Consumer price inflation at 3.02 per cent

As per the macroeconomic report published by Nepal Rastra Bank, the central bank, the year-on-year consumer price inflation stood at 3.02 per cent in the eighth month of fiscal 2020/21 as compared to 6.70 per cent a year ago. Food and beverage inflation stood at 3.80 per cent whereas non-food and service inflation stood at 2.41 per cent in the review month. The price of ghee and oil; fruit; tobacco products; and pulses and legumes sub-groups rose 19.97 per cent, 13.67 per cent, 10.41 per cent and 10.17 per cent, respectively, on a year-on-year basis.

In the review month, Kathmandu Valley witnessed 2.50 per cent inflation whereas the Terai, Hill and Mountain regions witnessed 3.25 per cent, 3.40 per cent and 1.14 per cent inflation, respectively. These regions had witnessed 7.61 per cent, 6.84 per cent, 5.53 per cent and 5.42 per cent inflation, respectively, a year ago.

The report further mentions that in the eight months of 2020/21, merchandise imports increased 2.1 per cent to Rs 943.99 billion against a decrease of 2.6 per cent a year ago. Destination-wise, imports from India, increased 9.8 per cent whereas imports from China and other countries decreased 7.1 per cent and 12.1 per cent, respectively. Based on customs points, exports from Dry Port, Biratnagar, Kailali, Tatopani, Kanchanpur and Rasuwa Customs Office decreased whereas exports from all the other customs points increased in the review period. On the import side, imports from all the other customs points decreased except Bhairahawa, Biratnagar, Nepalgunj, Krishnanagar, Kailali and Kanchanpur Customs Offices in the review period.

As per the central bank, total trade deficit increased 1.6 per cent to Rs 863.21 billion in the eight months of fiscal 2020/21. Such deficit had decreased 4.3 per cent in the same period of the previous year. The export-import ratio increased to 8.6 per cent in the review period from 8.1 per cent in the same period of the previous year.

Similarly, remittance inflows increased 8.6 per cent to Rs 642.14 billion in the review period compared to 1.5 per cent in the same period of the previous year. The report also states that the number of Nepali workers (institutional and individual-new and legalised) taking approval for foreign employment decreased 74.8 per cent in the review period. It had increased 24.2 per cent in the same period of the previous year. The number of Nepali workers (Renew entry) taking approval for foreign employment decreased 65.2 per cent in the review period. It had decreased 2.7 per cent in the same period of the previous year.

The central bank report further states that the current account remained at a deficit of Rs 148.68 billion in the review period compared to a deficit of Rs 119.70 billion in the same period of the previous year. In US dollar terms, the current account registered a deficit of Rs 1.27 billion in the review period compared to a deficit of Rs 1.05 billion in the same period of the previous year.

In the review period, capital transfer increased 6.8 per cent to Rs 11.91 billion and net foreign direct investment (FDI) decreased 34.8 per cent to Rs 10.18 billion. In the same period of the previous year, capital transfer and net FDI amounted to Rs 11.15 billion and Rs 15.61 billion, respectively.

Likewise, Balance of Payments (BOP) registered a surplus of Rs 68 billion in the review period as compared to a surplus of Rs 37.84 billion in the same period of the previous year.

The report also mentions that gross foreign exchange reserves increased 2.5 per cent to Rs 1,436.54 billion in mid-March 2021 from Rs 1,401.84 billion in mid-July 2020. Of the total foreign exchange reserves, reserves held by NRB increased 3.3 per cent to Rs 1,266.10 billion in mid-March 2021 from Rs 1,226.12 billion in mid-July 2020. Reserves held by banks and financial institutions (except NRB) decreased 3 per cent to Rs 170.44 billion in mid-March 2021 from Rs 175.71 billion in mid-July 2020. The share of Indian currency in total reserves stood at 27.6 per cent in mid-January 2021.

Major Highlights

• CPI-based Inflation remained 3.02 per cent on y-o-y basis.
• Imports increased 2.1 per cent and exports increased 7.8 per cent.
• Remittances increased 8.6 per cent in NPR terms and 5 per cent in USD terms.
• Balance of Payments remained at a surplus of Rs 68.0 billion.
• Gross foreign exchange reserves stood at $12.37 billion.
• Federal government spending amounted to Rs 571.02 billion and revenue collection Rs 571.20 billion.
• Broad money (M2) expanded 11.4 per cent. On y-o-y basis, M2 expanded 22.6 per cent.
• Deposits at BFIs increased 11.0 per cent and claims on the private sector increased 17.5 per cent. On y-o-y basis, deposits increased 21.9 per cent and claims on the private sector 18.9 per cent.