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For the first time in the history of the Nepali capital market, banks are all set to receive licenses to operate stock brokerage services. With the Securities Board of Nepal (Sebon) issuing letters of intent (LoIs) to 16 brokerage firms including seven subsidiary companies of commercial banks on Monday, the deck has been cleared for banks to get into stock broking. The subsidiary companies of seven commercial banks, namely Nabil Bank, Nepal Investment Mega Bank, Citizens Bank, Kumari Bank, NMB Bank, Rastriya Banijya Bank, and Sanima Bank will be allowed to operate stock brokerage transactions. Nepal Stock Exchange (NEPSE) was established in Nepal on January 13, 1994. In the same year, the first stock brokerage firm Sewa Securities was established. At present, there are 50 brokerage companies operating in Nepal including one stock dealer company. Banks have long sought to get permits for stock brokerage services that they intend to provide through their subsidiary companies. Sebon in 2007 introduced a policy of granting brokerage licenses to subsidiaries of BFIs. However, the plan failed after the Nepal Rastra Bank (NRB) issued instructions that the bank's subsidiary companies could not operate as stock brokers. Similarly, influential stock brokers also lobbied heavily to stop banks from getting stock brokerage licenses. In 2017, Sebon and the Finance Ministry again started preparations to grant brokerage licenses to BFIs. The central bank, through the monetary policy, introduced a policy that brokerage licenses could be given to the subsidiaries of BFIs. However, it again got stalled after the Parliamentary Finance Committee stopped the process. After the Finance Committee’s green signal, the Sebon amended the necessary regulations and invited applications in the third week of September last year for the new stock brokerage licenses. A total of 45 companies including the subsidiaries of the commercial banks applied for the licenses. Of the 16 companies that received LoIs from Sebon for stock brokerage licenses, 7 were the subsidiaries of commercial banks. These include Nabil Securities, Mega Stock Market, CBIL Securities, KBL Securities, NMB Securities, RBB Securities, and Sanima Securities. Nabil Securities, which has a paid-up capital of Rs 1.5 billion, has received LoI for trading of shares, and to work as a share underwriter and as a qualified institutional investor. Similarly, Mega Stock, which has paid-up capital is Rs 600 million, has received LoI to manage the investment and act as a depository member.

The recovery in tourist arrival has continued as Nepal welcomed 98,773 foreign visitors in April 2023. The latest statistics from the Nepal Tourism Board (NTB) show that tourism in Nepal has largely recovered from the impacts of the Covid-19 pandemic. The tourist footfall in April 2023 is 90.28 percent compared to April 2019 when 109,399 foreigners visited Nepal. The tourist arrival has surged by 132.67 percent in the first four months of 2023. According to NTB, 326,528 tourists visited Nepal in the first four months of 2023 compared to 140,336 during the same period of 2022. Nepal welcomed 55,074 international visitors in January, 73,255 in February, and 99,426 in March. While the number of Chinese visitors is gradually improving, Nepal received the highest number of tourists from India, the US, and the United Kingdom in April. According to NTB, 31,437 Indian tourists and 8,413 US visitors came to Nepal in April. The country welcomed 5,409 tourists from the United Kingdom, 4,770 from China, 3,828 from Australia, 3,246 from Germany, and 3,211 from France. While there has been a huge improvement in tourist arrivals this year, it is yet to touch the pre-Covid level. Nepal received 420,446 tourists in the first four months of 2019. The arrival of foreigners in the first four months of 2023 is 77.66 percent compared to the same period in 2019. With the easing of travel restrictions and China reponing outbound travel for its citizens, Nepali tourism entrepreneurs are pinning high hopes for 2023. NTB on its 24th anniversary announced that it aims to attract at least one million foreign tourists in 2023. In 2022, tourist arrivals reached over 600,000 without any significant contribution from China. Only 9,595 Chinese tourists visited Nepal in 2022. Tour operators say they are receiving increasing fresh inquiries from major source markets including China. While the FITs (free independent travelers) have already started coming to Nepal, group travelers from the northern neighbor arrived in the second week of April, the first group tour from China after the Covid-19 pandemic. The arrival of 180 Chinese trekkers in Nepal on April 13 has rekindled hopes for Nepal's tourism sector. They were the first of four batches of nearly 8,00 Chinese trekkers to visit Nepal to trek on the Poon Hill trail located some 270 kilometers west of Kathmandu. This visit has come after China included Nepal on a second list of 40 destinations for group tours that Chinese nationals could visit starting from March 15. After China reopened its door to its citizens to visit Nepal, Nepal Tourism Board (NTB) and Nepali travel trade entrepreneurs are visiting various Chinese cities to promote Nepal tourism. Travel trade entrepreneurs say that a significant contribution of Chinese tourists would be required if Nepal wants to meet the target of one million visitors in 2023. Tourist arrivals

