The macroeconomic report is prepared based on first eight month’s data of FY 2074/75 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 as at Mid-March 2018 declined by 5.11% to close at 1,285.96 points, compared to 1,355.23 points in the same period last year. The market capitalization of NEPSE as well decreased from NPR 1,536.93 billion in Mid-March 2017 to NPR 1,505.58 billion in Mid-March 2018. Out of total market capitalization, the share of banks, financial institutions and insurance companies stood at 81.4 percent, hydro power: 4.5 percent, manufacturing and processing companies: 2.7 percent, hotels: 1.6 percent, trading: 0.1 percent, and others: 9.7 percent respectively.

On the other hand, the ratio of market capitalization of NEPSE to GDP as at Mid-March 2018 has dropped down to 57.9% compared to 68.4% in the last year during the same review period.

* GDP of 2015, 2016 and 2017 at Producer’s Prices


To evaluate current scenario of interest rate of the economy, following rates are taken into consideration:

  1. Interbank Rate
  2. Base Rate of Commercial Banks

Interbank Rate

As shown in the chart below, the inter bank rate of commercial banks has reached the one-year-high of 4.87% in Mid-March 2018 indicating tight liquidity faced by commercial banks. Since past four months, inter bank rate has stood above 4% level, which is on the higher end indicating commercial banks are facing difficulty in maintaining their CD ratio and are in shortage of further loanable fund.

Base Rate

The base rate of commercial banks is in increasing trend, which has reached the one-year-high of 10.36% as at Mid-March 2018 compared to 10.19% during the previous month. Last year during the same review period, the base rate of commercial banks stood at 8.3%, implying borrowers have to pay higher interest rate at present, which is a major setback for them.


As reported by NRB, the consumer price inflation in Nepal has elevated to 6.0% in Mid-March 2018 compared to 5.0% a month ago. The current index of inflation is at 119.1 which was 120.6 in November 2017. Compared to base index of 112.4 in March 2017, the inflation is computed as 6%. However, the index at fiscal year-end (Mid-July 2016/17) was 115.9. So, based on this index, the inflation rate can be computed as 2.72% only. The inflation index at the end of fiscal year 2074/75 is likely to be around 119.3. Therefore, the inflation rate of 4% can be expected by the end of fiscal year.

The current rise in inflation is partly due to spike in prices of vegetables and the lower price base of last year. However, the ongoing market interest rate on deposits or, government bond and corporate debentures can easily beat this inflation rate.

Real Interest Rate

Considering nominal interest rate as weighted average deposit rate of 6.45% (as at Mid-March 2018) and inflation rate of 6%, the real interest via Fisher equation is 0.45% only.


Deposit Growth: The deposits of BFI’s as at Mid-March End, 2018 increased to NPR 2,554.53 billion by 7.55%, compared to NPR 2,375.11 billion in Mid-July End, 2017. The growth during the same period last year was 8.50%. Out of the total deposits at the BFIs, the share of saving deposits decreased to 36.5 percent in mid-March 2018 from 37.3 percent a year ago. However, the share of demand deposits increased to 8.4 percent from 7.6 percent, and fixed deposits to 44.0 percent from 38.1 percent a year ago. The share of institutional deposits in total deposit of BFI’s stood at 44.0 percent in mid-March 2018. Such share was 48.4 percent a year ago.

Credit Growth: The credit disbursement of BFI’s as at Mid-March End, 2018 increased to NPR 2,261.35 billion by 13.85%, compared to NPR 1,986.23 billion in Mid-July End, 2017. The growth during the same period during last year was 15.15%.

Moreover, if we compare the credit growth rate (13.85%) with deposit growth rate (7.55%) of BFI’s, then the credit growth rate is much higher than the deposit growth rate reflecting a tighter financial condition. Fiscal operations are gaining momentum following the successful conclusion of elections and the formation of government at local, provincial and federal levels. The acceleration in fiscal operations is expected to ameliorate financial conditions in days ahead.


Total liquidity mopped up in the first eight months of FY 2017/18:

Till the first eight months of FY 2017/18, NRB has mopped up NPR 130.25 billion through open market operation, out of which NPR 42.35 billion was mopped up under deposit collection auction, NPR 3.15 billion through 14 days’ deposit collection auction under interest rate corridor and NPR 84.75 billion through reverse repo auction on a cumulative basis. In the corresponding period of previous year, NPR 101.10 billion liquidity was absorbed.

Total liquidity injected in the first eight months of FY 2017/18:

In contrast, during the first eight months of FY 2017/18, NRB injected Rs. 283.32 billion through purchase of US dollars, whereas NPR 97.25 billion was injected through repo auction and outright purchase in the wake of liquidity crunch in the banking system compared to NPR 61 billion last year during the same period. In addition, the BFI’s had also utilized Standing Liquidity Facility (SLF) of NPR 27.38 billion in the first eight months of this fiscal year to further manage the liquidity in the banking system. The BFI’s had utilized such facility of NPR 58.17 billion during the same period last year.


Budget Deficit/ Surplus

In the first eight months of 2017/18, the Government of Nepal (GoN) was at a deficit of Rs. 53.63 billion in its budget. There was deficit of Rs. 8.73 billion in the corresponding period of the previous year.

 Government Revenue and Expenditure

In comparison to first eight months of FY 2016/17, the government expenditure has increased by 35.09% to NPR 506.55 billion.

On the other hand, the government revenue witnessed the growth of 22.19% compared to corresponding period of the last fiscal year. The government revenue for the first eight months in this fiscal year stood at NPR 432.74 billion compared to NPR 354.15 billion in the first eight months of last fiscal year.


The country’s BOP position is in deficit by Rs. 24.73 billion till the first eight months of FY 2017/18, mainly due to huge deficit seen in current account by Rs. 153.96 billion as a result of significant increase in imports and dividends payment for foreign investment. During the corresponding period in last year, BOP was at surplus by Rs. 50.02 billion, whereas the current account was at deficit by Rs. 6.31 billion.

In the review period, the flow of foreign direct investment (FDI) amounted to Rs. 14.24 billion compared to Rs. 8.35 billion in the corresponding period of the previous year.


The workers’ remittance growth rate is subject to change in terms of US Dollar and Nepalese Currency based on exchange rate of NRs with 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 first eight months’ data of FY 2017/18 show that worker’s remittance has witnessed an increment of 9.47% to reach $4,578.80 million compared to 3.69% growth in 2016/17.

Remittance in NPR terms

On the other hand, in NPR terms, the workers’ remittance increased by 4.9% to NPR 471.86 billion during first eight months in FY 2017/18 compared to a growth of 5.30% during the same period in FY 2016/17. However, net transfer receipts decreased 0.7 percent to Rs. 539.19 billion in the review period. Such receipts had increased 8.4 percent in the same period of the previous year.

As per the data of Department of Foreign Employment, the number of Nepalese workers going for foreign employment (except renew entry) fell by 5.4 percent in the review period. It had decreased 7.1 percent in the same period of the previous year, too.