NRB anticipates enormous economic growth; tremendous down in inflation to 2.8%
After the successful completion of the first & second phase local elections and timely present of annual budget for 2017/18, Nepal’s economy is heading into a positive direction. Nepal Rastra Bank’s macroeconomic report based on the financial data of the first eleven months of the ongoing FY 2073/74 (till Jestha 2074) shows the economic activities.
NRB has also added that due to massive increment of liquidity in BFIs will soon solve the problem of high interest rates and imbalance in the financial sectors. Moreover, NRB states that 4 main sectors namely, weather, fiscal, political and financial verifies the outlook of whole macro financial position.
Inflation
Central bank attempts to limit inflation, and avoid deflation, in order to keep the economy running smoothly. While excessive inflation and hyperinflation have negative economic consequences, deflation’s negative consequences for the economy can be just as bad or worse.
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 2.8% by the end of Jestha this fiscal year. The inflation is likely to undershoot the annual target of 7.50% this year.
See Nepal's full inflation scenario in Share Sansar'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.
In the review period of eleven months, the government revenue collection increased by 33.1 % to Rs. 527.14 billion. Such revenue had increased 14.7% in the corresponding period of the previous year. 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 43 percent to Rs. 555.10 billion. Such expenditure had increased just 4.4 percent to Rs. 388.31 billion in the corresponding period of the previous year.
The government currently holds Rs 269.07 billion in cash balance. This is due to the slow pace of government expenditure relative to resource mobilization.
Till the end of Jestha 2074, the government had earned 93.15 % of its targeted revenue and spent only 52.92 % of the budgeted expenditure. Though the revenue earned is quite satisfactory, the expenditure done by the government is disappointing.
See Nepal's Government full revenue and expenditure in Share Sansar's new economy section
Capital Expenditure
The government had targeted to spend Rs 311.95 billion as capital expenditure. Till the eleventh month of this fiscal year, only 34.75% of the budgeted capital expenditure was made which seems to be utilized ineffectively and it notifies slow growth of development activities.
See Nepal's Capital Expenditure in Share Sansar's new Economy section
Remittance
The economy of Nepal depends upon remittance since long time. It is the major financial inflows of Nepal which covers huge percentage in the GDP of the nation. In 2015, Nepal topped the chart of top 10 inward remittance economies in Asia and the pacific. This shows the contribution of remittance in the Nepali economy.
In the review period, Nepal’s workers’ remittance increased 5.80% to Rs 633.42 billion. The growth in the corresponding period of last year was 8.6%. Remittance has declined by 2.80% in respect to the corresponding period of last year which is all due to decrease in number of Nepalese workers going abroad and return of huge number of Nepalese workers. The recent issues arising in the Gulf countries might be another factor to demotivate workers in such countries.
See Nepal's Remittance in Share Sansar's new Economy section
BFIs Deposit & Lending
In Jestha, liquidity crunch somehow declined in respect to the previous month of this fiscal year. Many BFIs had already reduced the interest rate in deposits they had been providing in various deposits accounts. Due to this, a growth is noticed in the deposit, however the growth is less compared to the growth of corresponding previous year.
Deposits at Banks and Financial Institutions (BFIs) increased 10.1 percent in the review period compared to an increase of 13.9 percent in the corresponding period of the previous year. On y-o-y basis, deposits at BFIs expanded 15.5 percent in mid-June 2017. Such growth was 18.5 percent a year ago. Of the total deposits at BFIs, while the share of demand deposits fell to 7.9 percent from 8.5 percent and saving deposits to 35.8 percent from 43.8 percent, the share of fixed deposits increased to 43.4 percent in mid-June 2017 from 30.2 percent a year ago.
Credit to the private sector from BFIs increased 17.1 percent in the review period compared to a rise of 18.8 percent in the same period of the previous year. In the review period, private sector credit from commercial banks and development banks increased 20.5 percent and 1.5 percent respectively, while that of finance companies decreased 0.6 percent. On y-o-y basis, credit to the private sector from BFIs increased 21.9 percent in mid-June 2017 compared to an increase of 20.9 percent a year ago.
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 1.03 percent in eleventh month of 2016/17 from 0.12 percent a year ago. The T-bill rate was 0.78 in the last month. Likewise, the weighted average inter-bank transaction rate among commercial banks, which was 6.3 percent a year ago, inclined to 9.4 percent in the review month. The weighted average inter-bank rate among other financial institutions increased to 4.48 percent from 2.55 percent a year ago.
