Nepal rastra bank financial review : Net foreign asset growth slows, goods get costlier

Himalayan News Service

Kathmandu, April 12:

During the first seven months of the current fiscal year, the growth rate of net foreign assets of the monetary sector has been only 2.7 per cent to Rs 106.9 billion, compared to an increase of 11.8 per cent last year, said senior officials of the Nepal Rastra Bank (NRB) at a press meet held here today. Governor of NRB Bijay Nath Bhattarai, addressing a press meet, opined that the central bank has started a new trend from now onwards with a view to disseminate information on macro-economic situation of Nepal effectively. “It will help all economic journalists to increase their knowledge on various sectors,” Bhattarai commented.

Deputy governor of NRB, Krishna Bahadur Manandhar said that foreign exchange surplus has been only three billion rupees which was five billion rupees during the same period last year. Manandhar attributed the low surplus in foreign exchange to a fall in exports to third countries and also the downward growth rate in remittance inflow, especially from India. He also said that there is also a decline in the total reserve of Indian currency which stands at eight billion rupees equivalent to IC.

Keshav Acharya, chief of research department of the central bank said that the revenue growth in the current fiscal year’s seven months has been recorded at 13 per cent and prices of goods have gone up, thanks to price rise in petroleum products. Nara Bahadur Thapa, director of research department at NRB, said that the rate of growth in gross foreign exchange reserve slowed down to five per cent amounting to Rs 128.6 billion in mid-February 2005 compared to an increase of 12.3 per cent to Rs 122.5 billion in mid-February 2004. Thapa said that the decline in imports from other countries and the rise in remittances through the banking system were the factors responsible for the 11.2 per cent growth in the convertible currency reserves.

According to the NRB report, the gross foreign exchange reserve increased to Rs 128.6 billion, which is sufficient to cover merchandise imports for 12.3 months and merchandise and service imports for 10.4 months. Central bank has stated in its report that as a result of domestic credit of the monetary sector increased by 4.5 per cent to Rs 262.4 billion this year compared to an increase of two per cent last year, the share of the government in total domestic credit this year decreased by 1.1 percentage points to 22.3 per cent. The national urban consumer price index (CPI), on point to point basis, rose by 5.6 per cent in mid-February 2005 compared to an increase of 4.7 per cent last year. Despite the decline in the price of indices of spices, vegetables, fruits, oil, ghee, milk and milk products, the overall CPI increased further due to the growth in the price index is mainly attrituble to the upward revision in the prices of petroleum products together with the sharp rise in the price of sugar and related products, housing goods and services, transport and communication, meat, fish and eggs.

On point to point basis, the prices of food and beverages group moved up by 4.1 per cent. The prices of sugar and related products shot up by 39.1 per cent. Total exports increased by 2.7 per cent to Rs 32.2 billion compared to 10.5 per cent last year. Exports to India increased considerably by 21.7 per cent to Rs 21.5 billion compared to a rise of 15.2 per cent last year. Exports to other countries declined substantially by 21.8 per cent to Rs 10.7 billion this year in contrast to a rise of 5.1 per cent last year. Total imports fell by three per cent to Rs 72.9 billion as against a rise of 9.2 per cent last year. Imports from India increased by 9.6 per cent compared to the rise of 11.1 per cent last year.