This macroeconomic report is prepared based on First 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-Aug 2021 inclined remarkably by 127.11% to close at 3160.09 points, compared to 1391.50 points in the same period last year. The Market capitalization of NEPSE as well increased from NPR 4,414.11 billion in Mid-Aug 2021 to NPR 1,836.79 billion in Mid-Aug 2021.
On the other hand, the ratio of market capitalization of NEPSE to GDP as at Mid-Aug 2021 has increased to 103.46% compared to 48.76% in the last year during the same review period.
To evaluate the current scenario of interest rate in the economy, interbank rate and base rate of commercial banks are taken into consideration.
Interbank Rate The interbank rate of commercial banks had decreased to 0.10% in Mid-Dec, 2020 which has been gradually rising since then and has reached to 2.13% in Mid-Aug 2021 indicating tightening of liquidity in the banking system compared to Mid-Dec 2021. The interbank rate during the same period a year ago stood at 0.02%.
The base rate of commercial banks stands at 6.71% in Mid-Aug 2021 compared to 8.08% a year ago. This has set the weighted average lending rate at 8.48%. On the other hand, the weighted average deposit rate stands at 4.76%. Such rates were 10.47% and 5.77% respectively in the corresponding month of the previous year.
C. INFLATION RATE
The consumer price inflation which was 3.49% a year ago increased to 4.35% in Mid-Aug 2021. Food and beverage inflation stood at 3.86% whereas non-food and service inflation stood at 4.74% in the review month. The price of ghee and oil, non-alcoholic drinks, tobacco products and transportation subcategories rose 29.07%, 10.51%, 10.12% and 9.43% respectively on y-o-y basis.
D. DEPOSIT AND LENDING GROWTH
Deposit Growth: The deposits of BFI’s as at Mid-Aug 2021 decreased by 1.61% to NPR 4,664.47 billion, compared to NPR 4,740.90 billion in Mid-July 2021. The increase during the same period last year was 0.001%. The share of demand, saving, and fixed deposits in total deposits stands at 7.8 %, 34.3 % and 49.5 % respectively in mid-August 2021. Such shares were 7.7 percent, 32.2 percent and 50.6 % respectively a year ago.
Credit Growth: The credit disbursement of BFI’s as at Mid-Aug 2021 increased to NPR. 4,219.61 billion by 1.12%, compared to NPR 3,245.55 billion in Mid-July 2021. The growth during the same period last year was -0.63%. Outstanding loan of BFIs to the agriculture sector increased 2.0 percent, industrial production sector 1.4%, construction sector 1.3%, transportation, communication and public sector 1.0 %, wholesale and retail sector 0.5% and service industry sector 0.4% in the review period. In the review period, term loan extended by BFIs increased 2.0 %, overdraft 1.4% , demand and working capital loan 0.7%, real estate loan (including residential personal home loan) 1.5%, margin nature loan 2.1% and hire purchase loan 1.8% while that of trust receipt (import) loan decreased 0.4%.
- LIQUIDITY MANAGEMENT
Summary of Monetary Operation during first month of FY 2021/22
In the review period, NRB mopped up Rs.60.00 billion liquidity out of which Rs.28.35 billion was through reverse repo auction and Rs.31.65 billion through deposit collection. In the review period, NRB injected liquidity of Rs.59.61 billion of which NPR 4.065 billion through Repo and NPR 55.55 billion through standing liquidity facility (SLF). In the corresponding period of the previous year, Rs.60 billion liquidity was mopped up through reverse repo auction. On the other hand, no liquidity was injected by NRB in the corresponding period of the previous year.
In the review period, NRB injected liquidity of Rs.7.08 billion through the net purchase of USD 59.5 million from foreign exchange market. Liquidity of Rs.52.19 billion was injected through the net purchase of USD 435.7 million in the corresponding period of the previous year.
F. FISCAL SITUATION
In the first month of 2021/22, total revenue collected by the government till mid-Aug 2021 is Rs.93.26 billion which is 58.57% higher compared with the corresponding month of the previous fiscal year. The total expenditure of the government till mid-Aug 2021 is Rs.10.49 billion which is 430.17% 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 month of FY 2021/22 by NPR 38.74 billion compared to a surplus of NPR 51.46 billion during the same period last year. On the other hand, the current account is at deficit of NPR 47.89 billion compared to a surplus of NPR 24.88 billion in the same period of last year. In the review period, capital transfer decreased 38.0% to Rs.679.7 million and net foreign direct investment (FDI) decreased 65.5% to Rs.480.6 million. In the same period of the previous year, capital transfer and net FDI amounted to Rs.1.10 billion and Rs.1.39 billion respectively.
WORKERS’ REMITTANCE 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 17.53% to NPR 638.20 million during the first months in FY 2021/22 compared to an increase of 14.50% during the same period in FY 2020/21.
Remittance in NPR terms
On the other hand, in NPR terms, the workers’ remittance decreased by 18.10% to NPR 75.96 billion during the first month in FY 2021/22 compared to a rise of 23.00% during the same period in FY 2020/21.
Net transfer decreased 16.4% to Rs.85.21 billion in the review period. Such a transfer had increased 20.0 percent in the same period of the previous year. As per the data of Department of Foreign Employment, Number of Nepali workers (institutional and individual-new and legalized) taking approval for foreign employment increased significantly to 13,800 in the review period. It had decreased 99.2% in the same period of the previous year. Likewise, the number of Nepali workers (Renew entry) taking approval for foreign employment increased 286.1% to 11,628 in the review period. It had decreased 80.0% in the same period of the previous year.