29th Poush, Kathmandu. It is seen that the external sector of the economy is gradually becoming free of pressure. According to the data released by Nepal Rastra Bank for the first 5 months of the current financial year 2079/80 (up to the end of Mangsir), there has been an improvement in foreign exchange reserves, foreign exchange status and other indices.
Economic stability is one of the major goals of any country. The main responsibility of maintaining price stability, external sector stability and financial sector stability under economic stability is generally given to the central bank, while the government’s financial policy and the central bank’s monetary policy work as complementary policies to each other in maintaining overall economic stability.
External sector stability refers to the situation where fluctuations in trade and other financial transactions with foreign countries are reduced. That is, external sector indicators such as the exchange rate, current account deficit and foreign exchange reserves should remain in balance.
If the transactions with the external sector are in a lot of deficit, problems may appear in the stability of the external sector due to the lack of foreign exchange reserves in the country. Its impact is also on the domestic economy.
In order to maintain the balance with the external sector, Nepal Rastra Bank manages the exchange rate and external reserves. In the past, due to its lack of proper management, the foreign exchange reserves were affected, and measures ranging from restrictions on imports were taken.
According to the report published by the Nepal Rastra Bank with details up to the end of Mangsir, it seems that the steps taken by the government in the past have led to a continuous increase in the balance of savings.
Data shows that remittances are increasing while inflation is coming under control. After the increase in remittances and decrease in imports, the trade deficit has now reduced. There has been a significant increase in tourism income. Because of this, the data shows that the foreign exchange reserves are improving.
Nepal Rastra Bank, Head of Economic Research Department Dr. Prakash Kumar Shrestha says that the result of strict importation has started to be seen in the external sector. “The facts are improving, although the risk remains,” he said. He said that the results of the policy arrangements undertaken by the National Bank in the external sector reforms have been seen. “The risk remains as imports may increase and remittances may decrease at any time,” he said.
Reserves to cover 8.7 months of imports
According to Nepal Rastra Bank, the total foreign exchange reserves which were equal to 12 trillion 15 billion 800 crores at the end of Ashad 2079 have increased by 6.3 percent in the end of Mangsir.
Now the country has foreign exchange reserves equal to 12 trillion 92 billion 56 crore rupees. When the Nepali currency is weak compared to the American dollar, the foreign exchange reserves have increased by more than 6 percent when calculated in Nepali rupees, but in US dollars, the reserves have increased by only 3 percent. The total foreign exchange reserves in US dollars at the end of Ashad 2079 were 9.54 billion at the end of Mangsir 2079, according to the data of the National Bank.
Out of the total foreign exchange reserves, the reserves in Nepal Rastra Bank have reached 11 trillion 39 billion 22 billion. Similarly, foreign exchange reserves with banks and financial institutions (except Nepal Rastra Bank) have remained at 1 trillion 53 billion 34 billion. According to the National Bank of India, the share of Indian currency in the total foreign exchange reserves of mid-Mangsir 2079 was 22.9 percent.
Compared to the first five months of the last financial year 2078/79, the import decreased by 20.7 percent, the export decreased by 34.6 percent and the total merchandise trade deficit decreased by 18.8 percent during the same period of the current financial year. According to the Rastra Bank, remittances increased by 23.0 percent in Nepali rupees and 13.1 percent in US dollars.
With the contraction in imports and the improvement in foreign exchange reserves, the import adequacy index has also improved. Taking the import of five months of the financial year 2079/80 as the basis, it is seen that the foreign exchange reserves held by the banking sector will be enough to support 10 months of goods import and 8.7 months of goods and services import.
Price control oriented
The country, which has been experiencing high inflation since the first month of the current financial year 2079/80, has seen a controlled trend in the last month. According to the data published by Nepal Rastra Bank up to Mangsir, inflation was 7.38 percent in the middle of the month. Inflation was 8.08 percent till Kartik.
By mid-Ashoj, the annual point consumer inflation was 8.50 percent. Compared to this, there has been an improvement in the price increase in Mangsir. Inflation of food and beverages was 5.85 percent and inflation of non-food and services group was 8.59 percent till mid-Mangsir.
During this period, the annual point index of the restaurant and hotel sub-group under the food and beverage group was 15.56 percent, tobacco products 11.81 percent, food and food products 9.39 percent, dairy products and eggs 9.07 percent and the price of beverages 8. It has increased by 84 percent.
In the non-food and service group, prices have increased by 17.33 percent in transport, 11.22 percent in health, 8.76 percent in entertainment and culture, 8.29 percent in household goods and 8.29 percent in furnishing and household appliances. According to the data, inflation is 6.56 percent in Kathmandu valley, 8 percent in Terai, 7.32 percent in mountains and 6.64 percent in mountains.
