market.

-Interbank transactions: inter-bank transactions among commercial banks amounted to Rs.1469.81 billion and among banks and financial institutions (excluding transactions among commercial banks) Rs.121.42 billion

-Interest rates: The average base rate of commercial banks decreased to 8.66% in the review month from 9.48% a year ago. Weighted average deposit and lending rates of commercial banks stood at 6.17% and 10.43% respectively in the review month. Such rates were 6.64% and 12.20% respectively in the corresponding month of the previous year.

Impact of COVID-19: Economic activities have been affected due to COVID-19. However, with the partial lifting of lockdown since June 15, economy is expected to return to normalcy.