Macroeconomic Summary of First 7 Months of Fiscal Year: Import-Export Rises While Liquidity Faces Imbalance
Nepal Rastra Bank, the central bank of Nepal, has unveiled the current macroeconomic and financial situation of Nepal based on the first seven months' data of the fiscal year 2021/22.
Inflation
The y-o-y consumer price inflation stood at 5.97 percent in the seventh month of FY 2021/22 compared to 2.70 percent a year ago. Food and beverage inflation stood at 6.00 percent whereas non-food and service inflation stood at 5.96 percent in the review month.
Import and Export
During the seven months of 2021/22, merchandise exports increased 88.3 percent to Rs.131.66 billion compared to an increase of 7.6 percent in the same period of the previous year. Destination-wise, exports to India and other countries increased 113.0 percent and 27.7 respectively whereas exports to China decreased 12.4 percent. Exports of palm oil, soyabean oil, oil cakes, polyster yarn, and thread, juice among others, increased whereas exports of cardamom, tea, herbs, wire, copper wire rod, among others, decreased in the review period.
During the seven months of 2021/22, merchandise imports increased 42.8 percent to Rs.1147.46 billion compared to an increase of 0.01 percent a year ago. Destination-wise, imports from India, China, and other countries increased 30.9 percent, 42.3 percent, and 83.8 percent respectively. Imports of petroleum products, medicine, crude palm oil, crude soyabean oil, transport equipment, vehicle, and other parts, among others, increased whereas imports of M.S. billet, chemical fertilizer, cement, pulses, molasses sugar, among others, decreased in the review period.
The total trade deficit increased 38.4 percent to Rs.1015.81 billion during the seven months of 2021/22. Such a deficit had contracted 0.7 percent in the corresponding period of the previous year.
Services and Remittance
Net services income remained at a deficit of Rs.55.59 billion in the review period compared to a deficit of Rs.35.37 billion in the same period of the previous year.
Remittance inflows decreased 4.9 percent to Rs.540.12 billion in the review period against an increase of 10.9 percent in the same period of the previous year. In the US Dollar terms, remittance inflows decreased 5.8 percent to 4.53 billion in the review period against an increase of 6.8 percent in the same period of the previous year.
Price of Oil and Gold
The price of oil (Crude Oil Brent) in the international market increased 56.1 percent to US Dollar 97.50 per barrel in mid-February 2022 from US Dollar 62.47 per barrel a year ago. The price of gold increased 0.8 percent to US Dollar 1831.15 per ounce in mid-February 2022 from US Dollar 1816.35 per ounce a year ago.
Exchange Rate
Nepalese currency vis-à-vis the US Dollar depreciated 1.06 percent in mid-February 2022 from mid July 2021. It had appreciated 3.53 percent in the same period of the previous year. The buying exchange rate per US Dollar stood at Rs.120.32 in mid-February 2022 compared to Rs.119.04 in mid-July 2021.
Government Fiscal Situation
During the seven months of 2021/22, the total expenditure of the federal government according to data of Financial Comptroller General Office (FCGO), Ministry of Finance, stood at Rs.591.02 billion. The recurrent expenditure, capital expenditure, and financial expenditure amounted to Rs.475.62 billion, Rs.60.79 billion, and Rs.54.61 billion respectively in the review period.
Meanwhile, revenue mobilization (including the amount to be transferred to provincial and local governments) stood at Rs.613.41 billion. The tax revenue and non-tax revenue amounted to Rs.560.84 billion and Rs.52.57 billion respectively in the review period.
The total resource mobilization of provincial governments remained at Rs.89.07 billion. The federal government transferred Rs.63.54 billion as grants and revenue from federal divisible funds to provincial governments and the provincial governments mobilized Rs.25.53 billion in terms of revenue and other receipts in the review period. In the review period, the total expenditure of provincial governments stood at Rs.49.31 billion.
Banking
Deposits at Banks and Financial Institutions (BFIs) increased 3.6 percent in the review period compared to an increase of 9.8 percent in the corresponding period of the previous year. On y-o-y basis, deposits at BFIs expanded 14.6 percent in mid-February 2022.
Meanwhile, the private sector credit from BFIs increased 12.3 percent in the review period compared to an increase of 14.1 percent in the corresponding period of the previous year. On y-o-y basis, credit to the private sector from BFIs increased 25.3 percent in mid-February 2022.
Interest Rates
The average base rate of commercial banks stood 8.53 percent in the seventh month of 2021/22 which was 6.97 percent a year ago. The weighted average deposit rate and lending rate of commercial banks stood at 6.49 percent and 10.31 percent respectively in the review month. Such rates were 4.86 percent and 8.89 percent respectively a year ago.
