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Financial data hints of an economy in crisis

Pratik Ghimire

Pratik Ghimire

Financial data hints of an economy in crisis

Gross foreign exchange reserves decreased 16.5 percent to Rs 1.16trn in mid-April 2022 from Rs 1.39trn in mid-July 2021

By all indications, Nepali economy is inching towards a crisis. The Nepal Rastra Bank (NRB) recently published the country’s current macroeconomic and financial status based on the first nine months’ data for the fiscal 2021/22. It says consumer inflation in this time inched up to 7.28 percent, imports increased by 32 percent while exports got a 69.4 percent boost (from a much lower base). 

Similarly, remittances dropped by 0.6 percent, balance of payments remained at a deficit of Rs 268.26bn, and gross foreign exchange reserves stood at $9.61bn. The federal government spending amounted to Rs 794.26bn and the revenue collection stood at Rs 789.26bn. Here are the details:

Inflation

  • Consumer price inflation stood at 7.28 percent in March/April compared to 3.10 percent the same time a year ago. Food and beverage inflation was at 7.40 percent, whereas non-food and service inflation was 7.18 percent in the review months. Average inflation was 5.62 percent. 

  • Under the food and beverage category, the prices of ghee and oil, milk products and eggs, pulses and legumes, and tobacco products subcategories rose by 28.36 percent, 11.56 percent, 10.53 and 8.91 percent respectively in a year-on-year basis. Likewise, under the non-food and services category, the prices of transport, education, and miscellaneous goods and services sub-categories rose by 20.16 percent, 8.79 percent and 8.17 percent respectively.

Foreign trade

  • Intermediate and final consumption goods accounted for 47.2 percent and 52.7 percent of the total exports respectively, whereas the ratio of capital goods in total exports remained negligible in the review period. At the same period of the previous year, the ratio of intermediate, capital and final consumption goods stood at 31.8 percent, 0.5 percent and 67.7 percent of total exports respectively.

  • On the import side, the share of intermediate goods stood at 53.2 percent, capital goods at 10.5 percent and final consumption goods at 36.3 percent in the review period. The respective ratios were 53.4 percent, 11.7 percent and 34.8 percent in the same period the previous year.

  • The unit value export price index increased 9.9 percent and the import price index increased 17.6 percent. The terms of trade index decreased 6.5 percent in the review months compared to a decrease of 3.2 percent a year ago.

  • Remittance inflows decreased 0.6 percent to Rs 724.74bn in the review period against an increase of 16.5 percent in the same period of the previous year. 

  • Net transfer decreased 0.7 percent to Rs 808.92bn in the review period. Such a transfer had increased 14.4 percent in the same period of the previous year.

Foreign exchange reserves

  • Gross foreign exchange reserves decreased 16.5 percent to Rs 1.16trn in mid-April 2022 from Rs 1.39trn in mid-July 2021.

  • Of the total foreign exchange reserves, reserves held by the NRB decreased 17.9 percent to Rs 1.02trn in mid-April 2022 from Rs 1.24trn in mid-July 2021. Reserves held by banks and financial institutions (except NRB) decreased 5.1 percent to Rs 146.48bn in mid-April 2022 from Rs 154.39bn in mid-July 2021. The share of Indian currency in total reserves stood at 24.3 percent in mid-April 2022.

Expenditure and revenue

  • The total expenditure of the federal government stood at Rs 794.26bn. The recurrent expenditure, capital expenditure, and financial expenditure amounted to Rs 625.5bn, Rs 103.79bn and Rs 64.97bn respectively in the review period.

  • In the review period, revenue mobilization (including the amount to be transferred to provincial and local governments) stood at Rs 789.26bn. The tax revenue and non-tax revenue amounted to Rs 727.79bn and Rs 61.47bn respectively.

  • The federal government mobilized Rs 105.47bn domestic debt including Rs 50bn treasury bills, Rs 54.5bn development bonds and Rs 0.97bn citizen saving certificates.

  • Balance in various government accounts maintained with the NRB was Rs 333.08bn (including provincial government and local authorities account) in mid-April 2022 compared to Rs 200.18bn in mid-July 2021.

Deposit mobilization

  • Deposits at Banks and Financial Institutions (BFIs) increased 5.1 percent in the review period compared to an increase of 13.7 percent in the corresponding period of the previous year. Deposits at BFIs expanded 12.2 percent in mid-April 2022.

  • The share of demand, saving, and fixed deposits in total deposits stands at 8.7 percent, 28.7 percent, and 56.1 percent respectively in mid-April 2022. Such shares were 8.5 percent, 35.1 percent, and 48.2 percent respectively a year ago.

  • The share of institutional deposits in total deposits of BFIs stands at 38.6 percent in mid-April 2022. Such a share was 41.7 percent in mid-April 2021.

Refinance

  • The amount of refinance provided by the NRB stood at Rs 116.9bn in mid-April 2022.

  • As of mid-April 2022, the concessional loan is Rs 216.06bn extended to 145,693 borrowers. Of which, Rs 138.84bn has been extended to 59,931 borrowers for selected commercial agriculture and livestock businesses. 

Interest rates

  • The weighted average 91-day treasury bills rate was 7.58 percent, which was 2.76 percent a year ago. The weighted average inter-bank transaction rate among commercial banks, which was 2.03 percent a year ago, increased to 6.99 percent in the review period. The weighted average interbank rate of BFIs, which is considered as the operating target of monetary policy, stood at 7 percent in the review period. Such a rate was 2.03 percent a year ago.

  • The average base rate of commercial banks stood at 9.17 percent, which was 6.90 percent a year ago. Weighted average deposit rate and lending rate of commercial banks stood at 7.11 percent and 10.78 percent respectively in the review period. Such rates were 4.79 percent and 8.61 percent respectively a year ago.

Capital Market

  • NEPSE index reached 2415.3 in mid-April 2022 compared to 2714.8 in mid-April 2021.

  • Stock market capitalization in mid-April 2022 stood at Rs 3.42trn compared to Rs 3.75trn in mid-April 2021.

  • The paid-up value of 6.68bn shares listed at NEPSE stood at Rs 658.33bn in mid-April 2022.

  • Securities worth Rs 182.76bn were listed at NEPSE. Such securities comprise government bonds worth Rs 54.5bn, debenture worth Rs 49.16bn, bonus shares worth Rs 47.96bn, ordinary share worth Rs 18.09bn, right share worth Rs 9.31bn, and mutual fund worth Rs 3.75bn.

  • The Securities Board of Nepal approved the total public issuance of securities worth Rs 15.05bn in the review period, which includes debenture worth Rs 4.8bn, ordinary share worth Rs 3.79bn, right share worth Rs 3.46bn and mutual fund worth Rs 3bn.

Source of all data: Nepal Rastra Bank
Based on nine months’ data ending mid-April 2021/22