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The price of gold has increased by Rs 100 per tola in the domestic market on Thursday. According to the Federation of Nepal Gold and Silver Dealers’ Association, the precious yellow metal is being traded at Rs 110, 700 per tola today. It was traded at Rs 110, 600 per tola on Wednesday. Meanwhile, tejabi gold is being traded at Rs 110, 150 per tola. Similarly, the price of silver has increased by Rs 15 and is being traded at Rs 1,395 per tola today.

The acute shortage of liquidity, rising interest rates, and the slowdown in demand have hit the industries in Madhes Province badly in the first half of the current fiscal year. As industries grapple with multiple issues, their capacity utilization dropped by 5.36 percent points in the first half of FY 2022/23. The average capacity utilization of industries in Madhes Province stood at 44.56 percent in the first half of FY 2022/23 compared to 49.92 percent during the same period of the last fiscal, states a new report of Nepal Rastra Bank (NRB). The decline in the average capacity utilization of the industries in the province is due to the shortage as well as the price rise of raw materials, says the NRB report. As the supply of raw materials remained not easy and the construction sector came to a standstill due to the economic recession, the industrial production and activities in the Madhes Province suffered in the first half of this fiscal. “The capacity utilization of the industries producing vegetable ghee and oil, rice flour, beverages, cement, iron rods, and medicinal products has decreased compared to the last fiscal,” says the NRB report. According to the NRB report titled “Provincial Economic Activities Report-Koshi Province”, the liquor industry has the highest capacity utilization of 96.32 percent, while the vegetable ghee industry has the lowest capacity utilization of 3.85 percent. The capacity utilization of the wheat flour industry stood at 91.69 percent, the aluminum industry at 71.25 percent, the iron rod industry at 64.13 percent, the soap industry at 63.43 percent, and the soft drink industry at 37.23 percent. The capacity utilization of the soybean oil industry stood at 28.63 percent, the synthetic yarn industry at 6.65 percent, the animal feed industry at 37.87 percent, and the steel industry at 13.90 percent. The slowdown in the construction sector has badly hit the cement industry whose capacity utilization, according to the NRB report, has fallen to zero in this fiscal year. The capacity utilization of the cement industry during the first half of the last fiscal was 98.3 percent. Similarly, the capacity utilization of the iron rod industry and vegetable ghee industry also declined in this fiscal. With industries operating below capacity, the bank and financial institutions’ (BFIs) loan disbursement to them grew marginally in the first half of FY 2022/23.  The BFIs’ loan disbursement to industries surged by 1.5 percent to Rs 114.02bn. The BFIs’ loan to the industrial sector had stood at Rs 112.34bn during the first half of FY 2021/22. Of the total industrial loans disbursed by the BFIs in Madhes Province, Parsa district has the highest share of 59.97 percent while Saptari district has the lowest share of 2.32 percent. As the majority of industries are based in the Parsha district, the BFIs’ disbursement of loans to the district stood at Rs 68.39bn. Of the total loans, the share of the non-food-producing sector is the highest. The BFIs disbursed 53.01percent of total industrial loans) to the non-food-producing sector. The agriculture sector was the second highest recipient of industrial loans with the BFIs disbursing 28.98 percent of loans. The BFIs’ loans to the electricity and gas sector surged by 90.9 percent, the mining sector by 43 percent, and the non-food-producing sector by four percent. However, loan disbursement to the construction sector declined by 50 percent in the first half of the current fiscal.

The Nepal Stock Exchange (NEPSE) plunged by 39. 26 points to close at 2,049.44 points on Wednesday. Similarly, the sensitive index dropped by 5. 89 points to close at 382. 74 points. A total of 8,092,969-unit shares of 277 companies were traded for Rs 3. 07 billion. Meanwhile, City Hotel Limited and Rawa Energy Development Limited were the top gainers today with their price surging by 9. 99 percent. Likewise, BPW Laghubitta Bittiya Sanstha Limited and Modi Energy Limited were the top losers with their price dropping by 10. 00 percent. At the end of the day, the total market capitalization stood at Rs 3. 00 trillion.

