Inflation
The consumer price inflation in Nepal moderated to 4.40 percent year-on-year in mid-May 2024, down from 7.41 percent a year ago. Food and beverage inflation stood at 6.27 percent, while non-food and services inflation was 2.96 percent. Vegetable prices increased the most at 23.11 percent year-on-year. The wholesale price inflation stood higher at 5.68 percent, with a significant increase of 10.40 percent in consumption goods prices. However, the salary and wage rate index rose at a slower pace of 5.22 percent year-on-year.
External Sector Nepal's merchandise exports decreased by 3.6 percent to Rs 126.17 billion during the review period, with exports to India and other countries declining, except for a 68.1 percent increase in exports to China. Imports also decreased by 2.4 percent to Rs 1303.36 billion, resulting in a 2.3 percent decrease in the trade deficit to Rs 1177.18 billion. Remittance inflows increased by 19.2 percent in Nepali rupee terms and 17.1 percent in US dollar terms. The current account remained at a surplus of Rs 193.25 billion, a significant improvement from a deficit of Rs 63.74 billion a year ago. The balance of payments also posted a surplus of Rs 392.64 billion.
Foreign Exchange Reserves
Nepal's gross foreign exchange reserves increased substantially by 26.2 percent to Rs 1942.4 billion in mid-May 2024 from Rs 1539.36 billion in mid-July 2023. In US dollar terms, the gross foreign exchange reserves increased by 24.2 percent to $14.54 billion in mid-May 2024 from $11.71 billion in mid-July 2023.
Of the total foreign exchange reserves, reserves held by Nepal Rastra Bank (NRB) increased by 28 percent to Rs 1722.02 billion in mid-May 2024 from Rs 1345.78 billion in mid-July 2023. Reserves held by banks and financial institutions (excluding NRB) increased by 13.8 percent to Rs 220.38 billion in mid-May 2024 from Rs 193.59 billion in mid-July 2023. The share of Indian currency in total reserves stood at 22.1 percent in mid-May 2024.
Foreign Exchange Adequacy Indicators
Based on the imports during the ten months of 2023/24, Nepal's foreign exchange reserves held by the banking sector are sufficient to cover 15.1 months of prospective merchandise imports and 12.6 months of merchandise and services imports. The ratio of reserves-to-GDP stood at 34 percent, the reserves-to-imports ratio was 105.3 percent, and the reserves-to-M2 (broad money supply) ratio was 29.2 percent in mid-May 2024. In mid-July 2023, these ratios were 28.8 percent, 83.0 percent, and 25.0 percent, respectively.
Prices of Oil and Gold
In the international market, the price of oil (Crude Oil Brent) increased by 11.6 percent to $83.18 per barrel in mid-May 2024 from $74.54 per barrel a year ago. Similarly, the price of gold increased by 16 percent to $2343.80 per ounce in mid-May 2024 from $2019.90 per ounce a year ago.
Exchange Rate
The Nepalese currency vis-à-vis the US dollar depreciated by 1.61 percent in mid-May 2024 from mid-July 2023. In the same period of the previous year, it had depreciated by 2.79 percent. The buying exchange rate per US dollar stood at Rs 133.31 in mid-May 2024 compared to Rs 131.17 in mid-July 2023.
Fiscal Situation
According to the Ministry of Finance's Financial Comptroller General Office (FCGO), the total expenditure of the Nepal Government stood at Rs 1056.89 billion during the ten months of 2023/24. Compared to a growth of 15.3 percent in the last fiscal year, government expenditure increased by a modest 0.9 percent in the review period. The recurrent expenditure, capital expenditure, and financial expenditure amounted to Rs 752.56 billion, Rs 111.88 billion, and Rs 192.45 billion, respectively.
In the review period, total revenue mobilization of the Nepal Government (including the amount to be transferred to provincial and local governments) stood at Rs 831.93 billion, recording a growth of 10.0 percent. This contrasts with a decrease of 12.6 percent in the same period of the last fiscal year. Tax revenue amounted to Rs 746.83 billion, and non-tax revenue stood at Rs 85.10 billion.
Monetary Situation
Broad money supply (M2) increased by 8.1 percent during the review period, while on a year-on-year basis, it expanded by 12.4 percent in mid-May 2024. Deposits at banks and financial institutions (BFIs) increased by 7.8 percent, and private sector credit grew by 4.7 percent. On a year-on-year basis, deposits increased by 12.8 percent, and private sector credit increased by 5.2 percent. The weighted average 91-day treasury bills rate decreased to 3.02 percent from 9.66 percent a year ago, while the weighted average inter-bank transaction rate among BFIs decreased to 2.88 percent from 7.00 percent.
Capital Market
The NEPSE index stood at 1998.89 in mid-May 2024, up from 1821.65 a year ago. Stock market capitalization increased to Rs 3169.48 billion from Rs 2657.76 billion a year earlier. The number of companies listed at NEPSE reached 272, with banks, financial institutions, and insurance companies accounting for 58.4 percent of the market capitalization.
Cash Balance of Government
The cash balance at various accounts of the Government of Nepal (GoN) maintained with NRB remained at Rs 279.74 billion (including Provincial Governments and Local Government Accounts) in mid-May 2024. This balance was Rs 65.36 billion in mid-July 2023.
Provincial Government Expenditure and Revenue
During the review period, the total expenditure of provincial governments stood at Rs 98.34 billion, while resource mobilization stood at Rs 150.67 billion. The total resource mobilization of provincial governments includes grants and revenue transferred from the Nepal Government amounting to Rs 113.13 billion and revenue and other receipts of the provincial governments amounting to Rs 37.54 billion.
