This macroeconomic report is prepared based on six 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-Jan 2021 inclined remarkably by 80.99% to close at 2286.60 points, compared to 1263.40 points in the same period last year. The market capitalization of NEPSE as well increased from NPR 1,610.69 billion in Mid-Jan 2020 to NPR 3,079.94 billion in Mid-Jan 2021.
On the other hand, the ratio of market capitalization of NEPSE to GDP as at Mid-Jan 2021 has increased to 81.80% compared to 46.60% 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 0.14% in Mid-Jan 2021 indicating liquidity ease in the banking system. The interbank rate during the same period a year ago stood at 1.76%.
The base rate of commercial banks stands at 7.18% in Mid-Jan 2021 compared to 9.45% a year ago. This has set the weighted average lending rate at 9.09%. On the other hand, the weighted average deposit rate stands at 5.00%. Such rates were 11.94% and 6.79% respectively in the corresponding month of the previous year.
C. INFLATION RATE
The consumer price inflation which was 6.82% a year ago significantly declined to 3.56% in Mid-Jan 2021. Food and beverage inflation stood at 4.27 % whereas non-food and service inflation stood at 2.99 % in the review month. Within the food and beverage group, prices of ghee and oil; fruit; pulses and legumes; meat and fish spiked 17.01%, 16.58%, 11.48% and 10.68% respectively in the review month.
D. DEPOSIT AND LENDING GROWTH
The deposits of BFI’s as at Mid-Jan 2021 increased by 8.93% to NPR 4,281.29 billion, compared to NPR 3,930.17 billion in Mid-July 2020. The increase during the same period last year was 6.12%. The share of demand, saving, and fixed deposits in total deposits stands at 8.5 percent, 33.6 percent and 49.2 percent respectively in mid-Jan 2021. Such shares were 8.5 percent, 31.9 percent and 49.2 percent respectively a year ago. The share of institutional deposits in total deposit of BFIs stands at 42.5 percent in mid-Jan 2021. Such share was 45.1 percent in mid-Jan 2020.
The credit disbursement of BFI’s as at Mid-Jan 2021 increased to NPR. 3658.38 billion by 12.01%, compared to NPR 3,266.01 billion in Mid-July 2020. The growth during the same period last year was 8.56%. Out of the total outstanding credit of the BFIs, 66.3% is against the collateral of land and building and 12.2% against the collateral of current assets (such as agricultural and non-agricultural products). Such ratios were 64.9 percent and 13.5 percent respectively a year ago.
In the review period, term loan extended by BFIs increased 11.5 percent, overdraft increased 13.4 percent, demand and working capital loan increased 13.6 percent, real estate loan (including residential personal home loan) increased 4 percent and margin nature loan increased 50.2 percent while that of trust receipt (import) loan decreased 5.6 percent and hire purchase loan decreased 4.4 percent.
E. LIQUIDITY MANAGEMENT
In the review period, NRB mopped up Rs. 241.34 billion liquidity through reverse repo auction (89.54 billion) and deposit collection auction (151.8 billion). Rs.58 billion liquidity was mopped up in the corresponding period of the previous year. Rs.92.07 billion liquidity was injected including Rs.39.52 billion through repo and Rs.52.55 billion through standing liquidity facility (SLF) in the corresponding period of the previous year.
Moreover, NRB injected liquidity of Rs.251.02 billion through the net purchase of USD 2.12 billion from foreign exchange market. Liquidity of Rs.193.40 billion was injected through the net purchase of USD 1.70 billion in the corresponding period of the previous year.
F. FISCAL SITUATION
In the six months of 2020/21, fiscal position of the Government based on FCGO, remained at a surplus of Rs.6.49 billion in the review period compared to a surplus of Rs.22.68 billion in the corresponding period of the previous year.
In comparison to six months of FY 2019/20, the expenditure of federal government increased by 1.29% to reach at NPR 415.74 billion. On the other hand, the revenue of the government witnessed a decline of 2.52% compared to corresponding period of the last fiscal year. The government revenue in the six months in this fiscal year stood at NPR 422.23 billion compared to NPR 433.15 billion in the six months of the last fiscal year.
G. BALANCE OF PAYMENT POSITION
The country’s BOP position is at surplus in the six month of FY 2020/21 by NPR 124.92 billion compared to a surplus of NPR 26.65 billion during the same period last year. On the other hand, the current account is at deficit of NPR 49.53 billion compared to a deficit of NPR 79.65 billion in the same period of last year. In the review period, capital transfer and foreign direct investment (FDI) in Nepal amounted to Rs. 6.85 billion and Rs.14.33 billion respectively. In the same period of the previous year, capital transfer and FDI amounted to Rs.7.45 billion and Rs.-13.62 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 6.7% to NPR 4,187.20 million during the six months in FY 2020/21 compared to an increase of 0.87% during the same period in FY 2019/20.
Remittance in NPR terms
On the other hand, in NPR terms, the workers’ remittance increased by 11.07% to NPR 495.30 billion during the six months in FY 2020/21 compared to a rise of 0.59% during the same period in FY 2019/20.
Net transfer receipt increased 8.9 percent to Rs. 549.51 billion in the review period. Such receipt had decreased 0.4 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 77.6 percent in the review period. It had increased by 17.7 percent in the same period of the previous year. The number of Nepalese workers (Renew entry) migrated for foreign employment decreased 68.9 percent in the review period. It had increased by 0.5 percent in the same period of the previous year.