Monetary Policy for the Fiscal Year 2077/78
Background
1. The monetary policy for the Fiscal Year 2077/78 has been formulated in a different environment where the Covid-19 epidemic has created a humanitarian crisis as well as an economic crisis around the world. A century later, an unexpected epidemic has infected more than 13.9 million people and killed 593,000. The world economy has contracted to its worst since the Great Depression of the 1930s. Poverty, unemployment, and income inequality are expected to increase as the world faces a simultaneous health crisis and economic crisis.
2. With the foundation being laid for achieving the national aspiration of 'Prosperous Nepal, Happy Nepal' while achieving sustainable and high economic growth with social justice, COVID-19 has added an unexpected challenge. After three consecutive years of high economic growth, economic growth is estimated to be low in FY 2076/77. Inflation remained within the target range, while the trade deficit and current account deficit improved due to contraction in imports. BOP surplus has increased significantly. Credit expansion has been lower than deposit mobilization.
3. Financial access has expanded significantly. The use of electronic payments in financial transactions is increasing. Along with the financial expansion, infrastructure development work for the modern payment system has moved forward. Due to the increase in the use of mobile banking, the banking business has become easier even during the shutdown.
4. Covid-19 is expected to affect labor markets and remittance inflows worldwide. Along with the return of foreign labor, it has also affected the domestic labor market. If the major labor destination countries go into economic contraction and the inflow of remittances decreases, it will have an impact on resource mobilization in the banking sector, external sector balance, and poverty alleviation.
5. To manage the impact of the Covid-19 epidemic on the economy, monetary policy needs to focus on economic recovery while maintaining price and external sector stability. In order to keep the economic activities going, credit management and access of the affected areas has to be facilitated and the financial resources have to be encouraged to develop entrepreneurship, increase production, and create employment.
6. The monetary policy for the Fiscal Year 2077/78 has been formulated keeping in view the national and international economic situation and scenario as per the provisions of Nepal Rastra Bank Act, 2058 BS. In addition, the Fifteenth Five Year Plan of the Government of Nepal, the budget for the Fiscal Year 2077/78, the Financial Sector Development Strategy, and the Third Strategic Plan of this Bank have been taken as the basis for formulating monetary policy. This monetary policy has been formulated keeping in mind the suggestions received from all the stakeholders.
International economic situation
7. The global economy is shrinking as the chain from production to supply is disrupted by measures taken globally to control and prevent the Covid-19 infection. According to the World Economic Outlook, updated by the International Monetary Fund in June 2020, the world economy is projected to shrink by 4.9 percent by 2020.
8. Developed countries' economies are projected to expand by 1.7 percent in 2019 and shrink by 2 percent in 2020, according to the International Monetary Fund. Emerging and developing economies are projected to grow by 3.7 percent in 2019 and shrink by 3 percent in 2020.
9. The International Monetary Fund (IMF) has projected the Asian economy to shrink by 1.6 percent by 2020. Of this, India's economy is projected to shrink by 4.5 percent, and China's economy is projected to expand by 1 percent. The International Monetary Fund (IMF) has projected that Nepal's economic growth will be limited to 1 percent.
10. Inflation has been somewhat lower due to contraction in aggregate demand due to COVID-19 as well as a fall in the prices of petroleum products. The International Monetary Fund (IMF) has projected inflation in developed economies at 1.4 percent in 2019 to 0.3 percent in 2020. In emerging and developing economies, consumer price inflation is projected to be 4.4 percent in 2020, compared to 5.1 percent in 2019, compared to 5.1 percent in 2019.
11. To meet the challenges facing the world economy, most countries have adopted expansionary monetary and fiscal policies. Despite the uncertainty created by the COVID-19 crisis, many countries have been gradually easing sanctions and other measures to facilitate economic activity.
