Country’s Economic Report : Current account deficit is rising due to rising imports

Kathmandu : Nepal Rastra Bank has made public the report of the economic condition of the country up to the seventh month of the current fiscal year. Accordingly, the current account, which has been positive for some time, is under pressure again due to increasing imports.

Current account :
As per the details made public by NRB, the current account has a deficit of Rs. 101.90 billion as of January. 106 billion in the corresponding period of the previous year.

Balance of payments status :

As of last January, the BOP was in surplus of Rs. 97.36 billion. 21.61 billion in the corresponding period of the previous year. In US dollar terms, the BOP surplus was Rs. 191.1 million in the corresponding period of the previous year.

Trade deficit :

The total merchandise trade deficit decreased by 0.7 percent to Rs. 733.73 billion in the first seven months of FY 2011/12 compared to a decrease of 5.3 percent in the corresponding period of the previous year. The export-import ratio has reached 8.7 percent during the review period. Such ratio was 8.1 in the corresponding period of the previous year. Similarly, total merchandise exports increased by 7.6 percent to Rs. 69.92 billion during the review period. Such exports had increased by 22.4 percent in the corresponding period of the previous year.

On a destination basis, exports to India and other countries increased by 10.0 percent and 4.9 percent, respectively, while exports to China declined by 47.7 percent. On commodity basis, exports of soybean oil, cardamom, jute goods, pashmina, yarn (polyester and others) increased while exports of palm oil, pulses, zinc sheets, juice and wire declined. Similarly, total merchandise imports during this period were Rs. 803.64 billion in the corresponding period of the previous year. Such imports had declined by 3.6 percent in the corresponding period of the previous year. Imports from India increased by 7.1 percent, while imports from China and other countries declined by 12.4 percent and 10.8 percent, respectively.

On a commodity basis, imports of goods including rice, crude oil, gold, telecommunication equipment and spare parts have increased while imports of petroleum products, aircraft parts, crude palm oil, other machinery and spare parts have declined. On the export side, exports from dry ports, Biratnagar, Kailali, Tatopani, Kanchanpur and Rasuwa have increased. On the import side, imports from Bhairahawa, Biratnagar, Nepalgunj, Krishnanagar, Kailali and Kanchanpur customs offices have declined. It had decreased by 6 percent.

Imports from India increased by 7.1 percent, while imports from China and other countries declined by 12.4 percent and 10.8 percent, respectively. On commodity basis, imports of rice, crude oil, gold, telecommunication equipment and spare parts have increased while imports of petroleum products, aircraft parts, crude palm oil, other machinery and spare parts have declined. On the export side, exports from dry ports, Biratnagar, Kailali, Tatopani, Kanchanpur and Rasuwa have increased. On the import side, imports from Bhairahawa, Biratnagar, Nepalgunj, Krishnanagar, Kailali and Kanchanpur customs offices have declined.

It had decreased by 6 percent. Imports from India increased by 7.1 percent, while imports from China and other countries declined by 12.4 percent and 10.8 percent, respectively. On a commodity basis, imports of rice, crude oil, gold, telecommunication equipment and spare parts have increased while imports of petroleum products, aircraft parts, crude palm oil, other machinery and spare parts have declined.

On the export side, exports from dry ports, Biratnagar, Kailali, Tatopani, Kanchanpur and Rasuwa have increased. On the import side, imports from Bhairahawa, Biratnagar, Nepalgunj, Krishnanagar, Kailali and Kanchanpur customs offices have declined. Imports of telecommunication equipment and spare parts have increased while imports of petroleum products, aircraft parts, crude palm oil, other machinery and spare parts have declined.

On the export side, exports from dry ports, Biratnagar, Kailali, Tatopani, Kanchanpur and Rasuwa have increased. On the import side, imports from Bhairahawa, Biratnagar, Nepalgunj, Krishnanagar, Kailali and Kanchanpur customs offices have declined. Imports of telecommunication equipment and spare parts have increased while imports of petroleum products, aircraft parts, crude palm oil, other machinery and spare parts have declined.

On the export side, exports from dry ports, Biratnagar, Kailali, Tatopani, Kanchanpur and Rasuwa have increased. On the import side, imports from Bhairahawa, Biratnagar, Nepalgunj, Krishnanagar, Kailali and Kanchanpur customs offices have declined.

Remittance :

Remittance has increased by 10.9 percent till January / February of the current Fiscal Year. Till this period, 567.70 billion remittances have entered Nepal. Remittance inflows had declined by 0.7 percent in the corresponding period of the previous year. In US dollar terms, remittance inflows increased by 6.7 percent to Rs 4.81 billion. Such inflows had declined by 0.5 percent in the previous year.

