NRB Unveils Current Macroeconomic & Financial Situation Based on 2 Months Data; Remittance Inflows Increased by 19.8% to Rs.187.04 Billion

Nepal Rastra Bank, the central bank of Nepal, has unveiled the current macroeconomic and financial situation of Nepal based on two months’ data ending mid-September, 2022/23)

Overall

The Nepal Rastra Bank estimated that the inflation remained at 8.64 percent on a y-o-y basis. The gross foreign exchange reserves stood at USD 9.35 billion and the imports decreased 13 percent, and exports decreased by 34.9 percent.

An amount of Rs. 139.67 billion has been extended to 60,302 borrowers for selected commercial agriculture and livestock business. Likewise, Rs. 70.10 billion loan has been extended to 84,790 women entrepreneurs. Similarly, the areas most affected due to covid -19, viz tourism, cottages, and others have also been granted a loan of Rs. 0.90 billions as of mid-September 2022.

NEPSE index stood at 1910.4 in mid-September 2022 compared to 2812.3 in mid-September 2021.

Inflation

The y-o-y wholesale price inflation increased by 14.00 percent in the review month compared to 3.11 percent a year ago.

The y-o-y consumer price inflation in Nepal in second month of 2022/23 remained 8.64 percent. Such inflation in India stood at 7.41 percent in September 2022.

The y-o-y wholesale price of consumption goods, intermediate goods and capital goods increased by 12.91 percent, 15.93 percent and 6.36 percent respectively in the review month. The wholesale price of construction materials increased by 19.36 percent in the review month.

Import and Export

During the two months of 2022/23, merchandise exports decreased 34.9 percent to Rs.28.68 billion against an increase of 115.4 percent in the same period of the previous year. Destination-wise, exports to India and China decreased 45.2 percent and 21.6 percent respectively whereas exports to other countries increased 13.2 percent. Exports of zinc sheet, woollen carpets, particle board, readymade garments, medicine (ayurvedic), among others, increased whereas exports of soyabean oil, palm oil, oil cakes, cardamom, toothpaste, among others, decreased in the review period.

During the two months of 2022/23, merchandise imports decreased 13.0 percent to Rs.273.60 billion against an increase of 75.9 percent a year ago. Destination-wise, imports from India, China and other countries decreased 9.5 percent, 13.3 percent, and 20.7 percent respectively. Imports of petroleum products, chemical fertilizer, sponge iron, medicine, aircraft & spare parts, among others, increased whereas imports of transport equipment & parts, silver, crude soyabean oil, hot rolled sheet in coil, M.S. billet, among others, decreased in the review period

The total trade deficit decreased 9.4 percent to Rs.244.92 billion during the two months of 2022/23. Such a deficit had increased by 70.8 percent in the corresponding period of the previous year. The export-import ratio decreased to 10.5 percent in the review period from 14.0 percent in the corresponding period of the previous year.

Services and Remittance

Net services income remained at a deficit of Rs.18.62 billion in the review period compared to a deficit of Rs.17.52 billion in the same period of the previous year.

Remittance inflows increased 19.8 percent to Rs.187.04 billion in the review period against a decrease of 5.8 percent in the same period of the previous year. In US Dollar terms, remittance inflows increased 11.3 percent to 1.47 billion in the review period against a decrease of 5.3 percent in the same period of the previous year.

The number of Nepali workers (Renew entry) taking approval for foreign employment increased 169.9 percent to o 103,898 in the review year. It had increased by 70.6 percent in the previous year.

Inter-bank Transaction

The BFIs interbank transactions amounted Rs.647.59 billion including Rs.580.52 billion inter-bank transactions among commercial banks and Rs.67.06 billion among other financial institutions (excluding transactions among commercial banks). In the corresponding period of the previous year, such transactions was Rs.648.31 billion including Rs.557.30 billion among commercial banks and Rs.91 billion among other financial institutions (excluding transactions among commercial banks).

Price of Oil and Gold

The price of oil (Crude Oil Brent) in the international market increased 19.0 percent to US dollar 89.43 per barrel in mid-September 2022 from US dollar 75.14 per barrel a year ago. The price of gold decreased 4.8 percent to US dollar 1664.65 per ounce in mid-September 2022 from US dollar 1747.95 per ounce a year ago.

Foreign Exchange Reserves and Adequacy Indicators

Gross foreign exchange reserves decreased 2.2 percent to Rs.1189.16 billion in mid September 2022 from Rs.1215.80 billion in mid-July 2022. In the US dollar terms, the gross foreign exchange reserves decreased 2.0 percent to 9.35 billion in mid-September 2022 from 9.54 billion in mid-July 2022.

Of the total foreign exchange reserves, reserves held by NRB decreased 0.5 percent to Rs.1051.53 billion in mid-September 2022 from Rs.1056.39 billion in mid-July 2022. Reserves held by banks and financial institutions (except NRB) decreased 13.7 percent to Rs.137.63 billion in mid-September 2022 from Rs.159.41 billion in mid-July 2022. The share of Indian currency in total reserves stood at 24.3 percent in mid-September 2022.

Based on the imports of two months of 2022/23, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 9.0 months, and merchandise and services imports of 7.7 months. The ratio of reserves-to-GDP, reserves-to-imports and reserves-to-M2 stood at 24.5 percent, 64.6 percent, and 21.8 percent respectively in mid-September 2022. Such ratios were 25.1 percent, 57.8 percent, and 22.1 percent respectively in mid-July 2022.

Exchange Rate

Nepalese currency vis-à-vis the US dollar appreciated 0.23 percent in mid-September 2022 from mid July 2022. It had appreciated by 1.49 percent in the same period of the previous year. The buying exchange rate per US dollar stood at Rs.127.22 in mid-September 2022 compared to Rs.127.51 in mid July 2022.

According to Financial Comptroller General Office (FCGO), the total expenditure of the federal government amounted to Rs. Rs.134.34 billion in 2022/23. The recurrent expenditure, capital expenditure and financing expenditure of the federal government amounted to Rs. 108.73 billion, Rs. 5.86 billion and Rs 19.75 billion respectively in 2022/23.

In the review period, revenue mobilization (including the amount to be transferred to provincial and local governments) stood at Rs.143.81 billion. The tax revenue and non tax revenue amounted Rs.130.70 billion and Rs.13.11 billion respectively in the review period.

Banking

Domestic credit increased 0.6 percent in the review period compared to an increase of 3.1 percent in the corresponding period of the previous year. On y-o-y basis, domestic credit increased 11.6 percent in mid-September 2022.

Monetary Sector's claims on the private sector 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 y-o-y basis, such claims increased 8.2 percent in mid-September 2022.

Interest Rates

The average base rate of commercial banks increased to 10.01 percent in the second month of 2022/23 from 6.89 percent a year ago. Weighted average deposit rate and lending rate of commercial banks stood at 7.81 percent and 12.06 percent respectively in the review month. Such rates were 4.92 percent and 8.57 percent respectively a year ago.