Continued uncertainty: NRB data reveals economy’s bleak prospects  

No sign of recovery: The remittance inflow continues to decline. The current account and the BoP are alarmingly in deficit. The foreign exchange reserve is sufficient to finance imports of just 6.6 months. And other indicators are not encouraging.

Abiral Gautam

  • Read Time 2 min.

Kathmandu: Nepal’s external sector of the economy is continuously depleting. In what is a worrisome situation, major indicators of the external sector are down. 

A recent data published by the Nepal Rastra Bank (NRB) shows that the remittance inflows decreased 5.5 percent to Rs 468.45 billion in the first six months of the current fiscal year, against an increase of 11.1 percent in the same period of the previous year.

As remittance, the major source of foreign currency earnings for Nepal has declined, the foreign exchange reserve also decreased 15.9 percent to USD 9.8 billion in mid-January 2022 from USD 11.75 billion in mid-July 2021.

The foreign exchange reserve is sufficient to cover imports of just half a year. 

In the review period, the central bank, to finance the imports, purchased Indian currency equivalent to Rs 260.07 billion through the sale of USD 2.18 billion.

[Related: How Finance Minister Janardan Sharma is failing Nepal’s economy]

The remittance inflow is on a decline though the number of Nepali workers taking approval for foreign employment is increasing at a massive rate. As per the data, Nepalis seeking approval for foreign employment increased significantly to 167,513 in the review period.

The remittance inflow is on a decline as a large sum of money is being sent to Nepal through informal channels like Hundi, experts say.

Likewise, Nepal’s total trade deficit increased 46.6 percent to Rs 880.49 billion during the six months of 2021/22. Such a deficit had contracted 5.8 percent in the corresponding period of the previous year. The export-import ratio increased to 11.9 percent in the review period from 9.2 percent in the corresponding period of the previous year, according to the NRB.

According to the central bank, inflation stood at 5.65 percent in the sixth month of 2021/22, compared to 3.56 percent a year ago. 

[Related: Nepal is in throes of economic slowdown: Observers criticize government indifference]

The report adds that the current account remained at a deficit of Rs 354.07 billion in the review period compared to a deficit of Rs.51.68 billion in the same period of the previous year. 

Major highlights
• CPI-based Inflation remained 5.65 percent on y-o-y basis.
• Imports increased 51.1 percent and exports increased 95.5 percent.
• Remittances decreased 5.5 percent in Rs terms and 6.2 percent in USD terms.
• Balance of Payments remained at a deficit of Rs 241.23 billion.
• Gross foreign exchange reserves stood at USD 9.89 billion.
• Federal spending amounted to Rs 506.70b and revenue collection Rs 542.05b.
• Deposits at BFIs increased 3.8% and claims on the private sector increased 12%.
• On a year-on-year basis, deposits increased 15.5%.