October 26: By mid-August, the second month of the current fiscal year, various economic indicators have remained negative. The indicators seemed negative since the first month of the current fiscal year and the trend has got continuity in August.
According to the latest report on the Current Macroeconomic and Financial Situation of the country released by Nepal Rastra Bank on Monday, indicators such as balance of payments, foreign exchange reserves, current account, foreign trade, and remittance inflows have shown negative signs in August.
The balance of payments and current account deficit have widened further in August, while the decline in foreign exchange reserves has continued. The decline in remittance inflows also seems to have continued. At the same time, the foreign trade deficit has skyrocketed. As a result, the report confirms that there are still no signs of recovery in the economy.
The current account deficit was Rs 47.90 billion in the corresponding period of the previous year and grew to 106.75 billion during the review period. Similarly, the balance of payments was Rs 38.75 billion in the corresponding period of the previous year and has increased to Rs 83.41 billion during the review period. Thus, the current account deficit and balance of payments have skyrocketed within a month.
Meanwhile, foreign exchange reserves have also declined. Last July, foreign exchange reserves, which stood at Rs 1,353.82 billion, declined to Rs 136.95 billion in the corresponding period of the previous year. As a result, Nepal's capacity to support goods and imports has also declined, says NRB spokesperson Dev Kumar Dhakal.
A large number of goods and services have been imported in August, especially due to festivals. As imports increase, payments in foreign currency also increase automatically. However, the foreign exchange could not be earned during that period through remittances. As a result, foreign exchange reserves have declined, he said.
"It simply came to our notice then. Due to the festival, imports have also been high in September. However, the NRB has not yet received the figures. Therefore, it is necessary to do something immediately in collaboration with the government on issues including imports. We will move forward immediately,” he shared.
Similarly, the trade deficit increased by 70.8 percent to Rs 270.48 billion during the review period. Such a deficit had decreased by 24.9 percent to Rs 158.40 billion in the corresponding period of the previous year..
Spokesperson Dhakal says that the current state of the overall economy is not so satisfactory. He also said that it was not possible to say for sure when the economy would recover.
He says there has been some improvement in the financial sector.
“Deposit collection and credit flow of banks have increased during the review period. It should be taken positively,” he said, adding, “But the growth rate of credit flow is higher than the collection of deposits.”
Deposits in banks and financial institutions increased by 0.7 percent during the review period. Credit flow increased by 5.7 percent, the report said.
Meanwhile, the consumer price inflation, which stood at 4.35 percent in July, has come down to 3.49 percent in August. Such inflation was 4.52 percent in August last year.
Food and beverage inflation stood at 2.57 percent whereas non-food and service inflation stood at 4.22 percent in the review month. The price of ghee and oil, meat and fish, nonalcoholic drinks, tobacco products and transportation sub-categories rose 28.91 percent, 10.66 percent, 10.25 percent, 9.99 percent and 9.92 respectively on y-o-y basis.
In the review month, the Kathmandu Valley, Terai, Hill and Mountain witnessed 3.23 percent, 3.65 percent, 3.96 percent and 3.51 percent inflation respectively. Inflation in these regions was 3.66 percent, 4.71 percent, 4.73 percent and 4.51 percent respectively a year ago, the report states.