This macroeconomic report is prepared based on four 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-November 2018 declined by 19.08% to close at 1,205.02 points, compared to 1,489.06 points in the same period last year. The market capitalization of NEPSE as well declined from NPR 1,728.68 billion in Mid-November 2017 to NPR 1,456.95 billion in Mid-October 2018.

On the other hand, the ratio of market capitalization of NEPSE to GDP as at Mid-November 2018 has significantly dropped down to 48.45% compared to 65.42% 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-November 2018 has leveled with the recent low of 1.68% (reported in Mid-September, 2018). The interbank rate during the same period a year ago was 2.68%. The interbank rate has been maintained at lower range in the first four months of this fiscal year, inferring slight ease in liquidity.

Base Rate

The base rate of commercial banks has marginally increased to 10.21% in Mid-November, 2018 compared to 10.11% a year ago. This has set the weighted average lending rate at 12.26%. On the other hand, the weighted average deposit rate stands at 6.61%.


As reported by NRB, the consumer price inflation which was 3.90% a year ago marginally increased to 4.20% in Mid-November 2018, mainly due to increase in price of transportation, cereal & grains, housing & utilities and clothing, among others, which contributed to a rise in overall inflation in the review period. 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 6.61% (as at Mid-November 2018) and inflation rate of 4.20%, the real interest via Fisher equation is 2.41% only.


Deposit Growth: The deposits of BFI’s as at Mid-November 2018 increased by 4.07% to NPR 2,952.24 billion, compared to NPR 2,836.65 billion in Mid-July 2018. The growth during the same period last year was 4.68%. The share of demand, saving and fixed deposits in total deposits stood at 7.70 percent, 34.70 percent and 46.2 percent respectively in Mid-November 2018. Such shares were 7.9 percent, 36.2 percent and 42.3 percent respectively a year ago. And the share of institutional deposits in total deposit of BFIs stood at 44.30 percent in Mid-November 2018. Such share was 44.80 percent a year ago.

Credit Growth: The credit disbursement of BFI’s as at Mid-November 2018 increased to NPR 2625.10 billion by 8.35%, compared to NPR 2,422.78 billion in Mid-July 2018. The growth during the same period during last year was 6.09%. Of the total outstanding credit of BFIs in mid-November 2018, 63.2 percent is against the collateral of land and building and 14.7 percent against the collateral of current assets (such as agricultural and non-agricultural products). Such ratios were 61.2 percent and 14.5 percent respectively a year ago.

In the review period, term loan extended by BFIs increased 11.1 percent, overdraft increased 4.0 percent, trust receipt (import) loan increased 14.50 percent, demand and working capital loan increased 13.70 percent, real estate loan (including residential personal home loan) increased 5.2 percent and hire purchase loan increased 3.1 percent.

Though the liquidity situation is at some ease as of now, if we compare the credit growth rate of 8.35% and deposit growth rate of 4.07%, 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 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 101.86 billion through the net purchase of USD 879.50 million from foreign exchange market. Net liquidity of NPR 130.74 billion was injected through the net purchase of USD 1.27 billion in the corresponding period of the previous year. Moreover, BFIs have also utilized standing liquidity facility (SLF) of Rs. 5.42 billion in the review period. Such facility was Rs. 5.50 billion in the corresponding period of the previous year.


Budget Performance

The budget surplus of the Government of Nepal (GoN) increased to NPR 51.01 billion in four months of FY 2018/19 from NPR 32.15 billion in the corresponding period of the previous year. Of the total revenue budget of NPR 945.6 billion, 26.86% has been outturned in the first four months of FY 2018/19. In contrast, only 15.79% of the total expenditure budget of NPR 1,315.2 billion has been attained in four months of current fiscal year.

In comparison to four months of FY 2017/18, the government expenditure growth has decreased to 17.53% to reach at NPR 207.68 billion.  On the other hand, the government revenue witnessed a growth of 29.96% compared to corresponding period of the last fiscal year. The government revenue for four months in this fiscal year stood at NPR 253.97 billion compared to NPR 195.43 billion in the four months of last fiscal year.


The country’s BOP position is in deficit in the first four months of FY 2018/19 by NPR 57.33 billion, mainly due to huge deficit seen in current account by NPR 88.64 billion. During the corresponding period in last year, BOP was at surplus by NPR 2.40 billion only, whereas the current account was at deficit by NPR 48.98 billion.

In the review period, Nepal received capital transfer amounting to NPR 4.22 billion and Foreign Direct Investment (FDI) inflows of NPR 4.95 billion. In the same period of the previous year, capital transfer and FDI inflows had amounted to NPR 6.42 billion and NPR 10.17 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 four months’ data of FY 2018/19 shows that worker’s remittance growth has witnessed an increment of 23.10% to reach $2,730.14 million compared to 2.20% growth in 2017/18.

Remittance in NPR terms

On the other hand, in NPR terms, the workers’ remittance increased by 36.39% to NPR 312.26 billion during four months in FY 2018/19 compared to a growth of -1.37% during the same period in FY 2017/18.

As per the data of Department of Foreign Employment, the number of Nepali workers migrated for foreign employment decreased 41.2 percent in the review period. It had decreased 1 percent in the same period of the previous year. In the review period, the number of workers outbound to Malaysia shrank significantly.