Macroeconomic status:
Economic growth and price situation:
12. According to the preliminary estimates of the Central Statistics Office, the economic growth achieved in the fiscal year 2075/76 was limited to 2.28 percent in the fiscal year 2076/77. The growth rate of the agriculture sector is estimated at 2.6 percent, industry sector at 3.2 percent, and service sector at 2 percent.
13. In FY 2076/77, the ratio of total household savings to total wheat production is estimated to be 105.1 percent and the ratio of total national savings to 46 percent. In the previous year, these ratios were 19 percent and 48.9 percent respectively.
14. In FY 2076/77, the ratio of total fixed capital formation to total domestic production is estimated to be 28.1 percent, and the ratio of total capital formation to 50.2 percent. In the previous year, these ratios were 33.7 percent and 56.6 percent respectively.
15. Annual point-wise consumer price inflation stood at 4.54 percent in June 2012/13. In the eleven months of FY 2076/77, the average consumer price inflation stood at 6.28 percent. Such inflation had stood at 4.51 percent in the corresponding period of the previous year.
Government expenditure, revenue, and internal credit operations:
16. As per the public statement from the Office of the Comptroller and Auditor General, the current expenditure of the Federal Government in the Fiscal Year 2076/77 was Rs. 786.53 billion, capital expenditure was Rs. 191.77 billion and financial management expenditure was Rs. 116.04 billion and a total of Rs. 1094.34 billion has been spent. Revenue collection during this period was Rs. 841 is now Rs. 360 million
17. In FY 2076/77, the Government of Nepal mobilized Rs. 194.64 billion and the second payment was Rs. 34.39 billion and Rs. 160.25 billion. That amounts to 4.3 percent of GDP.
Foreign trade, remittance inflows and balance of payments status:
18. In the eleven months of FY 2076/77, exports increased by 0.2 percent to Rs. 88 billion and imports declined by 15.3 percent to Rs. 1100 is now 810 million. The trade deficit improved by 16.4 percent during the review period, while remittance inflows declined by 3 percent to Rs. 774 million now stands at Rs. 870 million.
19. In the eleven months of FY 2076/77, the current account deficit increased to Rs. 71.64 billion in the corresponding period of the previous year. 179 crore now stands at Rs. 370 million. In the corresponding period of FY 2075/76, the current account deficit increased to Rs. 249.08 billion and BOP deficit stood at Rs. 90.83 billion in the corresponding period of the previous year.
20. In the eleven months of FY 2076/77, the current account deficit increased to Rs. 71.64 billion in the corresponding period of the previous year. 179 crore now stands at Rs. 370 million. In the corresponding period of FY 2075/76, the current account deficit increased to Rs. 249.08 billion and BOP deficit stood at Rs. 90.83 billion in the corresponding period of the previous year.
21. In mid-June 2012, foreign exchange reserves reached Rs. 1306.46 billion (US १० 10.79 billion). Based on the eleven months of imports for the Fiscal Year 2076/77, the foreign exchange reserves maintained with the banking sector will be sufficient to support 13.3 months of goods and 11.7 months of goods and services imports.
22. The Nepali rupee depreciated by 9.15 percent against the US dollar in mid-July 2012/13 compared to mid-July 2012/13. 120.37.
Financial sector situation
Banking sector
22. In the eleven months of FY 2076/77, deposit mobilization of banks and financial institutions increased by 13.3 percent to Rs. 3666.62 billion during the review period. In the corresponding period of the previous year, deposit mobilization increased by 13.3 percent to Rs. 3105.74 billion in the corresponding period of the previous year.
23. In the eleven months of FY 2076/77, credit to banks and financial institutions increased by 10.7 percent to Rs. 3172.98 billion during the review period. Such loans increased by 18.2 percent to Rs. 2836.07 billion in the corresponding period of the previous year.
