This macroeconomic report is prepared based on seven 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-February 2019 declined by 18.26% to close at 1,128.19 points, compared to 1,380.29 points in the same period last year. The market capitalization of NEPSE as well declined from NPR 1,614.17 billion in Mid-February 2018 to NPR 1,377.15 billion in Mid-February 2019.

On the other hand, the ratio of market capitalization of NEPSE to GDP as at Mid-February 2019 has significantly dropped down to 45.79% compared to 62.10% 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-February 2019 spiked up to 5.82% to make a year-high compared to 2.84% a month ago, mainly due to increase in interbank borrowing in order to maintain their tight CCD ratio. The interbank rate during the same period a year ago was at 4.31%.

Base Rate

The base rate of commercial banks has slightly declined to 9.69% in Mid-February, 2019 compared to 10.19% a year ago. This has set the weighted average lending rate at 12.34%. On the other hand, the weighted average deposit rate stands at 6.67%. Such rates were 11.90% and 6.38% respectively in the corresponding month of the previous year.


As reported by NRB, the consumer price inflation which was 5.00% a year ago marginally decreased to 4.40% in Mid-February 2019, due to marginal decrease in the price of food and beverage group, which contributed to a moderate decline in inflation in the review period. Moreover, 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 6.67% (as at Mid-February 2019) and inflation rate of 4.40%, the real interest via Fisher equation is 2.27% only.


Deposit Growth: The deposits of BFI’s as at Mid-February 2019 increased by 8.76% to NPR 3,085.07 billion, compared to NPR 2,836.65 billion in Mid-July 2018. The growth during the same period last year was 6.24%. The share of demand, saving and fixed deposits in total deposits stood at 8.70 percent, 33.50 percent and 47.60 percent respectively in Mid-February 2019. Such shares were 8.20 percent, 36.60 percent and 43.90 percent respectively a year ago. And the share of institutional deposits in total deposit of BFIs stood at 44.80 percent in Mid-February 2019. Such share was 44 percent a year ago.

Credit Growth: The credit disbursement of BFI’s as at Mid-February 2019 increased to NPR 2,764.55 billion by 14.11%, compared to NPR 2,422.78 billion in Mid-July 2018. The growth during the same period during last year was 12.94%. Of the total outstanding credit of BFIs in mid-February 2019, 63.4 percent is against the collateral of land and building and 14.50 percent against the collateral of current assets (such as agricultural and non-agricultural products). Such ratios were 61.50 percent and 14.60 percent respectively a year ago.

In the review period, term loan extended by BFIs increased 19.0 percent, overdraft increased 10.30 percent, trust receipt (import) loan increased 19.20 percent, demand and working capital loan increased 18.60 percent, real estate loan (including residential personal home loan) increased 7.0 percent and hire purchase loan increased 7.50 percent.


Though the liquidity situation is at some ease as of now after the banks have reached a gentleman agreement to fix the interest rate ceiling at 9.25 percent for the private fixed deposits; but if we compare the credit growth rate of 14.11% and deposit growth rate of 8.76%, then the credit crunch 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 a cumulative basis. Rs.130.25 billion liquidity was mopped up in the corresponding period of the previous year.

On the other hand, NRB injected NPR 21.03 billion liquidity through repo auctions under open market operations in the review period. Rs. 90.40 billion liquidity was injected in the corresponding period of the previous year. Moreover, NRB injected net liquidity of NPR 197.66 billion through the net purchase of USD 1.72 billion from foreign exchange market. Net liquidity of NPR 236.65 billion was injected through the net purchase of USD 2.30 billion in the corresponding period of the previous year. BFIs have also utilized standing liquidity facility (SLF) of Rs. 6.72 billion in the review period. Such facility utilized in the corresponding period of the previous year was Rs. 24.08 billion.


Budget Performance

The budget surplus of the Government of Nepal (GoN) recorded to NPR 57.74 billion in seven months of FY 2018/19 from the deficit of NPR 26.47 billion in the corresponding period of the previous year. Of the total revenue budget of NPR 945.6 billion, 48.16% has been outturned in the first seven months of FY 2018/19. In contrast, only 34.65% of the revised expenditure budget of NPR 1199.15 billion has been attained in seven months of current fiscal year.

In comparison to seven months of FY 2017/18, the expenditure of federal government (based on banking transactions) decreased by 3.12% to reach at NPR 415.51 billion.  On the other hand, the revenue of federal government (including the amount to be transferred to provincial and local governments) witnessed a growth of 18.41% compared to corresponding period of the last fiscal year. The government revenue for seven months in this fiscal year stood at NPR 455.39 billion compared to NPR 384.60 billion in the seven months of last fiscal year.


The country’s BOP position is in deficit in the first seven months of FY 2018/19 by NPR 49.32 billion, mainly due to huge deficit seen in current account by NPR 166.24 billion. During the corresponding period in last year, BOP was at deficit by NPR 18.28 billion only, whereas the current account was at deficit by NPR 142.09 billion. In the review period, capital transfer and FDI in Nepal amounted to Rs. 7.43 billion and Rs.5.15 billion respectively. In the same period of the previous year, capital transfer and FDI amounted to Rs.10.64 billion and Rs.14.34 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 seven months’ data of FY 2018/19 shows that worker’s remittance growth has witnessed an increment of 15.96% to reach $4,521.00 million compared to 6.39% growth in 2017/18.

Remittance in NPR terms

On the other hand, in NPR terms, the workers’ remittance increased by 28.46% to NPR 515.55 billion during seven months in FY 2018/19 compared to a growth of 1.72% during the same period in FY 2017/18.

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 39.20 percent in the review period. It had decreased 4.90 percent in the same period of the previous year. Moreover, the number of Nepalese workers (Renew entry) migrated for foreign employment increased 4.90 percent in the review period. It had decreased 1.60 percent in the same period of the previous year.