A sharp slowdown in economic activities, slackened domestic demand, tighter monetary policy, and persistent global headwinds have adversely affected Nepal's economy in the current fiscal year. Making public the National Account Statistics on Tuesday, the National Statistics Office (NSO) estimated that Nepal’s economy would grow by 2.16 percent in the current fiscal year 2022/23. With an acute liquidity crunch, higher interest rates, rising inflation, and sluggish market demand, the country’s economy has been under pressure from the start of FY 2022/23. The economy grew by a meager 1.7 percent in the first quarter of the current fiscal year. In its economic growth projection for the second quarter, NSO said the gross domestic product (GDP) growth has been negative by 1.1 percent. However, NSO has expected that economic growth will be positive by the last quarter of the current fiscal year. Similarly, Nepal’s gross domestic product (GDP) is estimated to be at Rs 5,381bn in FY 2022/23. Much lower than WB’s and ADB’s projections NSO’s GDP growth projection is much lower than what World Bank (WB) and the Asian Development Bank (ADB) forecasted a month ago. Both WB and ADB have projected that Nepal’s economic growth would grow at 4.1 percent this year. On the other hand, the government set an ambitious growth rate target of eight percent in the budget of the current fiscal year. The per capita income growth of Nepalis has stagnated this year as the NSO estimated that per capita GDP will remain unchanged from last year’s $1399. Per capita income means an average income of a person in a year. The average per capita income of Nepalis increased by $122 in the last fiscal year. Economist Dr Biswas Gauchan has termed the NSO projection as realistic. “Given the current state of our economy which is grappling with higher inflation, high interest rates, and liquidity crunch, the growth projection is realistic,” said Gauchan. “However, for a developing country like Nepal, this growth rate cannot be termed as satisfactory.” Contraction in major sectors This year, the slump in the construction, mining, transport, manufacturing, and wholesale and retail trade sectors dragged the overall economic growth. The NSO has projected that the mining sector will grow by a meager 1.11 percent in FY 2022/23 compared to a growth of 8.84 percent in FY 2021/22. The construction sector which grew by 7.08 percent in the last fiscal year, is expected to remain negative by 2.62 percent in this fiscal year. Similarly, the wholesale and retail trade's growth has been projected to be negative by 2.96 percent in this fiscal compared to growth of 7.46 percent in the last fiscal. According to NSO, the growth of the manufacturing sector is likely to decelerate by 2.04 percent in FY 2022/23 due to higher interest rates, import restriction measures, and the slowdown in domestic consumption. Business community members have been saying that the mining and construction sectors have been going through a prolonged slump which has resulted in a sharp decline in the demand for cement, steel, and other construction materials. The demand for cement, steel, sand, and other construction materials has decreased with construction activities in the country coming to a halt. The NSO has stated that the electricity and accommodation (hospitality) sectors will have the highest growth in FY 2022/23. According to the projection, the electricity sector will grow by 19.36 percent while accommodation will grow by 18.56 percent. A gradual recovery in the tourism sector with a surge in tourist arrival has helped the hospitality sector. Ramprasad Thapaliya, Chief of NSO said that the contraction in economic activities has affected the country’s economic growth. “The National Account Statistics will help the federal government to prepare the budget for the next fiscal year,” he said, “We have made public the real state of the economy, based on which the government can bring the necessary policy interventions through the next budget.”

The International Monetary Fund (IMF) has decided to release Rs 6.9bn (about $52.8m) to Nepal in the second tranche of the Extended Credit Facility (ECF). After completing the first and second reviews of Nepal’s performance, the executive board of IMF agreed to provide the second installment of the loan. In the last week of February, the Nepal government and IMF reached a staff-level agreement on policies and reforms needed to complete the combined first and second review of the ECF arrangement. Nepal was expecting to receive the second installment in May 2022, but the Washington DC-based global lender delayed the second tranche of $ 395.9m in loan to Nepal till February 2023, stating that the country is yet to fulfill the obligations. The IMF had approved the $395.9m ECF for Nepal in January 2022 of which the Himalayan nation had already received the first installment of $110m. The funding was approved to assist Nepal’s Covid-19 response in mitigating the pandemic’s impact on health and economic activity, protect vulnerable groups, preserve macroeconomic and financial stability, and support sustained growth and poverty reduction. Issuing a press statement, the IMF said that the ECF arrangement had helped mitigate the impact of the pandemic and global shocks on economic activity and aims at protecting vulnerable groups, preserving macroeconomic and financial stability, and supporting sustained growth and poverty reduction. “The program is also helping to catalyze additional financing from Nepal’s development partners,” the statement reads. Even though the import restrictions helped to stabilize the declining foreign exchanges, the measures contributed to the reduction of the government’s revenue sharply in the current fiscal year forcing the government to cut funding for various development projects. The IMF praised Nepal for making continued progress with the implementation of the ECF-supported program despite a challenging global and domestic environment last year, including the impact of Russia’s war in Ukraine. “The Nepali authorities have taken decisive actions to maintain a stable macroeconomic environment in the context of the post-Covid-19 recovery and global shocks. The much-needed monetary policy tightening last year, together with the gradual unwinding of covid support measures, helped moderate credit growth and lower inflation,” the IMF said. “While reform implementation has been slower than expected, in a difficult environment, the Nepali authorities remain committed to their economic reform program,” the statement quoted Bo Li, Deputy Managing Director and Acting Chair of IMF as saying. “Maintaining momentum on governance reforms is critical to cement recent gains in fiscal transparency,” said Bo. “Fiscal consolidation and further structural reforms are needed to support medium-term fiscal sustainability. Revenue mobilization, advancing fiscal federalism, addressing fiscal risks, and strengthening public investment management are important measures.” The IMF has also pointed out the asset quality of the Nepali financial system. Bank asset quality, according to the IMF, has deteriorated as higher lending rates depress borrowers’ repayment capacity. In fact, Nepal has committed to evaluating the situation of Nepal’s large 10 banks through external auditors to receive the ECF funding. A Nepal Rastra Bank (NRB) official had earlier told the Annapurna Express that Nepal Rastra Bank would foreign auditors to identify the exact status of 10 commercial banks following the completion of the latest first and second review of the ECF-supported program. “The NRB is prioritizing the asset quality of banks, including through regulatory initiatives to ensure appropriate classification of loans, and is focused on advancing the financial sector reform agenda,” the IMF said. “Measures to improve the autonomy and accountability framework of the central bank and strengthen the AML/CFT framework and its effectiveness remain crucial.”