This macroeconomic report is prepared based on three 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-Oct 2021 inclined remarkably by 70.05% to close at 2656.97 points, compared to 1562.46 points in the same period last year. The Market capitalization of NEPSE as well increased from NPR 2082.58 billion in Mid-Oct 2020 to NPR 3,719.72 billion in Mid-Oct 2021.
On the other hand, the ratio of market capitalization of NEPSE to GDP as at Mid-Oct 2021 has increased to 87.19% compared to 55.28% in the last year during the same review period.
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-Dec, 2020 which has been gradually rising since then and has reached to 4.95% in Mid-Oct 2021 indicating tightening of liquidity in the banking system compared to Mid-Dec 2020. The interbank rate during the same period a year ago stood at 0.11%.
The base rate of commercial banks stands at 7.57% in Mid-Oct 2021 compared to 7.73% a year ago. This has set the weighted average lending rate at 8.69%. On the other hand, the weighted average deposit rate stands at 5.43%. Such rates were 9.83% and 5.45% respectively in the corresponding month of the previous year.
The consumer price inflation which was 3.79% a year ago increased to 4.24% in Mid-Oct 2021. Food and beverage inflation stood at 3.63 percent whereas non-food and service inflation stood at 4.72 percent in the review month. The price of ghee and oil; meat and fish; pulses and legumes; tobacco products and non-alcoholic drinks sub-categories rose 31.68 percent, 11.93 percent, 10.71 percent, 10.12 percent and 9.63 respectively on y-o-y basis.
D.DEPOSIT AND LENDING GROWTH
Deposit Growth: The deposits of BFI’s as at Mid-Oct 2021 increased by 1.94% to NPR 4,833.01 billion, compared to NPR 4,740.90 billion in Mid-July 2021. The increase during the same period last year was 4.79%. The share of demand, saving, and fixed deposits in total deposits stands at 7.7 percent, 34.4 percent and 50.3 percent respectively in mid-October 2021. Such shares were 9.1 percent, 32.8 percent and 49.5 percent respectively a year ago.
Credit Growth: The credit disbursement of BFI’s as at Mid-Oct 2021 increased to NPR. 4,492.52 billion by 7.66%, compared to NPR 4172.78 billion in Mid-July 2021. The growth during the same period last year was 4.50%. Outstanding loan of BFIs to the agriculture sector increased 9.1 percent, industrial production sector 7.1 percent, transportation, communication and public sector 4.8 percent, wholesale and retail sector 7.5 percent and service industry sector 5.0 percent in the review period. In the review period, term loan extended by BFIs increased 7.1 percent, overdraft 13.4 percent, demand and working capital loan 6.1 percent, real estate loan (including residential personal home loan) 5.9 percent, trust receipt (import) 4.7 percent and hire purchase loan 3.6 percent while that of margin nature loan decreased 2.2 percent.
E. LIQUIDITY MANAGEMENT
Summary of Monetary Operation during Third month of FY 2021/22
In the review period, NRB mopped up Rs.60.00 billion liquidity out of which Rs.28.35 billion was through reverse repo auction and Rs.31.65 billion through deposit collection. In the review period, NRB injected liquidity of Rs.1008.17 billion of which NPR 185.49 billion through Repo and NPR 822.67 billion through standing liquidity facility (SLF). In the corresponding period of the previous year, Rs.60 billion liquidity was mopped up through reverse repo auction. On the other hand, no liquidity was injected by NRB in the corresponding period of the previous year.
In the review period, NRB injected liquidity of Rs.29.73 billion through the net sale of USD 0.25 billion from foreign exchange market. Liquidity of Rs.147.43 billion was injected through the net purchase of USD 1.24 billion in the corresponding period of the previous year.
F. FISCAL SITUATION
In the third month of 2021/22, total revenue collected by the government till mid-Oct 2021 is Rs.255.03 million which is 47.97% higher compared with the corresponding month of the previous fiscal year. The total expenditure of the government till mid-Oct 2021 is Rs.234.52 million which is 16.63% 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 third month of FY 2021/22 by NPR 76.13 billion compared to a surplus of NPR 101.08 billion during the same period last year. On the other hand, the current account is at deficit of NPR 151.70 billion compared to a surplus of NPR 33.38 billion in the same period of last year. In the review period, capital transfer decreased 45.9 percent to Rs.1.92 billion but net foreign direct investment (FDI) increased 73.5 percent to Rs.5.07 billion. In the same period of the previous year, capital transfer and net FDI amounted to Rs.3.56 billion and Rs.2.92 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 7.65% to $2.017 billion during the first three months in FY 2021/22 compared to an increase of 7.63% during the same period in FY 2020/21.
Remittance in NPR terms
On the other hand, in NPR terms, the workers’ remittance decreased by 7.58% to NPR 239.32 billion during the first three months in FY 2021/22 compared to a rise of 12.65% during the same period in FY 2020/21.
Net transfer decreased 8.1 percent to Rs.263.73 billion in the review period. Such a transfer had increased 10.2 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 increased significantly to 66,316 in the review period. It had decreased 96.8 percent in the same period of the previous year. The number of Nepali workers (Renew entry) taking approval for foreign employment increased significantly to 34,823 in the review period. It had decreased 78.6 percent in the same period of the previous year.