This macroeconomic report is prepared based on five 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-Dec 2021 inclined remarkably by 17.13% to close at 2,414.62 points, compared to 2,061.42 points in the same period last year. The Market capitalization of NEPSE as well increased from NPR 2,763.66 billion in Mid-Dec 2020 to NPR NPR 3,394.70 billion in Mid-Dec 2021.
On the other hand, the ratio of market capitalization of NEPSE to GDP at Mid-Dec 2021 has increased to 79.57% compared to 73.36% 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 had decreased to 0.10% in Mid-Dec, 2020 which has been gradually rising since then and has reached to 4.96% in Mid-Dec 2021 indicating tightening of liquidity in the banking system compared to Mid-Dec 2020. The interbank rate during the same period a year ago stood at 0.10%.
The base rate of commercial banks stands at 8.25% in Mid-Dec 2021 compared to 7.36% a year ago. This has set the weighted average lending rate at 9.29%. On the other hand, the weighted average deposit rate stands at 6.24%. Such rates were 9.37% and 5.14% respectively in the corresponding month of the previous year.
C. INFLATION RATE
The consumer price inflation which was 2.93% a year ago increased to 7.11% in Mid-Dec 2021. Food and beverage inflation stood at 5.67 percent whereas non-food and service inflation stood at 8.25 percent in the review month. The price of ghee and oil; transportation; pulses & legumes; education and tobacco products subcategories rose 28.52 percent, 16.25 percent, 11.79 percent, 11.78 percent and 11.74 percent respectively on y-o-y basis.
D. DEPOSIT AND LENDING GROWTH
Deposit Growth: The deposits of BFI’s as at Mid-Dec 2021 increased by 1.45% to NPR 4,809.50 billion, compared to NPR 4,740.90 billion in Mid-July 2021. The increase during the same period last year was 6.51%. The share of demand, saving, and fixed deposits in total deposits stands at 7.1 percent, 31.5 percent and 54.3 percent respectively in mid-December 2021. Such shares were 8.1 percent, 33.1 percent and 50.00 percent respectively a year ago.
Credit Growth: The credit disbursement of BFI’s as at Mid-Dec 2021 increased to NPR. 4,603.89 billion by 10.33%, compared to NPR 4,172.78 billion in Mid-July 2021. The growth during the same period last year was 7.39%. Outstanding loan of BFIs to the agriculture sector increased 12.1 percent, industrial production sector 10.7 percent, transportation, communication and public sector 5.8 percent, wholesale and retail sector 10.9 percent and service industry sector 4.9 percent in the review period.
In the review period, term loan extended by BFIs increased 8.7 percent, overdraft 17.2 percent, demand and other working capital loan 5.4 percent, real estate loan (including residential personal home loan) 8.0 percent, trust receipt (import) 8.2 percent and hire purchase loan 5.1 percent while that of margin nature loan decreased 5.3 percent.
E. LIQUIDITY MANAGEMENT
Summary of Monetary Operation during Five month of FY 2021/22
In the review period, NRB mopped up Rs.60 billion liquidity of which Rs.28.35 billion was through reverse repo auction and Rs.31.65 billion through deposit collection. In the corresponding period of the previous year, it was Rs.161.80 billion liquidity of which Rs.60 billion was through reverse repo and Rs. 101.80 billion through deposit collection auction.
In the review period, NRB injected Rs.2721.06 billion liquidity of which Rs.287.23 billion was through repo, Rs.27.22 billion through outright purchase and Rs.2406.62 billion through standing liquidity facility (SLF) where as, no fund was injected by the NRB in the same period previous year.
F. FISCAL SITUATION
In the five month of 2021/22, total revenue collected by the government till Mid-Dec 2021 is Rs.412,403.4 million which is 36.88% higher compared with the corresponding month of the previous fiscal year. The total expenditure of the government till mid-Dec 2021 is Rs.387.034.3 million which is 17.83% 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 five month of FY 2021/22 by NPR 195.01 billion compared to a surplus of NPR 106.48 billion during the same period last year. On the other hand, the current account remained at a deficit of Rs.300.69 billion in the review period compared to a deficit of Rs.22.99 billion in the same period of the previous year.
In the review period, capital transfer decreased 2.4 percent to Rs.4.64 billion while net foreign direct investment (FDI) increased 57.0 percent to Rs.7.07 billion. In the same period of the previous year, capital transfer and net FDI amounted to Rs.4.75 billion and Rs.4.50 billion respectively.
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 7.37% to $3,242.47 million during the first five months in FY 2021/22 compared to an increase of 6.47% during the same period in FY 2020/21.
Remittance in NPR terms
On the other hand, in NPR terms, the workers’ remittance decreased by 6.90% to NPR 386.04 billion during the first five months in FY 2021/22 compared to a rise of 11.07% during the same period in FY 2020/21.
Number of Nepali workers (institutional and individual-new and legalized) taking approval for foreign employment increased significantly to 131,082 in the review period. It had decreased 92.7 percent in the same period of the previous year. The number of Nepali workers (Renew entry) taking approval for foreign employment increased 295.8 percent to 99,580 in the review period. It had decreased 77.3 percent in the same period of the previous year. Net transfer decreased 5.7 percent to Rs.433.92 billion in the review period. Such a transfer had increased 8.5 percent in the same period of the previous year.