4 trillion 80 billion remittances were received in 5 months
In the first 5 months of the current fiscal year 2079/80, 4 trillion 80 billion 500 million rupees of remittances have been received. This is an increase of 23.0 percent compared to the same period of the previous financial year. In the previous year, the remittance inflow decreased by 6.3 percent during this period.
According to the National Bank, remittances in US dollars have increased by 13.1 percent. According to which remittance is 3 billion 71 million dollars. This amount was reduced by 6.8 percent during the review period of the previous year. According to Nepal Rastra Bank, the net transfer increased by 21.6 percent in the first 5 months to reach 530 billion 60 million. In the same period of the previous year, such transfer decreased by 5.3 percent.
46 billion in savings after research
According to Nepal Rastra Bank, the balance of payments (current account) savings has also been increasing recently. The data shows that the external sector has improved as the tight policies aimed at reducing the external sector pressure and liquidity pressure on the economy are gradually loosening as the deficit continues to increase. According to the Economic Research Department of Nepal Rastra Bank, the current account balance is 45.87 billion in surplus till Kartik.
In the same period of the last financial year 2078/79, there has been a significant improvement in the external sector, which was in a deficit of 1 trillion 95 billion 1 crore. According to the Rastra Bank, the balance sheet in the US dollar during the same period of the previous year was a deficit of 1.64 billion, but in the 5 months of the current financial year, it was in a surplus of 346.8 million.
There has been a significant improvement in the current account along with the balance sheet. The current account, which was in a deficit of around 3 trillion in the last 5 months of the financial year, has been in a deficit of only around 38 billion during the same period of the current financial year, the National Bank has announced.
Current account which was in deficit of 298 billion 51 crores in 5 months of the last financial year is in deficit of only 37 billion 91 crores in the same period of the current financial year. In US dollars, the current account which was in deficit of 2.51 billion in the same period of the previous year, has been in a deficit of 297.2 million during the review period.
Average interest rate increases
The data of Nepal Rastra Bank has shown that as the base rate increases along with the deposit interest rate, the loan interest rate becomes more expensive. In Kartik itself, the weighted average interest rate of loans reached the highest level after about 10 years, and further increased in Mangsir. According to the economic and financial situation report, the weighted average interest rate of loans reached 12.74 percent in Mangsir 2079. The weighted average of loans which was 12.65 percent in Kartik 2079 increased further in Mangsir.
In Mangsir 2079, the average interest rate of the loan was the highest since the end of Ashoj of the financial year 069/70. According to the data of Rashtra Bank, the weighted average interest rate of loans was 12.65 percent in Poush 2079 and 12.94 percent in mid-Ashoj.
At the end of Mangsir 2078, the weighted average interest rate of loans was 9.29 percent. As the weighted average interest rate of deposits increases along with the base rate, the loan interest rate also increases. In Mangsir 2078, the weighted average interest rate of deposits was 6.24 percent, while in Mangsir 2079, it reached 8.46 percent. Similarly, the base rate has increased from 8.25 percent to 10.69 percent.
In the monetary policy of the current financial year, Nepal Rastra Bank had set a target of 12 percent growth rate of loans to the private sector. After 5 months of the financial year, the credit flowing to the private sector has increased by only 1.6 percent. According to Rastra Bank, the credit flowing to the private sector increased by 73 billion 30 million in mid-Mangsir compared to mid-Ashad 2079.
Whereas during the last financial year, the loan has expanded by 4 trillion 23 billion 13 billion or 10.4 percent. According to the National Bank, the credit flow from banks and financial institutions to the private sector increased by 4.1 percent at the end of Mangsir 2079 on an annual point-by-point basis.
Deposits have increased by 2.2 percent in 5 months of the financial year. Compared to Ashad 2079, deposits have increased by 1 trillion 11 billion 16 crore in Mangsir 2079, according to the Rastra Bank. During the same period last year, deposits increased by 1.7 percent or 78.44 billion only. The National Bank has mentioned in the report that the growth rate of deposits is 9.5 percent on an annual point basis.
Significant increase in tourism income
There has been a significant increase in tourism income till the end of Mangsir . During this period, tourism income increased by 132.9 percent to 23.63 billion. In the same period of the previous financial year, it was 10 billion 14 billion rupees. During this period, the service income is at a loss of 26.68 billion.
In the same period last year, service income was 38.13 billion. The loss of service income has been reduced due to the improvement in tourism income. The loss of service income means an excessive increase in tourism expenditure. During the period of 5 months, the travel expenses have reached 42.8 billion. Out of which only 28 billion 81 crore rupees have been spent on education.