This macroeconomic report is prepared based on nine 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 at Mid-April 2021 inclined remarkably by 116.93% to close at 2714.79 points, compared to 1251.46 points in the same period last year. The Market capitalization of NEPSE as well increased from NPR 1,600.20 billion in Mid-April 2020 to NPR 3,758.98 billion in Mid-April 2021.
On the other hand, the ratio of market capitalization of NEPSE to GDP as at Mid-April 2021 has increased to 88.11% compared to 40.88% 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 high of 6.91% in Mid-June 2019 stands at 2.03% in Mid-April 2021 indicating liquidity ease in the banking system. The interbank rate during the same period a year ago stood at 2.13%.
The base rate of commercial banks stands at 6.90% in Mid-April 2021 compared to 9.36% a year ago. This has set the weighted average lending rate at 8.61 %. On the other hand, the weighted average deposit rate stands at 4.79%. Such rates were 11.77% and 6.74% respectively in the corresponding month of the previous year.
C. INFLATION RATE
The consumer price inflation which was 6.74% a year ago significantly declined to 3.10% in Mid-April 2021. Food and beverage inflation stood at 3.49% whereas non-food and service inflation stood at 2.79%, in the review month. The price of ghee and oil; meat and fish; tobacco products; and non-alcoholic drinks sub-groups rose 21.38% , 12.61%, 10.41% and 10.18% respectively as of Mid-April 2021 on year on year basis.
D. DEPOSIT AND LENDING GROWTH
The deposits of BFI’s as at Mid-April 2021 increased by 13.43% to NPR 4,457.98 billion, compared to NPR 3,930.17 billion in Mid-July 2020. The increase during the same period last year was 9.23%. . The share of demand, saving, and fixed deposits in total deposits stands at 8.5 percent, 35.1 percent and 48.2 percent respectively in mid-April 2021. Such shares were 8.5 percent, 32.2 percent and 49.3 percent respectively a year ago. The share of institutional deposits in total deposit of BFIs stands at 41.7 percent in mid-April 2021. Such a share was 44.4 percent in mid-April 2020.
The credit disbursement of BFI’s as at Mid-April 2021 increased to NPR. 4,022.32 billion by 23.16%, compared to NPR 3,266.01 billion in Mid-July2020. The growth during the same period last year was 11.81%. Outstanding loan of BFIs to the agriculture sector increased 35.7 percent, industrial production sector increased 17.0 percent, construction sector increased 12.7 percent, transportation, communication and public sector increased 13.8 percent, wholesale and retail sector increased 20.8 percent and service industry sector increased 16.8 percent in the review period.
In the review period, term loan extended by BFIs increased 22.2%, overdraft increased 27.5%, demand and working capital loan increased 20.1%, real estate loan (including residential personal home loan) increased 12.4%, margin nature loan increased 82.3% and trust receipt (import) loan increased 40.8% while that of hire purchase loan decreased 5.4%.
E. LIQUIDITY MANAGEMENT
In the review period, NRB mopped up Rs.303.29 billion liquidity of which Rs.109.54 billion was through reverse repo auction and Rs.193.75 billion through deposit collection. In the review period, NRB injected liquidity of Rs.8.14 billion of which Rs.1.02 billion through Repo and Rs.7.12 billion through standing liquidity facility (SLF). In the corresponding period of the previous year, Rs.58 billion liquidity consisting of Rs.28 billion reverse repo auction and Rs.30 billion deposit collection was mopped up. On the other hand, Rs.187.04 billion liquidity was injected including Rs.113.99 billion through repo and Rs.73.06 billion through standing liquidity facility (SLF) in the corresponding period of the previous year.
In the review period, NRB injected liquidity of Rs.324.84 billion through the net purchase of USD 2.75 billion from foreign exchange market. Liquidity of Rs.305.23 billion was injected through the net purchase of USD 2.66 billion in the corresponding period of the previous year.
F. FISCAL SITUATION
In the nine months of 2020/21, total revenue collected by the government till mid-April 2021 is Rs.683.87 billion which is 15.79% higher compared with the corresponding month of the previous fiscal year. The total expenditure of the government till mid-April 2021 is Rs. 690.28 billion which is 2.14% 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 surplus in the nine month of FY 2020/21 by NPR 42.54 billion compared to a surplus of NPR 36.61 billion during the same period last year. On the other hand, the current account is at deficit of NPR 207.40 billion compared to a deficit of NPR 126.08 billion in the same period of last year. In the review period, capital transfer increased 10.7 percent to Rs.12.86 billion and net foreign direct investment (FDI) decreased 25.0 percent to Rs.12.35 billion. In the same period of the previous year, capital transfer and net FDI amounted to Rs.11.62 billion and Rs.16.48 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 increased by 13.04% to NPR 6,187.86 million during the nine months in FY 2020/21 compared to a decrease of 4.89% during the same period in FY 2019/20.
Remittance in NPR terms
On the other hand, in NPR terms, the workers’ remittance increased by 16.51% to NPR 729.02 billion during the nine months in FY 2020/21 compared to a fall of 4.21% during the same period in FY 2019/20.
Net transfer increased 14.4 percent to Rs.814.36 billion in the review period. Such a transfer had decreased 4.7 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 decreased 66.7 percent in the review period. It had increased 10.2 percent in the same period of the previous year. The number of Nepali workers (Renew entry) taking approval for foreign employment decreased 55.7 percent in the review period. It had decreased 15.0 percent in the same period of the previous year.