Kathmandu: In a comprehensive analysis of the current economic scenario, the Nepal Rastra Bank (NRB) reveals encouraging trends and resilience in Nepal’s economic landscape for the first five months ending mid-December 2023/24.
Inflation and Trade Dynamics:
Inflation Stability: The Consumer Price Index (CPI)-based inflation remained steady at 4.95 percent on a year-on-year basis, indicating a controlled price environment.
Trade Balance Improvements: Despite a 3.4 percent decline in imports and a 6.1 percent decrease in exports, the trade deficit contracted by 3.1 percent, reflecting a positive trajectory in trade dynamics.
Remittances and Financial Flows:
Remittance Surge: Remittances exhibited remarkable growth, surging by 27.6 percent in NPR terms and 24.5 percent in USD terms, reaching Rs. 613.25 billion. This underscores the crucial role of remittances in supporting the domestic economy.
Balance of Payments and Reserves:
Current Account Turnaround: The current account registered a surplus of Rs. 140.23 billion, a significant shift from the Rs. 41.21 billion deficit recorded in the corresponding period last year.
Robust Balance of Payments: The overall Balance of Payments (BOP) remained robust, boasting a surplus of Rs. 210.59 billion, indicating strong external financial stability.
Foreign Exchange Reserves: Gross foreign exchange reserves witnessed a notable increase of 14.8 percent, reaching NPR 1767.04 billion, providing a substantial cushion against external uncertainties.
Government Finances and Monetary Policy:
Prudent Fiscal Management: Government expenditure amounted to Rs. 453 billion, while revenue collection reached Rs. 363.43 billion, highlighting disciplined fiscal management.
Monetary Expansion: Broad money (M2) expanded by 4.7 percent, with a noteworthy year-on-year growth of 14.4 percent, reflecting a stable monetary environment.
Financial Sector Stability: Deposits at BFIs increased by 4.6 percent, and private sector credit grew by 2.3 percent, contributing to overall financial stability.
Foreign Exchange Adequacy and Indicators:
Sufficient Foreign Exchange Cover: Foreign exchange reserves are deemed sufficient, covering prospective merchandise imports for 14.1 months. Reserves-to-GDP, reserves-to-imports, and reserves-to-M2 ratios stood at 32.8 percent, 98.3 percent, and 27.5 percent, respectively, in mid-December 2023.
Global Market Influences:
Oil and Gold Price Movements: In the international market, the price of oil (Crude Oil Brent) decreased by 6.7 percent to USD 76.84 per barrel, while the price of gold increased by 14.5 percent to USD 2041.35 per ounce.
Exchange Rate Stability: The Nepalese currency depreciated by 1.01 percent against the US dollar, showcasing relative stability. The buying exchange rate per US dollar stood at Rs. 132.51 in mid-December 2023.
While acknowledging ongoing challenges, the comprehensive NRB report signals resilience and adaptability in Nepal’s economic landscape, laying the groundwork for sustainable growth in the months ahead.
