This macroeconomic report is prepared based on six 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-January 2019 declined by 17.68% to close at 1,178.03 points, compared to 1,431.10 points in the same period last year. The market capitalization of NEPSE as well declined from NPR 1,671.61 billion in Mid-January 2018 to NPR 1,436.67 billion in Mid-January 2019.

On the other hand, the ratio of market capitalization of NEPSE to GDP as at Mid-January 2019 has significantly dropped down to 47.77% compared to 63.26% 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-January 2019 inclined to 2.84% compared to 1.20% a month ago in the wake of second quarter-end at Poush, 2075, due to increase in interbank borrowing in order to maintain their CCD ratio. The interbank rate during the same period a year ago was near to peak at 4.40% indicating slight ease in liquidity at present.

Base Rate

The base rate of commercial banks has slightly declined to 9.80% in Mid-January, 2019 compared to 9.94% a year ago. This has set the weighted average lending rate at 12.29%. On the other hand, the weighted average deposit rate stands at 6.72%. Such rates were 11.79% and 6.21% respectively in the corresponding month of the previous year.


As reported by NRB, the consumer price inflation which was 4.00% a year ago marginally increased to 4.60% in Mid-January 2019, due to marginal increase in the price of food and beverage group as well as non-food and service group, which contributed to a moderate rise 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 6.72% (as at Mid-January 2019) and inflation rate of 4.60%, the real interest via Fisher equation is 2.12% only.


Deposit Growth: The deposits of BFI’s as at Mid-January 2019 increased by 8.10% to NPR 3,066.53 billion, compared to NPR 2,836.65 billion in Mid-July 2018. The growth during the same period last year was 6.74%. The share of demand, saving and fixed deposits in total deposits stood at 8.60 percent, 33.30 percent and 47.90 percent respectively in Mid-January 2019. Such shares were 8.40 percent, 36.40 percent and 42.80 percent respectively a year ago. And the share of institutional deposits in total deposit of BFIs stood at 45.10 percent in Mid-January 2019. Such share was 44.30 percent a year ago.

Credit Growth: The credit disbursement of BFI’s as at Mid-January 2019 increased to NPR 2,737.63 billion by 13.00%, compared to NPR 2,422.78 billion in Mid-July 2018. The growth during the same period during last year was 11.21%. Of the total outstanding credit of BFIs in mid-January 2019, 63.10 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 61.30 percent and 14.50 percent respectively a year ago.

In the review period, term loan extended by BFIs increased 15.50 percent, overdraft increased 10.10 percent, trust receipt (import) loan increased 13.10 percent, demand and working capital loan increased 18.70 percent, real estate loan (including residential personal home loan) increased 6.20 percent, margin nature loan 2.1 percent, and hire purchase loan increased 6.80 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 13.00% and deposit growth rate of 8.10%, 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.129.20 billion liquidity was mopped up in the corresponding period of the previous year.

On the other hand, NRB injected net liquidity of NPR 160.29 billion through the net purchase of USD 1.40 billion from foreign exchange market. Net liquidity of NPR 196.31 billion was injected through the net purchase of USD 1.90 billion in the corresponding period of the previous year. Moreover, 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. 23.58 billion.


Budget Performance

The budget surplus of the Government of Nepal (GoN) recorded to NPR 79.22 billion in six months of FY 2018/19 from the deficit of NPR 35.47 billion in the corresponding period of the previous year. Of the total revenue budget of NPR 945.6 billion, 42.56% has been outturned in the first six months of FY 2018/19. In contrast, only 25.80% of the total expenditure budget of NPR 1,315.2 billion has been attained in six months of current fiscal year.

In comparison to six months of FY 2017/18, the government expenditure growth has decreased by 7.03% to reach at NPR 339.29 billion.  On the other hand, the government revenue witnessed a growth of 20.10% compared to corresponding period of the last fiscal year. The government revenue for six months in this fiscal year stood at NPR 402.46 billion compared to NPR 335.10 billion in the six months of last fiscal year.


The country’s BOP position is in deficit in the first six months of FY 2018/19 by NPR 63.68 billion, mainly due to huge deficit seen in current account by NPR 152.16 billion. During the corresponding period in last year, BOP was at deficit by NPR 6.66 billion only, whereas the current account was at deficit by NPR 97.78 billion. In the review period, capital transfer and FDI in Nepal amounted to Rs.6.89 billion and Rs.4.36 billion respectively. In the same period of the previous year, capital transfer and FDI amounted to Rs.10.07 billion and Rs.14.33 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 six months’ data of FY 2018/19 shows that worker’s remittance growth has witnessed an increment of 17.59% to reach $3,885.05 million compared to 3.83% growth in 2017/18.

Remittance in NPR terms

On the other hand, in NPR terms, the workers’ remittance increased by 30.19% to NPR 443.36 billion during six months in FY 2018/19 compared to a growth of -0.49% 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 39.1 percent in the review period. It had decreased 1.8 percent in the same period of the previous year. Moreover, the number of Nepalese workers (Renew entry) migrated for foreign employment increased 4.5 percent in the review period. It had decreased 3.8 percent in the same period of the previous year. In the review period, the number of workers outbound to Malaysia shrank significantly.