This macroeconomic report is prepared based on six 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-Jan 2022 inclined remarkably by 24.98% to close at 2,857.75 points, compared to 2,286.55 points in the same period last year. The Market capitalization of NEPSE as well increased from NPR 3,079.94 billion in Mid-Jan 2021 to NPR NPR 4,037.13 billion in Mid-Jan 2022.
On the other hand, the ratio of market capitalization of NEPSE to GDP at Mid-Jan 2022 has increased to 94.63% compared to 81.76% 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. Interbank Rate The interbank rate of commercial banks had decreased to 0.14% in Mid-Jan, 2021 which has been gradually rising since then and has reached to 4.76% in Mid-Jan 2022 indicating tightening of liquidity in the banking system compared to Mid-Jan 2021. The interbank rate during the same period a year ago stood at 0.14%.
The base rate of commercial banks stands at 8.42% in Mid-Jan 2022 compared to 7.18% a year ago. This has set the weighted average lending rate at 9.44%. On the other hand, the weighted average deposit rate stands at 6.37%. Such rates were 9.09% and 5.00% respectively in the corresponding month of the previous year.
C. INFLATION RATE
The consumer price inflation which was 3.56% a year ago increased to 5.65% in Mid-Jan 2022. Food and beverage inflation stood at 4.92 percent whereas non-food and service inflation stood at 6.23 percent in the review month. The prices of ghee and oil; transportation; alchoholic drinks; tobacco products and pulses & legumes sub-categories rose 21.22 percent, 14.07 percent, 11.37 percent, 10.48 percent and 9.22 percent respectively on y-o-y basis
D. DEPOSIT AND LENDING GROWTH
Deposit Growth: The deposits of BFI’s as at Mid-Jan 2022 increased by 3.43% to NPR 4,903.58 billion, compared to NPR 4,740.90 billion in Mid-July 2021. The increase during the same period last year was 8.93%. The share of demand, saving, and fixed deposits in total deposits stands at 8.5 percent, 30.3 percent and 54.4 percent respectively in mid-January 2022. Such shares were 8.5 percent, 33.6 percent and 49.2 percent respectively a year ago.
Credit Growth: The credit disbursement of BFI’s as at Mid-Jan 2022 increased to NPR. 4,667.16 billion by 11.85%, compared to NPR 4,172.78 billion in Mid-July 2021. The growth during the same period last year was 12.01%. Outstanding loan of BFIs to the agriculture sector increased 13.0 percent, industrial production sector 11.9 percent, transportation, communication and public sector 8.5 percent, wholesale and retail sector 12.7 percent and service industry sector 5.1 percent in the review period.
In the review period, term loan extended by BFIs increased 10.0 percent, overdraft 21.1 percent, demand and other working capital loan 10.9 percent, real estate loan (including residential personal home loan) 12.8 percent and hire purchase loan 4.9 percent while that of trust receipt (import) loan decreased 14.2 percent and margin nature loan 6.2 percent
E. LIQUIDITY MANAGEMENT
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.241.34 billion liquidity of which Rs.89.54 billion was through reverse repo and Rs. 151.80 billion through deposit collection auction.
In the review period, NRB injected Rs.3,366.96 billion liquidity of which Rs. 323.85 billion was through repo, Rs.27.22 billion through outright purchase and Rs.3015.89 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 six month of 2021/22, total revenue collected by the government till Mid-Jan 2022 is Rs.542,054.5 million which is 28.38% higher compared with the corresponding month of the previous fiscal year. The total expenditure of the government till Mid-Jan 2022 is Rs.506,693 million which is 21.88% 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 six month of FY 2021/22 by NPR 241.23 billion compared to a surplus of NPR 124.91 billion during the same period last year. On the other hand, the current account remained at a deficit of Rs.354.06 billion in the review period compared to a deficit of Rs.51.58 billion in the same period of the previous year.
In the review period, capital transfer decreased 20.0 percent to Rs.5.48 billion while net foreign direct investment (FDI) increased 48.1 percent to Rs.11.34 billion. In the same period of the previous year, capital transfer and net FDI amounted to Rs.6.85 billion and Rs.7.66 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 6.27% to $3,903.05 million during the first six months in FY 2021/22 compared to an increase of 6.84% during the same period in FY 2020/21.
Remittance in NPR terms
On the other hand, in NPR terms, the workers’ remittance decreased by 5.56% to NPR 465.18 billion during the first six months in FY 2021/22 compared to a rise of 11.22% 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 167,513 in the review period. It had decreased 89.0 percent in the same period of the previous year. The number of Nepali workers (Renew entry) taking approval for foreign employment increased 298.1 percent to 130,212 in the review period. It had decreased 75.5 percent in the same period of the previous year.