BOP Remains Stable: Nepal Rastra Bank

Nepal’s Microeconomic Status Reveals A Grim Economic Picture

June 24, 2020, 9:12 a.m.

Nepal’s Macroeconomic Status Reveals A Grim Economic Picture. As the COVID-19 pandemic continues to spread all over Nepal passing 10,000 cases, it has badly affected economic sectors including remittance inflows, private sector credit, capital expenditure and foreign trade. At a time when all these indicators is going down, the good news is that the foreign exchange reserves and current account witnessing surpluses.

Macroeconomic s Status report published by Nepal Rastra Bank’s showed the remittance inflows between mid-May to mid-June 2020 was Rs. 62 billion compared to Rs. 73.7 billion in the same period of last fiscal year.

Following the imposition of lockdown by the government to check the spread of COVID-19, all the businesses and movements shut down for three months.

“Remittance inflows declined by 6.1 per cent to Rs. 680.84 billion in the 10 months of the current fiscal year against an increase of 19.6 per cent in the same period of the previous year,” said the central bank.

In the US dollar terms, such inflows decreased by 7.4 per cent in the review period against an increase of 9.3 percent last year. Net transfer income was decreased by 6.5 per cent to Rs. 772.51 billion this year.

One of the badly affected sector was Capital expenditure. It has tumbled to just Rs. 9.1 billion in April/May and Rs. 8.7 billion in March/April this year while it was Rs. 19.4 billion and Rs. 19.2 billion in the respective months last year.

Similarly, the government revenue collection was just Rs. 16.1 billion in the tenth month of the current fiscal compared to Rs. 59.1 billion last year.

Private sector credit mobilization witnessed a negative growth by Rs. 13.3 billion in the 10th month while Rs. 15.6 billion was mobilised in the same month last year. It has further gone down to -15.9 billion in May-June this year.

Nepal’s import also declined as Nepal imported goods worth of Rs.58.3 billion compared to Rs. 116.5 billion last year.

The export trade also suffered badly. The country that exported goods worth Rs. 3.9 billion and Rs. 3.3 billion this year compared to Rs. 8.7 billion and Rs. 9.3 billion in mid-April to mid-May and mid-May to mid-June respectively last year.

Since the lockdown was also imposed in most of the trading partner countries, foreign trade witnessed a downward trend.

The year-on-year statistics show that in ten months of 2019/20, merchandise exports increased by 4.5 per cent to Rs. 82.06 billion compared to an increase of 18.9 per cent a year ago.

Merchandise imports decreased by 13.0 per cent to Rs. 1025.14 billion this year against an increase of 19.6 per cent in the same period of the previous year.

The decreased import means reduction in consumption of foods and other goods as well as contraction in capital formation sectors such as infrastructure development and business establishments since most of the capital goods come from India and third countries.

The trade deficit narrowed down by 14.2 per cent to Rs. 943.07 billion in the ten months of 2019/20. Such deficit had expanded by 19.7 per cent in the same period of the previous year.

The export-import ratio increased to 8.0 per cent in the review period from 6.7 per cent in the corresponding period of the previous year.

The current account that registered a deficit of Rs.105.74 billion in ten months of the current fiscal year against Rs. 221.77 billion deficit in the same period of the previous year.

Balance of Payments (BOP) remained at a surplus of Rs. 120.90 billion against a deficit of Rs. 68.20 billion of the previous year.

Meanwhile, foreign direct investment (FDI) has increased in the 10 months of this fiscal. The total FDI stands at Rs. 17.42 billion this year against Rs. 9.47 billion of the last year.

Gross foreign exchange reserves increased by 18.9 per cent to Rs. 1235.25 billion in mid-May 2020 from Rs. 1038.92 billion in mid-July 2019.

Similarly, of the total foreign exchange reserves, reserves held by NRB increased to Rs. 1075.19 billion in mid-May 2020 from Rs. 902.44 billion in mid-July 2019.

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