This macroeconomic report is prepared based on first month’s data of FY 2075/76 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-Aug 2018 declined by 25.87% to close at 1,210.32 points, compared to 1,632.66 points in the same period last year. The market capitalization of NEPSE as well declined from NPR 1,915.19 billion in Mid-Aug 2017 to NPR 1,440.17 billion in Mid-Aug 2018. Out of total market capitalization, the share of banks, financial institutions and insurance companies stood at 80.7 percent, hydropower: 4.4 percent, manufacturing and processing companies: 2.7 percent, hotels: 1.7 percent, trading: 0.1 percent, and others: 10.4 percent respectively.

On the other hand, the ratio of market capitalization of NEPSE to GDP as at Mid-Aug 2018 has significantly dropped down to 47.89% compared to 72.47% in the last year during the same review period.


To evaluate current scenario of interest rate in the economy, interbank rate and base rate of commercial banks are taken into consideration.

Interbank Rate

As shown in the chart below, the interbank rate of commercial banks has declined to 1.88% in Mid-August 2018 compared to 2.96% in the previous month. The interbank rate above 4% level from Mid-December, 2017 till Mid-June, 2018, which was on the higher end due to tight liquidity in the banking system. Thus, this sudden decline in interbank rate has indicated liquidity situation is improving in the banking system.

Base Rate

With some ease of liquidity in the banking channel, the weighted average interest rate on deposits of Commercial Banks has gone down to 6.40% and consequently, the base rate as well has gone down in Mid-Aug 2018 to reach at 10.12%, which was 10.47 in the previous month. Last year during the same review period, the base rate of commercial banks stood at 9.67%. The base rate of commercial banks was in increasing trend, and reached one-year-high of 10.47% in Mid-May 2018.


As reported by NRB, the consumer price inflation which was 2.3% a year ago increased to 4.2% in Mid-Aug 2018 due to increase in the price of food, beverage and other essential items. 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 6.40% (as at Mid-Aug 2018) and inflation rate of 4.2%, the real interest via Fisher equation is 2.20% only.


Deposit Growth: The deposits of BFI’s as at Mid-Aug 2018 has decreased by 0.38% to NPR 2,731.77 billion, compared to NPR 2,742.10 billion in Mid-July 2018. The growth during the same period last year was 1.28%. Out of the total deposits at the BFIs, the share of saving deposits decreased to 34.5 percent in Mid-Aug 2018 from 35.3 percent a year ago. However, the share of demand deposits remained at same level like last year at 7.8 percent, whereas as the fixed deposits increased to 46.4 percent from 43.2 percent a year ago. The share of institutional deposits in total deposit of BFIs stood at 44.50 percent in Mid-Aug 2018. Such share was 45.00 percent a year ago.

Credit Growth: The credit disbursement of BFI’s as at Mid-Aug 2018 increased to NPR 2,416.56, billion by 0.70%, compared to NPR 2399.81 billion in Mid-July 2018. The growth during the same period during last year was 0.39%. In the review period, the private sector credit from commercial banks increased 0.8 percent, whereas such credit from development banks and finance companies decreased 0.2 percent and 0.5 percent respectively. The term loan extended by BFIs increased 2.4 percent, trust receipt (import) loan increased 1.9 percent, demand and working capital loan increased 2.2 percent, real estate loan (including residential personal home loan) increased 0.6 percent and hire purchase loan increased 1.4 percent, while overdraft and margin nature loan decreased 1.7 percent and 2.3 percent respectively.

Though the liquidity situation is at ease as of now, if we compare the credit growth rate of 0.70% and deposit growth rate of -0.38%, then the liquidity problem is likely to reoccur again if the deposit growth couldn’t matchup with the credit demand and also if there is lag in the government expenditure.


In the review period, NRB mopped up NPR 80.35 billion through open market operations. Of which, NPR 79.65 billion was mopped up under deposit collection auction and NPR 700 million through reverse repo auction on a cumulative basis. NPR 73.50 billion liquidities was mopped up in the corresponding period of the previous year.

On the other hand, NRB injected net liquidity of NPR 9.69 billion through the net purchase of USD 87.8 million from foreign exchange market. Net liquidity of NPR 18.74 billion was injected through the net purchase of USD 182.9 million in the corresponding period of the previous year.


Budget Deficit/ Surplus

The budget surplus of the Government of Nepal (GoN) increased to NPR 57.54 billion in the first month of 2018/19 from a surplus of Rs.28.52 billion in the corresponding period of the previous year.

In comparison to one month of FY 2017/18, the government expenditure has decreased by 42.71% to NPR 10.64 billion.

On the other hand, the government revenue witnessed a growth of 37.55% compared to corresponding period of the last fiscal year. The government revenue for one month in this fiscal year stood at NPR 62.98 billion compared to NPR 45.79 billion in the first month of last fiscal year.


The country’s BOP position is already in deficit in the first month of FY 2018/19 by NPR 24.77 billion, mainly due to huge deficit seen in current account by NPR 25.38 billion as a result of significant increase in imports. During the corresponding period in last year, BOP was at deficit by NPR 3.29 billion only, whereas the current account was at deficit by NPR 5.98 billion.

In the review period, Nepal received capital transfer amounting to NPR 1.70 billion and Foreign Direct Investment (FDI) inflows of NPR 295.7 million. In the same period of the previous year, capital transfer and FDI inflows amounted to NPR 674.7 million and NPR 4.61 billion respectively.


The workers’ remittance growth rate is subject to change in 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 one months’ data of FY 2018/19 shows that worker’s remittance growth has witnessed an increment of 24.01% to reach $671.52 million compared to 11.75% growth in 2017/18. One of the main reason behind this significant growth is due to constantly increasing dollar value.

Remittance in NPR terms

On the other hand, in NPR terms, the workers’ remittance increased by 33.12% to NPR 73.95 billion during one month in FY 2018/19 compared to a growth of 6.96% during the same period in FY 2017/18.

As per the data of Department of Foreign Employment, the number of Nepalese workers seeking foreign employment decreased 33.5 percent in the review period. It had decreased 11.8 percent in the same period of the previous year. In the review period, the number of workers outbound to Malaysia shrank significantly.