The macroeconomic report is prepared based on data of first seven month of FY 2074/75 published by NRB.  Key macro-economic indicators and variables and explained further section.


A. NEPSE and Ratio of Market Cap to GDP

The NEPSE index as at Mid-February 2018 closed at 1,380.29 points, which is slightly higher by 6.48% compared to 1,296.23 points in the same period last year. The market capitalization of NEPSE has also increased from NPR 1,458.43 billion in Mid-February 2017 to NPR 1,614.17 billion in Mid-January 2018. The NEPSE on 14th March (end of Falgun) closed on 1285.96 points which is 6.8% less than mid-February index (end of Magh). However, the index has fallen sharply to 1192 points as on 2nd of April. This is 11.59% less than the index in mid-February at 1380.29 points. The market capitalization in Mid-March is NPR. 1505 billion.

On the other hand, the ratio of market capitalization of NEPSE to GDP as at Mid-February 2018 has dropped down to 62.1% compared to 64.9% in the last year during the same review period.


To evaluate current scenario of interest rate of the economy, following rates are taken into consideration.

  1. Interbank Rate
  2. Base Rate of commercial banks
  3. Weighted average deposit and lending rate of commercial banks

Interbank Rate

As shown in figure, the interbank rate of commercial banks has been decreasing slightly since January ~from 4.83% to 4.31%. Though the interbank rate among commercial banks as at February, 2018 dropped down to 4.31% compared to 4.40% in the previous month, it is still on the higher end indicating commercial banks are facing difficulty in maintaining their CD ratio and are in shortage of loanable fund.

Base Rate

The base rate of commercial banks is in increasing trend, which stands at 10.19% as at Mid-February 2018 compared to 9.94% in the previous month. Last year during the same review period, the base rate of commercial banks stood at 7.8%, implying borrowers have to pay higher interest rate at present, which is a major setback for them. The current base rate 10.19% is highest based on 1 year.

Weighted Average Deposit and Lending rate

The weighted average deposit and lending rate of commercial banks are 6.38% and 11.9% respectively. The weighted average deposit rate increased from 6.21% to 6.38% from January to February whereas the average lending rate increased from 11.79% to 11.9%.

The interbank rate is decreasing marginally. However, there is still rising trend in base rate, weighted average deposit and lending rate of banks.



As reported in NRB report, the consumer price inflation in Nepal has elevated to 5.0% in Mid-February 2018 compared to 4.0% a month ago. The current index of inflation is at 118 which was 120 in November 2018. Compared to base index of 113 in February 2017, the inflation is computed as 5%. However, the index at fiscal year-end (2017 July) was 115.9. So, based on this the inflation rate can be computed as only 2.6%.  The inflation index at the end of fiscal year 2074/75 is likely to be around 120. Therefore, the inflation rate 4% can be expected by the end of fiscal year. Mainly, a rise in prices of food items has contributed towards increase in inflation. However, the ongoing market interest rate on deposits or, government bond and corporate debentures can easily beat this inflation rate.

Real Interest Rate

Considering nominal interest rate as weighted average deposit rate of 6.38% and inflation of 5%, the real interest via fisher relation is only 1.92%.



Deposit Growth: The deposits of BFI’s as at February End, 2018 increased to NPR 2,523.26 billion by 6.24%, compared to NPR 2,375.11 billion in July End, 2017. The growth during the same period last year was 7.88%. Out of the total deposits of the BFIs, the share of demand deposits slightly increased from 8.1 percent to 8.2 percent and fixed deposits from 35.1 percent to 43.9 percent in mid-February 2018 compared to a year ago. However, the share of saving deposits decreased to 36.6 percent from 38.7 percent a year ago. The share of institutional deposits in total deposit of Bank and Financial Institutions (BFIs) declined to 44 percent in mid-February 2018 from 48.5 percent a year ago.

Credit Growth: The credit disbursement of BFI’s as at February End, 2018 increased to NPR 2,243.22 billion by 12.94%, compared to NPR 1,986.23 billion in July End, 2017. The growth during the same period in last year was 14.78%.

