News Digest: Economy & Development (December 30, 2021 – January 05, 2022)

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Money and Banking

Nepal Rastra Bank (NRB) issued a directive on 31 December 2021 reducing the ceiling of opening letter of credit (LC) account while importing goods worth more than Nrs. 48 million (USD 401,969) from India. Similarly, NRB also imposed restriction on availability of Indian currency (INR); with any individual or firm receiving only up to Nrs. 481,052 (USD 4,028) to settle service charges with Indian authorities.

The central bank (NRB) on 03 January 2022 issued a directive barring commercial banks from investing in local level reserve fund deposits for importing and commercial purposes. The directive was issued to tight the deposit of local reserve fund. NRB has also directed microfinance financial institutions (aiming to go for a merger) to submit an action plan by mid-July 2022.

The credit-to-deposit ratio (CD ratio) showed signs of improvement, by decreasing from 92 percent (as of December 2021) to 90.54 percent (as of January 2022). The decrement was supported by the increase in deposits at commercial banks which stood at Nrs. 42.49 trillion (USD 357 billion) during the first week of January 2022.

Nepal Oil Corporation (NOC) reported a monthly loss of Nrs. 3.70 billion (USD 31 million) per month as a result of accumulated loss due to bloated prices of petroleum products in the international petroleum market.

Agriculture and Farming

According to the preliminary paddy output report by the Ministry of Agriculture and Livestock Development (MoALD), paddy harvest is expected to shrink to 5.13 million tonnes, a five-year low in the current fiscal year (FY) 2021/22. Farmers had harvested 5.62 million tonnes of paddy this fiscal due to good monsoon rains and availability of farm labor. However, the unusual October rainfall devastated most of the harvest, resulting in immense loss to the farmers and the economy.

A case has been filed against the managing director, staff and contractor for embezzeling more than Nrs. 1 billion (USD 8 million) from the agri-products limited company as under the Ministry of Agriculture and Livestock Development (MoALD). The Commission for Investigation of Abuse and Authority (CIAA) on 02 January 2022 filed the case against the embezzlers in a special court alleging that the quality of manure purchased was less than the specified specification.   

The government on 04 January 2022 revealed that sugar mills in Tarai still owe around Nrs. 80.70 million (USD 678,239) to sugarcane farmers for their crops. According to the Ministry of Industry, Commerce and Supplies (MoICS), sugar mills including Himalayan, Annapurna, Lumbini and Indira Sugar Mills are in arrears for the massive sum.

Trade and Investment

According to the data from Department of Customs (DoC), Nepal has trade deficit with 120 countries; with highest trade deficit with India followed by China, Indonesia, Argentina, UEA, Australia and USA. Whereas, the country has trade surplus from foreign trade with countries such as Cambodia, Denmark, Algeria and Sweden.

Laborers and Employment

A report by the Centre for Social Change titled ‘Under the Shadows of Informality: A Vulnerability Assessment of the Informal Sector Workers of Nepal’ has revealed that around 62.2 percent of the country’s active labor force is involved in the informal sector.

Tourism

According to the data compiled by Nepal Tourism Board (NTB), a total of 150,962 tourists visited Nepal in the year 2021. The figure is 34.4 percent less as compared to the year 2020 which stood at 230,085. Tourists from Europe constituted the largest share of the tourists that visited Nepal in 2021.

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