This macroeconomic report is prepared based on ten month’s data of FY 2021/22 published by NRB. The key macro-economic indicators and variables are highlighted in the table below and explained in further section :
A. NEPSE and Ratio of Market Cap to GDP
The NEPSE index at Mid-May 2022 decline by -12.43% to close at 2,350.43 points, compared to 2,684.09 points in the same period last year. The Market capitalization of NEPSE as well decreased from NPR 3,724.55 billion in Mid-May 2021 to NPR NPR 3,343.56 billion in Mid-May 2022.
On the other hand, the ratio of market capitalization of NEPSE to GDP at Mid-May 2022 has decreased to 68.92% compared to 87.08% in the last year during the same review period.
B. INTEREST RATES
To evaluate the current scenario of interest rate in the economy, interbank rate and base rate of commercial banks are taken into consideration.
The interbank rate of commercial banks had decreased to 0.02% in Mid-Aug,2020 which has been gradually rising since then and has reached to 6.99% in Mid-May 2022 indicating tightening of liquidity in the banking system. The interbank rate during the same period a year ago stood at 4.12%.
The base rate of commercial banks stands at 9.30% in Mid-May 2022 compared to 6.83% a year ago. This has set the weighted average lending rate at 11.42%. On the other hand, the weighted average deposit rate stands at 7.25%. Such rates were 8.53% and 4.81% respectively in the corresponding month of the previous year.
C. INFLATION RATE
The consumer price inflation which was 3.65% a year ago which has increased to 7.87% in Mid-May 2022. This is the highest increase in CPI index in past five years. Food and beverage inflation stood at 7.13 percent whereas non-food and service inflation stood at 8.45 percent in the review month. The prices of ghee & oil, fruits, milk products & eggs, pulses & legumes, and tobacco products sub-categories rose by 24.86 percent, 12.61 percent, 11.30 percent, 10.53 and 9.70 percent respectively on y-o-y basis.
D. DEPOSIT AND LENDING GROWTH
Deposit Growth: The deposits of BFI’s as at Mid-May 2022 increased by 4.41% to NPR 4,949.89 billion, compared to NPR 4,740.90 billion in Mid-July 2021. The increase during the same period last year was 13.80%. The share of demand, saving, and fixed deposits in total deposits stands at 8.5 percent, 28.1 percent and 56.5 percent respectively in mid-May 2022. Such shares were 8.2 percent, 34.3 percent and 49.4 percent respectively a year ago.
Credit Growth: The credit disbursement of BFI’s as at Mid-May 2022 increased to NPR. 4,724.88 billion by 13.23%, compared to NPR 4,172.78 billion in Mid-July 2021. The growth during the same period last year was 24.35%. Outstanding loan of BFIs to the agriculture sector increased 18.9 percent, industrial production sector 10.3 percent, transportation, communication and public sector 12.1 percent, wholesale and retail sector 15.6 percent and service industry sector 8.5 percent in the review period.
In the review period, term loan extended by BFIs increased 18.5 percent, overdraft 17.7 percent, demand and other working capital loan 18 percent, real estate loan (including residential personal home loan) 15.8 percent and hire purchase loan 3.3 percent while that of trust receipt (import) loan decreased 52.5 percent and margin nature loan 14 percent.
E. LIQUIDITY MANAGEMENT
In the review period, NRB mopped up Rs.60 billion liquidity of which Rs.28.35 billion was through reverse repo auction and Rs.31.65 billion through deposit collection auction. In the corresponding period of the previous year, NRB mopped Rs.303.29 billion liquidity of which Rs.109.54 billion was through reverse repo and Rs. 193.75 billion through deposit collection auction.
In the review period, NRB injected Rs.7,402.65 billion liquidity of which Rs. 430.77 billion was through repo, Rs.55.92 billion through outright purchase and Rs.6,915.96 billion through standing liquidity facility.
F. FISCAL SITUATION
In the first Ten months of 2021/22, total revenue collected by the government till Mid-May 2022 is Rs.865.70 billion which is 13.76% higher compared with the corresponding month of the previous fiscal year. The total expenditure of the government till Mid-May 2022 is Rs.908.86 billion which is 10.19% higher than that of the expenditure on the corresponding month of previous fiscal year.
G. BALANCE OF PAYMENT POSITION
The country’s BOP position is at deficit in the first ten month of FY 2021/22 by NPR 288.50 billion compared to a surplus of NPR 7.75 billion during the same period last year. On the other hand, the current account remained at a deficit of Rs.547.36 billion in the review period compared to a deficit of Rs.251.28 billion in the same period of the previous year.
In the review period, capital transfer decreased 41.3 percent to Rs.7.99 billion and net foreign direct investment (FDI) increased 18.2 percent to Rs.16.65 billion. In the same period of the previous year, capital transfer and net FDI amounted to Rs.13.62 billion and Rs.14.08 billion respectively.
The workers’ remittance growth rate is subject to different terms of US Dollar and Nepalese Currency based on exchange rate of NPR with US Dollar. Hence, the workers’ remittance growth in terms of US Dollar and NPR has been presented below:
Remittance in Dollar Terms
In US Dollar terms, the workers’ remittance decreased by 1.58% to $6,762.71 million during the first ten months in FY 2021/22 compared to an increase of 16.11% during the same period in FY 2020/21.
Remittance in NPR terms
On the other hand, in NPR terms, the workers’ remittance increased by 0.19% to NPR 811.79 billion during the first ten months in FY 2021/22 compared to a rise of 19.21% during the same period in FY 2020/21.
Number of Nepali workers (institutional and individual-new and legalized) taking approval for foreign employment increased significantly to 278,298 in the review period. It had decreased 68.4 percent in the same period of the previous year. The number of Nepali workers (Renew entry) taking approval for foreign employment increased 185.5 percent to 230,466 in the review period. It had decreased 54.0 percent in the same period of the previous year. Net transfer increased 0.01 percent to Rs.903.62 billion in the review period. Such a transfer had increased 17.1 percent in the same period of the previous year.