This macroeconomic report is prepared based on five 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-December 2018 declined by 24.43% to close at 1,148.78 points, compared to 1,520.15 points in the same period last year. The market capitalization of NEPSE as well declined from NPR 1,767.56 billion in Mid-December 2017 to NPR 1,370.36 billion in Mid-December 2018.

On the other hand, the ratio of market capitalization of NEPSE to GDP as at Mid-December 2018 has significantly dropped down to 45.57% compared to 66.89% 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 as at Mid-December 2018 has slightly dropped down to 1.20% compared to 1.68% a month ago. The interbank rate during the same period a year ago was at peak at 4.83% indicating slight ease in liquidity at present. The interbank rate has been maintained at lower end in the first five months of this fiscal year, inferring slight ease in liquidity.

Base Rate

The base rate of commercial banks has slightly increased to 10.30% in Mid-December, 2018 compared to 9.87% a year ago. This has set the weighted average lending rate at 12.32%. On the other hand, the weighted average deposit rate stands at 6.62%.


As reported by NRB, the consumer price inflation which was 4.20% a year ago marginally declined to 3.70% in Mid-December 2018, due to marginal increase in the price of food and beverage group, which contributed to a moderate inflation in the review period. Moreover, 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 6.62% (as at Mid-December 2018) and inflation rate of 3.70%, the real interest via Fisher equation is 2.92% only.


Deposit Growth: The deposits of BFI’s as at Mid-December 2018 increased by 6.21% to NPR 3012.92 billion, compared to NPR 2,836.65 billion in Mid-July 2018. The growth during the same period last year was 5.62%. The share of demand, saving and fixed deposits in total deposits stood at 8.80 percent, 33.40 percent and 47.50 percent respectively in Mid-December 2018. Such shares were 8.2 percent, 36.40 percent and 41.90 percent respectively a year ago. And the share of institutional deposits in total deposit of BFIs stood at 45.10 percent in Mid-December 2018. Such share was 45.50 percent a year ago.

Credit Growth: The credit disbursement of BFI’s as at Mid-December 2018 increased to NPR 2667.14 billion by 10.09%, compared to NPR 2,422.78 billion in Mid-July 2018. The growth during the same period during last year was 6.95%. Of the total outstanding credit of BFIs in mid-December 2018, 63.30 percent is against the collateral of land and building and 14.6 percent against the collateral of current assets (such as agricultural and non-agricultural products). Such ratios were 61.9 percent and 14 percent respectively a year ago.

In the review period, term loan extended by BFIs increased 12.70 percent, overdraft increased 5.80 percent, trust receipt (import) loan increased 18.20 percent, demand and working capital loan increased 14.80 percent, real estate loan (including residential personal home loan) increased 6.0 percent and hire purchase loan increased 5.60 percent.

Though the liquidity situation is at some ease as of now after the banks have reached a gentleman agreement to fix the interest rate ceiling at 9.25 percent for the private fixed deposits; but if we compare the credit growth rate of 10.09% and deposit growth rate of 6.21%, then the credit crunch 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 100.35 billion through open market operations. Of which, NPR 79.65 billion was mopped up under deposit collection auction and NPR 20.70 billion through reverse repo auction.

On the other hand, NRB injected net liquidity of NPR 131.54 billion through the net purchase of USD 1.14 billion from foreign exchange market. Net liquidity of NPR 165.46 billion was injected through the net purchase of USD 1.60 billion in the corresponding period of the previous year. Moreover, BFIs have also utilized standing liquidity facility (SLF) of Rs. 5.72 billion in the review period. Such facility utilized in the corresponding period of the previous year was Rs. 20.58 billion.


Budget Performance

The budget surplus of the Government of Nepal (GoN) recorded to NPR 37.56 billion in five months of FY 2018/19 from NPR 4.93 billion in the corresponding period of the previous year. Of the total revenue budget of NPR 945.6 billion, 32.49% has been outturned in the first five months of FY 2018/19. In contrast, only 20.81% of the total expenditure budget of NPR 1,315.2 billion has been attained in five months of current fiscal year.

Government Revenue and Expenditure

In comparison to five months of FY 2017/18, the government expenditure growth has decreased to 6.80% to reach at NPR 273.74 billion.  On the other hand, the government revenue witnessed a growth of 26.45% compared to corresponding period of the last fiscal year. The government revenue for five months in this fiscal year stood at NPR 307.23 billion compared to NPR 242.97 billion in the five months of last fiscal year.


The country’s BOP position is in deficit in the first five months of FY 2018/19 by NPR 85.32 billion, mainly due to huge deficit seen in current account by NPR 119.33 billion. During the corresponding period in last year, BOP was at deficit by NPR 5.47 billion only, whereas the current account was at deficit by NPR 64.11 billion.In the review period, Nepal received capital transfer amounting to NPR 5.27 billion and Foreign Direct Investment (FDI) inflows of NPR 6.78 billion. In the same period of the previous year, capital transfer and FDI inflows had amounted to NPR 8.86 billion and NPR 11.12 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 five months’ data of FY 2018/19 shows that worker’s remittance growth has witnessed an increment of 19.25% to reach $3296.85 million compared to 3.16% growth in 2017/18.

Remittance in NPR terms

On the other hand, in NPR terms, the workers’ remittance increased by 31.92% to NPR 376.60 billion during five months in FY 2018/19 compared to a growth of 5.20% during the same period in FY 2017/18.

As per the data of Department of Foreign Employment, the number of Nepalese workers migrated for foreign employment (except renew entry) decreased 40.2 percent in the review period. It had decreased 2.5 percent in the same period of the previous year. In the review period, the number of workers outbound to Malaysia shrank significantly.