News Digest: Economy and Development (October 21 – 27, 2021)

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Money and Banking

Nepal Rastra Bank (NRB) issued a new directive on 21 October directing all banks and financial institutions (BFIs) across the country to not increase interest rate for deposits by more than 10 percent. Previously BFIs had hiked their interest rate by 10.5 percent for the month of October. Considering this, NRB introduced a new ceiling of 10 percent following criticisms form experts, investors and the general public.

The central government via the central bank (NRB) has provided Nrs. 1 billion in loan to tourism and domestic industry workers who were severely affected by the Covid-19 pandemic till the second month of the current fiscal year (FY) 2021/22. According to NRB, the loan amount was dispersed under the ‘Business Continuity Loan Disbursement Procedures, 2020’, with special arrangements made for business in tourism industry and small and medium enterprises (SMEs). The loan has primarily been provided to make payments towards wages of workers and employees.

Refinancing loan provided by the central bank (NRB) at concessional rate has reached Nrs. 118.85 billion by mid-September 2021. A total of 120,715 businesses and 51,272 borrowers have benefitted from the concessional loans. Similarly, around 66,690 women entrepreneurs have benefitted under the ‘Women Entrepreneur Loan’ within which an amount of Nrs. 62.37 billion has been utilized. Likewise, 2,753 other borrowers have also benefitted under other headings of concessional loans during the same review period.

Agriculture and Farming

According to the records of Ministry of Agriculture and Livestock Department (MoALD), the recent unseasonal rains and floods have damaged paddy crops worth Nrs. 8.26 billion across seven provinces, the highest losses on record for the past few years. As per the ministry, ready-to-harvest paddy crops on 85,580 hectares of land have either been swept away for submerged by floodwaters. Lumbini province has been identified as the most effected province with more than 161,000 tonnes of paddy worth Nrs. 4.51 billion being destructed.

As a repercussion to the incessant rainfall and flood, vegetable prices have skyrocketed across the nation with major impact on staples including onion and tomato. According to the Kalimati Fruits and Vegetable Market Development Board, the wholesale price of onion has increased to Nrs. 72 per kilogram and tomato to Nrs. 90; increasing by 50-60 percent during a period of a week.

Trade and Investment

Nepal’s foreign trade has increased by more than 80 percent to reach Nrs. 358.56 billion during the first two months of the current fiscal year (FY) 2021/22. During the same period, merchandise exports has increased by 115.4 percent to reach Nrs. 44.04 billion compared to an increase of 10.5 percent during the same period in the last fiscal. Similarly, merchandise imports have increased by 75.9 percent to Nrs. 314.52 billion against a decrease of 22.1 percent in the last fiscal. Consequently, the total trade deficit has widened by 70.8 percent to reach Nrs. 270.48 billion and the export-import ratio has increased to 14 percent as compared to a contraction of 24.9 percent and 11.4 percent last year.

According to Nepal Rastra Bank (NRB), remittance inflows in the country has decreased by 6.3 percent to reach Nrs. 155.37 billion during the first two months of the current fiscal year (FY) 2021/22 against a decrease of 8.1 percent as compared to the last fiscal. In terms of US dollars, the remittance inflows have decreased by 5.8 percent to reach 1.31 billion against an increase of 2.6 percent during the same review period.

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