Nepal Rastra Bank, the central bank of Nepal, has unveiled the current macroeconomic and financial situation of Nepal based on three months’ data ending mid-October, 2022/23)
The Nepal Rastra Bank estimated that the inflation remained at 8.50 percent on a y-o-y basis. The gross foreign exchange reserves stood at USD 9.48 billion, whereas, the total imports and exports have decreased by 16.2 percent and 35.7 percent respectively during the mentioned period.
As of mid-October 2022, the outstanding concessional loan is Rs.210.47 billion extended to 147,642 borrowers. Of which, Rs. 138.21 billion has been extended to 60,061 borrowers for selected commercial agriculture and livestock businesses. Likewise, Rs. 68.69 billion loan has been extended to 84,750 women entrepreneurs. Total 2,831 borrowers have availed Rs.3.57 billion concessional loan in other sectors.
NEPSE index stood 1858.3 in mid-October 2022 compared to 2657 in mid- October 2021.
The y-o-y wholesale price inflation increased 13.73 percent in the review month compared to 3.83 percent a year ago.
The y-o-y consumer price inflation remained at 8.50 percent in mid-October 2022 compared to 4.24 percent a year ago.
The y-o-y wholesale price of consumption goods, intermediate goods and capital goods increased 10.24 percent, 17.13 percent and 6.00 percent respectively. The wholesale price of construction materials increased 19.27 percent in the review month.
Import and Export
During the first three months of 2022/23, merchandise exports decreased 35.7 percent to Rs.41.82 billion against an increase of 109.5 percent in the same period of the previous year. Destination-wise, exports to India and China decreased 45.0 percent and 35.0 percent respectively whereas exports to other countries increased 5.0 percent. Exports of zinc sheet, particle board, woolen carpets, readymade garments, tea, among others, increased whereas exports of soyabean oil, palm oil, oil cakes, jute goods, silverware and jewelries, among others, decreased in the review period.
During the said period, merchandise imports decreased 16.2 percent to Rs.401 billion against an increase of 63.7 percent a year ago. Destination-wise, imports from India, China and other countries decreased 14.8 percent, 16.7 percent, and 19.2 percent respectively. Imports of petroleum products, chemical fertilizer, sponge iron, medicine, coal, among others, increased whereas imports of transport equipment & parts, silver, telecommunication equipments and parts, crude soyabean oil, M.S. wire rod, bars, coils & others, among others, decreased in the review period.
The total trade deficit decreased 13.1 percent to Rs.359.18 billion during the three months of 2022/23. Such a deficit had increased 58.3 percent in the corresponding period of the previous year. The export-import ratio decreased to 10.4 percent in the review period from 13.6 percent in the corresponding period of the previous year.
Services and Remittance
Net services income remained at a deficit of Rs.21.70 billion in the review period compared to a deficit of Rs.23.34 billion in the same period of the previous year.
Remittance inflows increased 16.8 percent to Rs.281.05 billion in the review period against a decrease of 7.1 percent in the same period of the previous year. In the US Dollar terms, remittance inflows increased 7.9 percent to 2.19 billion in the review period against a decrease of 7.1 percent in the same period of the previous year. The number of Nepali workers taking new approval (institutional and individual) for foreign employment increased 123.1 percent to 147,932 in the review period. Likewise, the number of Nepali workers taking renew entry approval for foreign employment increased 66.2 percent to 57,861 in the review period. It had increased 219.7 percent in the same period of the previous year.
The BFIs interbank transactions amounted Rs.941.61 billion including Rs.856.02 billion inter-bank transactions among commercial banks and Rs.85.58 billion among other financial institutions (excluding transactions among commercial banks). In the corresponding period of the previous year, such transactions was Rs.919.89 billion including Rs.797.28 billion among commercial banks and Rs.122.61 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 7.5 percent to US dollar 91.04 per barrel in mid-October 2022 from US dollar 84.67 per barrel a year ago. The price of gold decreased 6.1 percent to US dollar 1664.75 per ounce in mid October 2022 from US dollar 1772.65 per ounce a year ago.
Foreign Exchange Reserves and Adequacy Indicators
Gross foreign exchange reserves increased 2.5 percent to Rs.1246.22 billion in mid- October 2022 from Rs.1215.80 billion in mid-July 2022. In the US dollar terms, the gross foreign exchange reserves decreased 0.6 percent to 9.48 billion in mid-October 2022 from 9.54 billion in mid-July 2022.
Of the total foreign exchange reserves, reserves held by NRB increased 4.3 percent to Rs.1101.60 billion in mid-October 2022 from Rs.1056.39 billion in mid-July 2022. Reserves held by banks and financial institutions (except NRB) decreased 9.3 percent to Rs.144.62 billion in mid-October 2022 from Rs.159.41 billion in mid-July 2022. The share of Indian currency in total reserves stood at 23.8 percent in mid-October 2022.
Based on the imports of three months of 2022/23, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 9.6 months, and merchandise and services imports of 8.3 months. The ratio of reserves-to-GDP, reserves-to-imports and reserves-to-M2 stood at 25.7 percent, 69.5 percent and 22.5 percent respectively in mid-October 2022. Such ratios were 25.1 percent, 57.8 percent and 22.1 percent respectively in mid-July 2022.
Nepalese currency vis-à-vis the US dollar depreciated 3.01 percent in mid-October 2022 from mid- July 2022. It had depreciated 0.90 percent in the same period of the previous year. The buying exchange rate per US dollar stood at Rs.131.47 in mid-October 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. 278.17 billion in 2022/23. The recurrent expenditure, capital expenditure and financial expenditure amounted to Rs.223.75 billion, Rs.19.68 billion and Rs.34.73 billion respectively in the review period.
In the review period, revenue mobilization (including the amount to be transferred to provincial and local governments) stood at Rs.208.58 billion. The tax revenue and non tax revenue amounted Rs.189.38 billion and Rs.19.20 billion respectively in the review period.
Domestic credit increased 1.5 percent in the review period compared to an increase of 5.1 percent in the corresponding period of the previous year. On y-o-y basis, domestic credit increased 10.5 percent in mid-October 2022.
Monetary Sector's claims on the private sector increased 1.6 percent in the review period compared to an increase of 7.8 percent in the corresponding period of the previous year. On y-o-y basis, such claims increased 6.8 percent in mid-October 2022.
The average base rate of commercial banks increased to 10.34 percent in the third month of 2022/23 from 7.57 percent a year ago. Weighted average deposit rate and lending rate of commercial banks stood at 8.16 percent and 12.19 percent respectively in the review month. Such rates were 5.43 percent and 8.69 percent respectively a year ago.