With the majority of legislation related to the anti-money laundering regime still pending in the parliament, Nepal will have a tough time facing the plenary of the Financial Action Task Force (FATF) which will begin from July 9-14 in Vancouver, Canada. While Nepal Rastra Bank Governor Maha Prasad Adhikari-led Nepali delegation will defend the country during the plenary, chances are high that Nepal could again fall into the gray list of the FATF, a global anti-money laundering watchdog. The Adhikari-led Nepali delegation has to satisfy the FATF board about the progress and improvements made to strengthen the AML regime if the country wants to avoid the greylisting. The Nepali delegation comprises Prime Minister’s Office Secretary Udayaraj Sapkota, Law Secretary Dhanraj Gyawali, NRB Executive Director Dev Kumar Dhakal, and NRB’s Financial Information Unit Chief Dirgha Rawal. The delegation will also have senior officials from the Finance Ministry, Office of the Attorney General, CIB of Nepal Police, Department of Money Laundering Investigation, Securities Board of Nepal, and Insurance Authority of Nepal. A senior official at the Finance Ministry said that Nepal will present the progress made in the AML regime to date. “The central bank has taken action against banks not complying with AML and the Securities Board has also initiated action against the insider trading in the capital market,” he said. However, government officials admit that the deficiencies pointed out by the APG have not been addressed. “We have even failed to amend the legislation. Now, the only option is to persuade the FATF board by promising the law amendment,” he said. According to a senior NRB official, around 80 percent of deficiencies pointed out by the APG with regard to the legislation would have been addressed, had the parliament passed the bill. “The failure to endorse the bill from the parliament could prove costly for us,” he said. The Asia Pacific Group (APG) on Money Laundering team that visited Nepal twice in the last six months had pointed out several deficiencies of Nepal to comply with the standards on anti-money laundering and counter-terrorist financing (AML/CFT). The APG team made a field visit to Nepal in December 2022 as a part of the mutual evaluation of Nepal’s compliance. During the Nepal visit, the APG team held discussions with regulating agencies including NRB, the Nepal Insurance Authority, and the Securities Board of Nepal along with private sector representatives. The APG report prepared after the visit stated that the biggest weakness of Nepal is the enforcement of the laws. The report has shown deficiencies in taking legal action against big fishes of corruption and other illegal activities. It has also shown weakness in taking against reporting entities that are failing to comply with anti-money laundering measures. With the risk of Nepal finding a place on the ‘gray list’ of the Financial Action Task Force (FATF), the government in February first week had already decided to expedite the endorsement of amendment bills related to anti-money laundering (AML). The government sought to amend those laws through Some Nepal Acts Amendment processes and the Ministry of Law, Justice, and Parliamentary Affairs registered the Bill for the purpose. However, the parliament is yet to endorse the bill. A majority of the 19 laws in the group are meant to address deficiencies in compliance with the FATF’s anti-money laundering and terrorist financing standards. Some of the major laws that need amendment are the Money Laundering Prevention Act 2008, Land Revenue Act 1978, Tourism Act 1978, Securities Act 2007, Human Trafficking and Transportation (Control) Act 2008, Confiscation of Criminal Proceeds Act 2014, Mutual Legal Assistance Act 2014, Organized Crimes Prevention Act 2014, Criminal (Code) Act 2017 and Cooperatives Act 2017. Nepal is currently under pressure from FAFT and international lenders like the International Monetary Fund (IMF) to enact a number of laws to address the deficiencies to comply with the standards on AML and counter-terrorism financing (CFT). The ‘gray list’ is used to denote a group of countries/jurisdictions with “strategic deficiencies” in their regime to counter money laundering and terror financing. Once listed as ‘jurisdiction under increased monitoring’ by the FATF, they must develop an action plan within a specific period. A country on the gray list is not subject to sanctions. However, the gray list signals to the international banking system that there could be enhanced transactional risks from doing business with the said country. Nepal was on the FAFT's ‘gray list’ from 2008-2014. After a series of progress made on the AML/CFT regime that includes an amendment to the Anti-Money Laundering Act 2008, and the enactment of other laws, the FATF finally removed Nepal from the list in 2014.