24. Out of the total investment of banks and financial institutions, Rs. Loans up to Rs. 1.5 million 15 percent, Rs. 1.5 million to Rs. Loans up to Rs. 5 million 24.9 percent, Rs. 5 million to Rs. Loans up to Rs. 10 million 10.2 percent, Rs. 10 million to Rs. Loans up to Rs. 50 million 29.3 percent and Rs. Loans above Rs 50 million stood at 27.6 percent.
25. In mid-June 2012/13, the paid-up capital of banks and financial institutions (including MFIs) increased by 8.2 percent to Rs. 349.59 billion during the review period. Similarly, the capital increased by 9.8 percent to Rs. 518.05 billion during the review period.
26. As of mid-June 2012/13, the capital adequacy ratio of commercial banks stood at 13.4 percent, development banks at 13.4 percent, and finance companies at 18.7 percent. In mid-July 2076, these ratios were 14 percent, 16 percent, and 20.4 percent respectively.
27. The non-performing loan ratio of banks and financial institutions has increased from 1.52 percent in mid-July 2012/13 to 1.01 percent in mid-April 2012/13. In mid-April 2012/13, the non-performing loan ratio of commercial banks stood at 1.72 percent, that of development banks at 1.48 percent and that of finance companies at 6.76 percent.
28. In the decade since banks and financial institutions were encouraged to merge and acquire, 196 banks and financial institutions (including 25 commercial banks) have been involved in the merger and acquisition process and 46 institutions have been established. During this period, licenses of 150 institutions, including 5 commercial banks, have been revoked. In the Fiscal Year 2076/77, the licenses of 20 banks, including 4 commercial banks, involved in the process of merger and acquisition of 35 banks and financial institutions have been revoked.
29. Financial access has increased with the expansion of branches of banks and financial institutions. The number of branches of banks and financial institutions has increased from 8686 in mid-July 2076 BS to 9716 in mid-June 2077 BS. During that period, the population per bank branch has decreased from 3363 to 3075.
Agreed savings operations:
30. The assets/liabilities of the Employees Provident Fund last Rs. 342.72 billion in the last of Chaitra 2076. 371.18 billion. During the same period, the accumulated amount of savers increased by 7.7 percent to Rs. 333.75 billion while loans increased by 9.4 percent to Rs. 255.2 billion.
31. The property liability of the Citizens Investment Fund last of Ashad 2076 was Rs. 148.91 billion in the last of Chaitra 2076. 160.58 billion. During the same period, fundraising increased by 1.7 percent to Rs. 128.12 billion while credit increased by 13.9 percent to Rs. 46.31 billion.
32. It is estimated that the insurance service has expanded significantly in the last few years and about 27 percent of the citizens (including those in foreign employment) have access to insurance. In the last of Ashad 2076, the total assets/liabilities of insurance companies were Rs. 347.16 billion, an increase of 17.9 percent to Rs. 409.15 billion.
Capital market
33. The Nepse index of 1259 in the last of Ashad 2076 has stood at 1362.34 in the last of Ashad 2077. Similarly, in the last of Ashad 2076, the market registration was Rs. 1567.50 billion in the last of Ashad 2077. 1792.76 billion in the corresponding period of the previous year.
34. Instrumental diversification has started in the stock market as commercial banks have been encouraged to mobilize financial instruments by issuing long-term bonds. In the eleven months of the Fiscal Year 2076/77, 19 institutions including 17 commercial banks and 2 finance companies have received approval from this bank to issue bonds of Rs. 45.25 billion. In the last of Jestha 2077 Banks and Financial Institutions Rs. 54.29 billion.
Cooperative Society:
35. In 2075 Falgun last, the savings mobilization of cooperatives was Rs. 345.98 billion in the last of Falgun 2076 to Rs. 350.58 billion. During the same period, credit flow increased to Rs. 332.71 billion to Rs. 341.71 billion during the review period.
आर्थिक वर्ष २०७७/७८ को मौद्रिक नीति - (पूर्ण पाठ).Pdf
Monetary Policy for the Fiscal Year 2077-2078.Pdf
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