Foreign exchange reserves increased by 13.8 percent in current fiscal year

KATHMANDU: Gross foreign exchange reserves increased 13.8 percent to Rs.1383.33 billion in mid-February 2023 from Rs.1215.80 billion in mid-July 2022. In the US dollar terms, the gross foreign exchange reserves increased 10.2 percent to 10.50 billion in mid-February 2023 from 9.54 billion in mid-July 2022.

Of the total foreign exchange reserves, reserves held by NRB increased 16.2 percent to Rs.1228.05 billion in mid-February 2023 from Rs.1056.39 billion in mid-July 2022. Reserves held by banks and financial institutions (except NRB) decreased 2.6 percent to Rs.155.28 billion in mid-February 2023 from Rs.159.41 billion in mid-July 2022. The share of Indian currency in total reserves stood at 22.4 percent in mid-February 2023.

Consumer Price Inflation

The y-o-y consumer price inflation remained at 7.88 percent in mid-February 2023 compared to 6.24 percent a year ago. Food and beverage inflation stood at 6.19 percent whereas non-food and service inflation rose to 9.22 percent in the review month.

Under the food and beverage category, y-o-y price index of restaurant & hotel sub-category increased 15.24 percent, cereal grains & their products 12.39 percent, tobacco products 10.83 percent, alcoholic drinks 8.78 percent, and spices 8.04 percent.

Under the non-food and services category, y-o-y price index of transportation sub-category increased 15.58 percent, health 10.39 percent, housing & utilities 9.78 percent, furnishing & household equipment 9.00 percent
and recreation & culture 8.81 percent.

In the review month, consumer price inflation in the Kathmandu Valley, Terai, Hill and Mountain remained 8.47 percent, 7.82 percent, 7.30 percent and 7.92 percent respectively. Inflation in these regions were 5.47 percent, 6.50 percent, 6.71 percent and 5.97 percent respectively a year ago.

The y-o-y wholesale price inflation increased 9.67 percent in the review month compared to 10.34 percent a year ago.

The y-o-y wholesale price of consumption goods, intermediate goods and capital goods increased 3.49 percent, 14.02 percent and 5.44 percent respectively. The wholesale price of construction materials increased 12.07 percent in the review month.

The y-o-y salary and wage rate index increased 10.27 percent in the review month. Such growth rate was 5.72 percent a year ago. In the review month, salary index and wage rate index increased 12.39 and 9.64 percent, respectively.

Merchandise Trade

During the seven months of 2022/23, merchandise exports decreased 29.0 percent to Rs.93.43 billion against an increase of 88.3 percent in the same period of the previous year. Destination-wise, exports to India and China decreased 37.7 percent and 13.4 percent respectively whereas exports to other countries increased 8.0 percent.

Exports of zinc sheet, cardamom, particle board, woolen carpets, polyester yarn & thread, among others, increased whereas exports of soyabean oil, palm oil, oil cakes, textiles, silverware and jewelries, among others, decreased in the review period.

During the seven months of 2022/23, merchandise imports decreased 19.9 percent to Rs.919.17 billion against an increase of 42.8 percent a year ago. Destination-wise, imports from India, China and other countries decreased 18.0 percent, 24.3 percent, and 22.0 percent respectively.

Imports of petroleum products, sponge iron, chemical fertilizer, gold, other stationeries, among others, increased whereas imports of transport equipment & parts, medicine, M.S. billet, telecommunication equipments and parts, silver, among others, decreased in the review period.

Based on customs points, exports from Bhairahawa, Dry Port, Jaleshwor, Kailali, Krishnanagar, Mechi, Nepalgunj, Rasuwa and Tribhuwan Airport Customs Offices increased whereas exports from all the other major customs points decreased in the review period. On the import side, imports from all the major customs points decreased in the review period.

Total trade deficit decreased 18.7 percent to Rs.825.73 billion during the seven months of 2022/23. Such a deficit had increased 38.4 percent in the corresponding period of the previous year. The export-import ratio decreased to 10.2 percent in the review period from 11.5 percent in the corresponding period of the previous year.

During the seven months of 2022/23, merchandise imports from India by paying convertible foreign currency amounted Rs.71.78 billion. Such amount was Rs.128.17 billion in the same period of the previous year.

Composition of Foreign Trade

As per the Broad Economic Categories (BEC), the intermediate and final consumption goods accounted for 53.9 percent and 45.5 percent of the total exports respectively, whereas the ratio of capital goods in total exports remained negligible at 0.53 percent in the review period. In the same period of the previous year, the ratio of intermediate, capital and final consumption goods remained 48.2 percent, 0.02 percent and 51.7 percent of total exports respectively.
On the imports side, the share of intermediate goods remained 53.1 percent, capital goods 8.6 percent and final consumption goods remained 38.3 percent in the review period. Such ratios were 53.7 percent, 10.9 percent and 35.4 percent respectively in the same period of the previous year.

The y-o-y unit value export price index, based on customs data, increased 3.3 percent and the import price index increased 7.8 percent in the seventh month of 2022/23. The terms of trade (ToT) index decreased 4.3 percent in the review month compared to a decrease of 0.2 percent a year ago.

Net services income remained at a deficit of Rs.38.45 billion in the review period compared to a deficit of Rs.55.09 billion in the same period of the previous year. Under the service account, travel income increased 107.4 percent to Rs.32.24 billion in the review period which was Rs.15.54 billion in the same period of the previous year.

Under the service account, travel payments increased 56.6 percent to Rs.62.57 billion, includingRs.43.74 billion for education. Such payments were Rs.39.96 billion and Rs.22.60 billion respectively in the same period of the previous year.

Remittances
Remittance inflows increased 27.1 percent to Rs.689.88 billion in the review period against a decrease of 4.4 percent in the same period of the previous year. In the US Dollar terms, remittance inflows increased 16.4 percent to 5.30 billion in the review period against a decrease of 5.3 percent in the same period of the previous year.

Number of Nepali workers (institutional and individual-new) taking approval for foreign employment increased 57.3 percent to 314,767 in the review period.

The number of Nepali workers (Renew entry) taking approval for foreign employment increased 10.1 percent to 167,708 in the review period. It had increased 265.9 percent in the same period of the previous year.

Net transfer increased 25.2 percent to Rs.759.11 billion in the review period. Such a transfer had decreased 3.7 percent in the same period of the previous year.

Current Account and Balance of Payments

The current account remained at a deficit of Rs.29.64 billion in the review period compared to a deficit of Rs.411.34 billion in the same period of the previous year. In the US Dollar terms, the current account registered a deficit of 234.6 million in the review period compared to deficit of 3.45 billion in the same period last year.

In the review period, capital transfer decreased 15.2 percent to Rs.5.35 billion and net foreign direct investment (FDI) remained Rs.1.04 billion. In the same period of the previous year, capital transfer and net FDI amounted to Rs.6.31 billion and Rs.16.29 billion respectively.

Balance of Payments (BOP) remained at a surplus of Rs.133.21 billion in the review period compared to a deficit of Rs.247.03 billion in the same period of the previous year. In the US Dollar terms, the BOP remained at a surplus of 1.01 billion in the review period against a deficit of 2.07 billion in the same period of the previous year.