Moreover, if we compare the credit growth rate with deposit growth rate of BFI’s, then the credit growth rate is much higher than the deposit growth rate, due to which BFI’s are facing credit crunch to disburse further loan and maintain the CCD ratio in line with the NRB directives.



Total liquidity mopped up in the first seven months of FY 2017/18:

Instruments Rs. (in Billion) Last Year
Deposit Collection Auction 42.35
14 days deposit collection auction under interest rate corridor 3.15
Reverse Repo 84.75
Total mopped up Liquidity 130.25 101.1

Till the first seven months of FY 2017/18, NRB has mopped up NPR 130.25 billion through open market operation, out of which NPR 42.35 billion was mopped up under deposit collection auction, NPR 3.15 billion through 14 days deposit collection auction under interest rate corridor and NPR 84.75 billion through reverse repo auction on a cumulative basis. In the corresponding period of previous year, NPR 101.10 billion liquidity was absorbed.

Total liquidity injected in the first seven months of FY 2017/18:

Instruments Rs. (in Billion) Last year
Liquidity injected through repo auction & Outright Purchase 90.4 42.38
Liquidity injected through purchase of USD 238.38 251.12
SLF utilized by BFI’s 24.08 54.83

In contrast, in the first seven months of FY 2017/18, NRB injected Rs. 238.38 billion through purchase of US dollars, whereas NPR 90.4 billion was injected through repo auction and outright purchase in the wake of liquidity crunch in the banking system compared to NPR 42.38 billion last year during the same period. In addition, the BFI’s has also utilized Standing Liquidity Facility (SLF) of NPR 24.08 billion in the first seven months of this fiscal year to further manage the liquidity in the banking system. The BFI’s had utilized such facility of NPR 54.83 billion during the same period last year.



Budget Deficit/ Surplus

In the first seven months of 2017/18, the Government of Nepal (GoN) was at a deficit of Rs. 26.47 billion in its budget. There was surplus of Rs. 17.95 billion in the corresponding period of the previous year.

Government Revenue and Expenditure

In comparison to first seven months of FY 2016/17, the government expenditure has increased by 36.89% to NPR 428.88 billion after successful completion of state and central level election, helping to inject some liquidity into the system.

On the other hand, the government revenue witnessed the growth of 20.51% compared to corresponding period of the last fiscal year. The government revenue for the first seven months in this fiscal year stood at NPR 384.6 billion compared to NPR 319.15 billion in the first seven months of last fiscal year mainly due to half yearly tax collection at the Poush End.



The country’s BOP position is in deficit by Rs. 18.28 billion till the first seven months of FY 2017/18, mainly due to huge deficit seen in current account by Rs. 141.06 billion as a result of elevated level of imports and dividend payment for foreign investment. During the corresponding period in last year, BOP was at surplus by Rs. 36.95 billion, whereas the current account was at deficit by Rs. 10.66 billion.

In the review period, Nepal received capital transfer amounting to Rs. 10.64 billion and Foreign Direct Investment (FDI) inflows of Rs. 14.63 billion. In the same period of the previous year, capital transfer and FDI inflows had amounted to Rs. 9.25 billion and Rs. 22.00 billion respectively.



The workers’ remittance is subject to change based on exchange rate of NRs with Dollar. The NRs has appreciated compared to previous year exchange rate. Hence, the workers’ remittance growth in terms of NPR is different from Dollar.

Remittance in Dollar terms

Looking at the first seven months’ data of FY 2017/18, the worker’s remittance has witnessed a slight improvement with an increment of 6.39% to reach $3,898.60 million compared to 3.11% growth in 2016/17.

Remittance in NPR

The workers’ remittances increased 1.7% to NPR. 401.35 billion in the review period compared to a rise of 5.2% in the same period of the previous year. However, net transfer receipts decreased 3.0% to NPR. 460.85 billion in the review period. Such receipts had increased 8.3% in the same period of the previous year.

As per the data of Department of Foreign Employment, the number of Nepalese workers seeking foreign employment has decreased by 4.9 percent in the review period. It had decreased by 6.7 percent in the same period of the previous year.