Similarly, the number of Nepalis seeking final labor permit (institutional and individual-new and legalized) for foreign employment has decreased by 75.9 percent during this period. Such number had increased by 21.7 percent in the corresponding period of the previous year.

Nepal’s re-employment permit for foreign employment has declined by 67.4 percent. Such number had decreased by 0.6 percent in the corresponding period of the previous year.

Foreign investment :

Foreign direct investment declined by 37.3 percent to Rs. 9.2 billion. 14.38 billion in the corresponding period of the previous year.

Detailed money supply :

Broad money supply increased by 10.3 percent in the first seven months of the current fiscal year. It had increased by 5.6 percent in the corresponding period of the previous year. Annual point-wide money supply increased by 23.3 percent. Net foreign assets (adjusted for foreign exchange valuation profit / loss) increased by 97.36 billion (7.3 percent) during the review period.

Such assets had increased by 21.61 billion (2.2 percent) in the corresponding period of the previous year. Reserve money declined by 8.1 percent during the period. Such currency had declined by 5.3 percent in the corresponding period of the previous year. On a year-on-year basis, reserves increased by 22.9 percent.

Inflation :

Annual point-based consumer price inflation stood at 2.70 percent in January. Such inflation had stood at 6.87 percent in the corresponding month of the previous year. Inflation in food and beverages group was 3.02 percent and in non-food and services group was 2.44 percent during the review period.

The prices of fruits, ghee and oil, pulses and nuts and tobacco increased by 18.84 per cent, 18.14 per cent, 10.41 per cent and 10.41 per cent respectively in the corresponding period of the previous year.

Inflation in the Kathmandu Valley was 2.12 percent, 2.78 percent in the Terai, 3.30 percent in the hills and 2.05 percent in the mountains till January. Inflation in these sectors was 7.58 percent, 7.29 percent, 5.46 percent and 5.28 percent respectively in the corresponding period of the previous year.

Refinancing and concessional loans :

As of January / January of the current Fiscal Year, the Bank has been providing refinancing at concessional rates with an investment of Rs. 82.29 billion. As of mid-January, 682,206 debtors have received soft loans and 112.03 billion loans are outstanding.

Of this, Rs 82.18 billion was disbursed to 35,813 borrowers under agriculture and livestock business loan and Rs 29.84 billion was outstanding to 32,393 debtors under other headings of concessional loans.

Deposit operations :

Deposits in banks and financial institutions increased by 9.8 percent in the review period. Such deposits had increased by 6.4 percent in the corresponding period of the previous year. On a year-on-year basis, deposits in banks and financial institutions increased by 22.4 percent.

Similarly, current, savings and time deposits accounted for 8.2 percent, 33.9 percent and 48.9 percent of the total deposits of banks and financial institutions, respectively. In the previous year, the share was 8.2 percent, 31.6 percent and 49.9 percent respectively.

Institutional deposits accounted for 42.0 percent of the total deposits of banks and financial institutions in mid-January. The share of such deposits was 44.9 percent in the corresponding period of the previous year.

Loan flow :

As of January, credit to private sector from banks and financial institutions increased by 14.1 percent. Such loans had increased by 8.9 percent in the corresponding period of the previous year. On a year-on-year basis, credit to private sector from banks and financial institutions increased by 17.3 percent in mid-January.

Of the credit to private sector, credit to commercial banks increased by 14.0 percent, credit to banks by 17.7 percent and credit to finance companies by 4.4 percent during the review period.

Similarly, in mid-January, 66.4 percent of the total loans extended by banks and financial institutions were secured by house and land and 12.3 percent by current assets (agricultural and non-agricultural goods). In the corresponding period of the previous year, the ratio of such collateral loans was 65.1 percent and 13.4 percent respectively.

Similarly, credit to agriculture sector increased by 25.5 percent, credit to industrial manufacturing sector increased by 10.1 percent, credit to construction sector increased by 7.6 percent, credit to transport, communication and public services sector increased by 7.9 percent during the review period. Credit to the retail sector increased by 11.2 percent and credit to the services sector increased by 13.1 percent.

Of the loans disbursed by banks and financial institutions during the period, term loans increased by 13.2 per cent, overdraft loans by 14.8 per cent, demand and working capital loans by 16.8 per cent, real estate loans (including personal housing loans) by 5.3 per cent and margin nature.

Loans increased by 53.5 percent and trust receipts (imports) by 18.2 percent, while higher purchase loans declined by 5.9 percent