This macroeconomic report is prepared based on first month’s data of FY 2020/21 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 2020 inclined remarkably by 13.68% to close at 1,391.46 points, compared to 1,224.04 points in the same period last year. The market capitalization of NEPSE as well increased from NPR 1,551.60 billion in Mid-Aug 2019 to NPR 1836.79 billion in Mid-Aug 2020.
On the other hand, the ratio of market capitalization of NEPSE to GDP as at Mid-Aug 2020 has increased to 48.79% compared to 44.86% in the last year during the same review period.
B. INTEREST RATES
To evaluate the current scenario of interest rate in the economy, interbank rate and base rate of commercial banks are taken into consideration.
The interbank rate of commercial banks which reached a year-high of 6.91% in Mid-June 2019 stands at 0.02% in Mid-August 2020 indicating liquidity ease in the banking system. The interbank rate during the same period a year ago stood at 1.19%.
The base rate of commercial banks stands at 8.08% in Mid-Aug 2020 compared to 9.45% a year ago. This has set the weighted average lending rate at 10.47 %. On the other hand, the weighted average deposit rate stands at 5.77%. Such rates were 12.08% and 6.77% respectively in the corresponding month of the previous year.
C. INFLATION RATE
The consumer price inflation which was 6.95% a year ago significantly declined to 3.49% in Mid-Aug 2020. Food and beverage inflation stood at 5.38 % whereas non-food and service inflation stood at 2.04 % in the review month. Within the food and beverage group, The price of vegetables increased 28.21 percent in mid-August 2020 compared to a month ago.
D. DEPOSIT AND LENDING GROWTH
The deposits of BFI’s as at Mid-Aug 2020 increased by 0.09% to NPR 3,933.66 billion, compared to NPR 3,930.17 billion in Mid-July 2020. The decline during the same period last year was 0.65%. The share of demand, saving, and fixed deposits in total deposits stands at 7.7 percent, 32.2 percent and 50.6 percent respectively in mid-August 2020. Such shares were 7.9 percent, 32.9 percent and 48.0 percent respectively a year ago. The share of institutional deposits in total deposit of BFIs stands at 43.8 percent in mid-August 2020. Such share was 44.7 percent in mid-August 2019.
Credit Growth: The credit disbursement of BFI’s as at Mid-Aug 2021 decreased to NPR 3,245.55 billion by 0.63%, compared to NPR 3266.01 billion in Mid-July 2020. The growth during the same period last year was 0.27%. Out of the total outstanding credit of the BFIs, 66.1% is against the collateral of land and building and 12.7% against the collateral of current assets (such as agricultural and non-agricultural products). Such ratios were 64.1 percent and 13.6 percent respectively a year ago.
In the review period, term loan extended by BFIs increased 1.4 percent, demand and working capital loan increased 0.5 percent, real estate loan (including residential personal home loan) increased 0.1 percent and margin nature loan increased 0.3 percent while that of overdraft decreased 2.2 percent, trust receipt (import) loan decreased 9 percent and hire purchase loan decreased 1.4 percent. If we compare the credit growth rate of -0.63% with the deposit growth rate of 0.09%, this shows liquidity ease in the economy.
E. LIQUIDITY MANAGEMENT
In the review period, NRB mopped up Rs. 60 billion liquidity through reverse repo auction on a cumulative basis. Rs.30 billion liquidities was mopped up in the corresponding period of the previous year.
BFIs utilized standing liquidity facility (SLF) of Rs.3.30 billion in the review period. Moreover, injected liquidity of Rs.52.19 billion through the net purchase of USD 435.7 million from foreign exchange market. Liquidity of Rs.20.11 billion was injected through the net purchase of USD 178.6 million in the corresponding period of the previous year.
F. FISCAL SITUATION
In the first month of 2020/21, fiscal position of the Government based on banking transactions, remained at a surplus of Rs.58.93 billion compared to a surplus of Rs. 76.97 billion in the corresponding period of the previous year.
Government Revenue and Expenditure
In comparison to first month of FY 2019/20, the expenditure of federal government declined by 25.54% to reach at NPR 1.95 billion. On the other hand, the revenue of the government witnessed a decline of 9.83% compared to corresponding period of the last fiscal year. The government revenue (including other receipts) in the first month in this fiscal year stood at NPR 66.62 billion compared to NPR 73.89 billion in the first month of the last fiscal year.
G. BALANCE OF PAYMENT POSITION
The country’s BOP position is at surplus in the first month of FY 2020/21 by NPR 51.46 billion compared to a surplus of NPR 6.05 billion during the same period last year. On the other hand, the current account is at surplus of NPR 25.41 billion compared to a deficit of NPR 25.16 billion in the same period of last year. In the review period, capital transfer and foreign direct investment (FDI) in Nepal amounted to Rs.1.10 billion and Rs.1.39 billion respectively. In the same period of the previous year, capital transfer and FDI amounted to Rs.1.03 billion and Rs.1.44 billion respectively.
The workers’ remittance growth rate is subject to differ 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 annual data of FY 2020/21 shows that worker’s remittance growth has witnessed an increment of 14.47% to reach at $773.65 million compared to 0.65% growth in 2019/20.
Remittance in NPR terms
On the other hand, in NPR terms, the workers’ remittance increased by 22.96% to NPR 92.71 billion during the first month in FY 2020/21 compared to a growth of 1.96% during the same period in FY 2019/20.
Net transfer receipt increased 20 percent to Rs.101.87 billion in the review period. Such receipt had increased 0.2 percent in the same period of the previous year. As per the data of Department of Foreign Employment, the number of Nepalese workers (institutional and individual-new and legalized) migrated for foreign employment decreased 99.20 percent in the review period. It had decreased 19.00 percent in the same period of the previous year. The number of Nepalese workers (Renew entry) migrated for foreign employment decreased 80 percent in the review period. It had decreased 1.3 percent in the same period of the previous year.