News Digest Economy & Development (December 16 – 22, 2021)

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Money and banking

The United Kingdom government’s development finance institution, CDC Group announced a Nrs. 3.03 billion (USD 25 million) loan to Global IME Bank Ltd., to enhance the bank’s ability to provide credit to businesses across key economic sectors across the country. The capital facility is anticipated to assist the bank in providing credit facilities to businesses badly impacted by the Covid-19 pandemic.

According to Nepal Rastra Bank’s (NRB) ‘Current Macroeconomic and Financial Situation’, consumable loan shot up by nearly 379.57 percent between mid-July to mid-November period of the current fiscal year (FY) 2021/22. In terms of numbers, the loan has accumulated to Nrs. 578.3 billion (USD 4.76 billion) across domains including- personal consumption loan, education loan, residential personal home loan and professional loan. Similarly, import loans too has went up by 8.4 percent to reach Nrs. 17.2 billion (USD 141 million) during the same review period.

Finance Minister Janardan Sharma has instructed all ministries to spend 30 percent of their budget between mid-December to mid-January period of the current fiscal year (FY) 2021/22. The announcement was made in response to the increasing liquidity crunch across the economy. The minister also revealed that the budget allocated to ministries would be diverted in case of failure to spend it within the stipulated time period.

Market and Sectors

World Trade Organization (WTO) on 16 December 2021 declared that India violated international trade rules by offering excessive subsidies to the production and export of sugar and sugarcane between 2014-2019. Following the announcement, WTO has directed India to remove its illegal subsidies within 120 days. The decision comes as a relief to Nepali sugarcane farmers who were struggling to compete with the heavily-subsidized Indian sugarcane producers.

Poultry farmers across the country have been affected by the rise in price of raw materials needed for poultry feed, primarily due to unprecedented changes in the international market. According to Sky Lark Agro Company (one of the largest poultry feed industry of Nepal), price of legume has increased from Nrs. 72 (USD 0.59) to Nrs. 120 (USD 0.99) per kg. Similarly, price of corn has increased from Nrs. 32 (USD 0.26) to Nrs. 38 (USD 0.31) per kg, oil from Nrs. 160 (USD 1.32) to Nrs. 242 (USD 2) per kg. Moreover, price of vitamins, minerals and other medicinal items too has increased by 40 percent, making poultry farming a costly business.

Trade and Investment

According to Nepal Rastra Bank (NRB), the country has spent Nrs. 164.99 billion (USD 1.36 billion) to buy Indian currency (INR) to fund imports made by the economy during the first four months of the current fiscal year (FY) 2021/22. Comparing it to the last fiscal, the country has spent 12 percent more to fund its import in the current fiscal.

The central bank (NRB) revealed that the country’s total trade deficit has widened by 56.8 percent year-on-year during the four months period between mid-July to mid-November 2021 to reach Nrs. 568.17 billion (USD 4.68 billion). The deficit had contracted by 12.5 percent during the same review period in the last fiscal. However, the export-import ratio has rose by 12.6 percent (during the current fiscal) from the previous 10 percent (in the last fiscal) due to a slight increase in merchandise exports.

Phampa Bhusal, the Minister for Energy, Water Resources and Irrigation, while addressing the 19th and 20th General Assemblies of Independent Power Producers Association of Nepal (IPPAN) has announced that the government is ready to allow private sector to trade electricity as per their demand.

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