This macroeconomic report is prepared based on two 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-Sep 2021 inclined remarkably by 82.45% to close at 2812.26 points, compared to 1541.40 points in the same period last year. The Market capitalization of NEPSE as well increased from NPR 2,049.28 billion in Mid-Sep 2020 to NPR 3,935.74 billion in Mid-Sep 2021.
On the other hand, the ratio of market capitalization of NEPSE to GDP as at Mid-Sep 2021 has increased to 92.25% compared to 54.54% 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 0.10% in Mid-Dec, 2020 which has been gradually rising since then and has reached to 4.75% in Mid-Sep 2021 indicating tightening of liquidity in the banking system compared to Mid-Dec 2021. The interbank rate during the same period a year ago stood at 0.08%.
Base Rate The base rate of commercial banks stands at 6.89% in Mid-Sep 2021 compared to 7.83% a year ago. This has set the weighted average lending rate at 8.57%. On the other hand, the weighted average deposit rate stands at 4.92%. Such rates were 10.18% and 5.61% respectively in the corresponding month of the previous year.
C. INFLATION RATE
The consumer price inflation which was 4.52% a year ago decreased to 3.49% in Mid-Sep 2021. Food and beverage inflation stood at 2.57% whereas non-food and service inflation stood at 4.22% in the review month. The price of ghee and oil, non-alcoholic drinks, tobacco products and transportation subcategories rose 28.91%, 10.25%, 9.99% and 9.92% respectively on y-o-y basis.
D. DEPOSIT AND LENDING GROWTH
Deposit Growth: The deposits of BFI’s as at Mid-Sep 2021 decreased by 0.98% to NPR 4,787.18 billion, compared to NPR 4,740.90 billion in Mid-July 2021. The increase during the same period last year was 0.001%. The share of demand, saving, and fixed deposits in total deposits stands at 7.9 %, 35.0 % and 49.2 % respectively in mid-Sep 2021. Such shares were 7.5 percent, 32.6 percent and 50.9 % respectively a year ago.
Credit Growth: The credit disbursement of BFI’s as at Mid-Sep 2021 increased to NPR. 4,400.78 billion by 5.46%, compared to NPR 4172.78 billion in Mid-July 2021. The growth during the same period last year was 0.27%. Outstanding loan of BFIs to the agriculture sector increased 6.1 percent, industrial production sector 5.4%, construction sector 4.1%, transportation, communication and public sector 3.1%, wholesale and retail sector 5.5% and service industry sector 9.1% in the review period. In the review period, term loan extended by BFIs increased 7.7 percent, overdraft 6.6 percent, trust receipt (import) 3.3 percent, demand and working capital loan 3.8 percent, real estate loan (including residential personal home loan) 3.3 percent and hire purchase loan 5.9 percent while that of margin nature loan decreased 2.1 percent
E. LIQUIDITY MANAGEMENT
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.422.29 billion of which NPR 70.00 billion through Repo and NPR 352.29 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.0.3 billion through the net purchase of USD 3.9 million from foreign exchange market. Liquidity of Rs.85.27 billion was injected through the net purchase of USD 0.72 billion in the corresponding period of the previous year.
F. FISCAL SITUATION
In the second month of 2021/22, total revenue collected by the government till mid-Sep 2021 is Rs.168.58 million which is 59.97% higher compared with the corresponding month of the previous fiscal year. The total expenditure of the government till mid-Sep 2021 is Rs.89.93 million which is 31.16% 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 second month of FY 2021/22 by NPR 83.40 billion compared to a surplus of NPR 67.52 billion during the same period last year. On the other hand, the current account is at deficit of NPR 106.74 billion compared to a surplus of NPR 25.15 billion in the same period of last year. In the review period, capital transfer decreased 36.3% to Rs.1.25 billion and net foreign direct investment (FDI) increased 24.6% to Rs.3.04 billion. In the same period of the previous year, capital transfer and net FDI amounted to Rs.1.96 billion and Rs.2.44 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 5.76% to NPR 1.31 billion during the second months in FY 2021/22 compared to an increase of 2.59% during the same period in FY 2020/21.
Remittance in NPR terms On the other hand, in NPR terms, the workers’ remittance decreased by 6.27% to NPR 155.37 billion during the two month in FY 2021/22 compared to a rise of 8.1% during the same period in FY 2020/21.
Net transfer decreased 6.4% to Rs.171.92 billion in the review period. Such a transfer had increased 4.4 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 38,492 in the review period. It had decreased 99.2% in the same period of the previous year. Likewise, The number of Nepali workers (Renew entry) taking approval for foreign employment increased significantly to 22,976 in the review period. It had decreased 86.5 percent in the same period of the previous year.