See Nepal's Interest rates in Share Sansar's new Economy section
Budget Deficit / Surplus
In the first eleven months of 2016/17, the Government of Nepal (GoN) was at a surplus of Rs. 50.13 billion in its budget. Such surplus was Rs. 59.99 billion in the corresponding period of the previous year. The budget surplus was 59.91 in the last month.
See Nepal's Budget Deficit / Surplus in Share Sansar's new economy section
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 2.8% by the end of Jestha this fiscal year. The inflation is likely to undershoot the annual target of 7.50% this year.
See Nepal's full inflation scenario in Share Sansar'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.
In the review period of eleven months, the government revenue collection increased by 33.1 % to Rs. 527.14 billion. Such revenue had increased 14.7% in the corresponding period of the previous year. 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 43 percent to Rs. 555.10 billion. Such expenditure had increased just 4.4 percent to Rs. 388.31 billion in the corresponding period of the previous year.
The government currently holds Rs 269.07 billion in cash balance. This is due to the slow pace of government expenditure relative to resource mobilization.
Till the end of Jestha 2074, the government had earned 93.15 % of its targeted revenue and spent only 52.92 % of the budgeted expenditure. Though the revenue earned is quite satisfactory, the expenditure done by the government is disappointing.
See Nepal's Government full revenue and expenditure in Share Sansar's new economy section
Capital Expenditure
The government had targeted to spend Rs 311.95 billion as capital expenditure. Till the eleventh month of this fiscal year, only 34.75% of the budgeted capital expenditure was made which seems to be utilized ineffectively and it notifies slow growth of development activities.
See Nepal's Capital Expenditure in Share Sansar's new Economy section
Remittance
The economy of Nepal depends upon remittance since long time. It is the major financial inflows of Nepal which covers huge percentage in the GDP of the nation. In 2015, Nepal topped the chart of top 10 inward remittance economies in Asia and the pacific. This shows the contribution of remittance in the Nepali economy.
In the review period, Nepal’s workers’ remittance increased 5.80% to Rs 633.42 billion. The growth in the corresponding period of last year was 8.6%. Remittance has declined by 2.80% in respect to the corresponding period of last year which is all due to decrease in number of Nepalese workers going abroad and return of huge number of Nepalese workers. The recent issues arising in the Gulf countries might be another factor to demotivate workers in such countries.
See Nepal's Remittance in Share Sansar's new Economy section
BFIs Deposit & Lending
In Jestha, liquidity crunch somehow declined in respect to the previous month of this fiscal year. Many BFIs had already reduced the interest rate in deposits they had been providing in various deposits accounts. Due to this, a growth is noticed in the deposit, however the growth is less compared to the growth of corresponding previous year.
Deposits at Banks and Financial Institutions (BFIs) increased 10.1 percent in the review period compared to an increase of 13.9 percent in the corresponding period of the previous year. On y-o-y basis, deposits at BFIs expanded 15.5 percent in mid-June 2017. Such growth was 18.5 percent a year ago. Of the total deposits at BFIs, while the share of demand deposits fell to 7.9 percent from 8.5 percent and saving deposits to 35.8 percent from 43.8 percent, the share of fixed deposits increased to 43.4 percent in mid-June 2017 from 30.2 percent a year ago.
Credit to the private sector from BFIs increased 17.1 percent in the review period compared to a rise of 18.8 percent in the same period of the previous year. In the review period, private sector credit from commercial banks and development banks increased 20.5 percent and 1.5 percent respectively, while that of finance companies decreased 0.6 percent. On y-o-y basis, credit to the private sector from BFIs increased 21.9 percent in mid-June 2017 compared to an increase of 20.9 percent a year ago.
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 1.03 percent in eleventh month of 2016/17 from 0.12 percent a year ago. The T-bill rate was 0.78 in the last month. Likewise, the weighted average inter-bank transaction rate among commercial banks, which was 6.3 percent a year ago, inclined to 9.4 percent in the review month. The weighted average inter-bank rate among other financial institutions increased to 4.48 percent from 2.55 percent a year ago.See Nepal's Interest rates in Share Sansar's new Economy section
Budget Deficit / Surplus
In the first eleven months of 2016/17, the Government of Nepal (GoN) was at a surplus of Rs. 50.13 billion in its budget. Such surplus was Rs. 59.99 billion in the corresponding period of the previous year. The budget surplus was 59.91 in the last month.
See Nepal's Budget Deficit / Surplus in Share Sansar's new economy section
