This macroeconomic report is prepared based on ten 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-May2021 inclined remarkably by 123.38% to close at 2684.09 points, compared to 1201.58 points in the same period last year. The Market capitalization of NEPSE as well increased from NPR 1,536.42 billion in Mid-May 2020 to NPR 3,724.55 billion in Mid-May 2021.
On the other hand, the ratio of market capitalization of NEPSE to GDP as at Mid-May2021 has increased to 87.30% compared to 39.25% 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 had decreased to 0.10% in Mid-Jan, 2021 which has been gradually rising since then and has reached to 4.12% in Mid-May 2021 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 4.06%.
The base rate of commercial banks stands at 6.83% in Mid-May2021 compared to 8.96% a year ago. This has set the weighted average lending rate at 8.53 %. On the other hand, the weighted average deposit rate stands at 4.81%. Such rates were 10.99% and 6.44% respectively in the corresponding month of the previous year.
C. INFLATION RATE
The consumer price inflation which was 5.83% a year ago significantly declined to 3.65% in Mid-May2021. Food and beverage inflation stood at 4.72 percent whereas non-food and service inflation stood at 2.81 percent in the review month. The price of ghee and oil; meat and fish; nonalcoholic drinks and tobacco products sub-groups rose 28.20 percent, 17.12 percent, 9.85 percent and 9.84 percent respectively as of Mid-May 2021 on year on year basis.
D. DEPOSIT AND LENDING GROWTH
The deposits of BFI’s as at Mid-May2021increased by 13.80% to NPR 4,472.55 billion, compared to NPR 3,930.17 billion in Mid-July 2020. The increase during the same period last year was 10.14%. The share of demand, saving, and fixed deposits in total deposits stands at 8.2 percent, 34.3 percent and 49.4 percent respectively in mid-May 2021. Such shares were 8.6 percent, 32.6 percent and 48.6 percent respectively a year ago.. The share of institutional deposits in total deposit of BFIs stands at 40.9 percent in mid-May 2021. Such a share was 44.25 percent in mid-May 2020.
The credit disbursement of BFI’s as at Mid-May2021increased to NPR. 4,061.41 billion by 24.35%, compared to NPR 3,266.01 billion in Mid-July2020. The growth during the same period last year was 11.20%. Outstanding loan of BFIs to the agriculture sector increased 38.3 percent, industrial production sector17.4 percent, construction sector 15.1 percent, transportation, communication and public sector 14.6percent, wholesale and retail sector 22.5 percent and service industry sector 17.6 percent in the review period.
In the review period, term loan extended by BFIs increased 24.6 percent, overdraft 27.7 percent, demand and working capital loan 20.8 percent, real estate loan (including residential personal home loan) 11.4 percent, margin nature loan 87.2 percent and trust receipt (import) loan 46.5 percent while that of hire purchase loan decreased 5.4 percent.
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.100.36 billion of which NPR 25.67 billion through Repo and NPR 74.69billionthrough standing liquidity facility (SLF). In the corresponding period of the previous year, Rs.58 billion liquidity was mopped up consisting of Rs.28 billion through reverse repo auction and Rs.30 billion through deposit collection. On the other hand, Rs.216.45 billion liquidity was injected of which Rs.115.87 billion was through repo and Rs.100.58 billion through standing liquidity facility (SLF) in the corresponding period of the previous year.
In the review period, NRB injected liquidity of Rs.356.93 billion through the net purchase of USD 3.02 billion from foreign exchange market. Liquidity of Rs.346.65 billion was injected through the net purchase of USD 3 billion in the corresponding period of the previous year.
F. FISCAL SITUATION
Fiscal Deficit/Surplus In the ten months of 2020/21, total revenue collected by the government till mid-May 2021 is Rs.761.00 billion which is 25.43% higher compared with the corresponding month of the previous fiscal year. The total expenditure of the government till mid-May2021 is Rs.824.81 billion which is 8.30% 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 ten month of FY 2020/21 by NPR 7.75billion compared to a surplus of NPR 120.89billion during the same period last year. On the other hand, the current account is at deficit of NPR 247.07billion compared to a deficit of NPR 96.18 billion in the same period of last year. In the review period, capital transfer increased 11.5 percent to Rs.13.92 billion and net foreign direct investment (FDI) decreased 19.2 percent to Rs.14.08 billion. In the same period of the previous year, capital transfer and net FDI amounted to Rs.12.49 billion and Rs.17.43 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 16.06% to NPR 6,868.43 million during the ten months in FY 2020/21 compared to a decrease of 7.58% during the same period in FY 2019/20.
Remittance in NPR terms
On the other hand, in NPR terms, the workers’ remittance increased by 19.16% to NPR 809.89 billion during the ten months in FY 2020/21compared to a fall of 6.30% during the same period in FY 2019/20.
Net transfer increased 17.2 percent to Rs.903.77 billion in the review period. Such a transfer had decreased 6.9 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 60.3 percent in the review period. It had decreased 2.7 percent in the same period of the previous year. The number of Nepali workers (Renew entry) taking approval for foreign employment decreased 49.0 percent in the review period. It had decreased 24.6 percent in the same period of the previous year.