October 2023 Analysis: Economy and Development
In October, remittance inflows surged by 22.1% reaching NPR 228.37 billion. New regulations requires hydropower companies to guarantee their capital and investment loans when obtaining licenses for hydropower projects. Securities Board of Nepal (SEBON) allows IPO issuing through book building.
Remittance inflows surged by 22.1% in the first two months of the current fiscal year, reaching NPR 228.37 billion. The increase is attributed to the rising number of Nepali workers seeking foreign employment, with 74,455 Nepalis leaving the country during this period.
The economy showed positive signs of recovery, with foreign exchange reserves increasing by 3.9% to NPR 1,598.90 billion compared to the same period last year. Meanwhile, consumer price inflation remained stable at 8.19%. Merchandise exports declined by 7.8%, primarily due to lower exports to India and China. However, the overall trade deficit narrowed by 4.7%.
A comprehensive study by the Nepal Rastra Bank (NRB) in Lumbini Province found that remittances have a positive impact on Nepali families, with an increasing trend towards using formal banking channels for remittance transfers. Remittances are also primarily invested in household construction and property purchases, accounting for more than 68% of the funds received.
The Government of Nepal has recently introduced significant regulatory changes in the hydropower sector, affecting how project licenses are issued and managed. These changes are outlined in the fourth amendment to the Electricity Project Permit Guide-2075. One of the most significant changes is that companies are now required to guarantee their capital and investment loans when obtaining licenses for hydropower projects. Additionally, the government has distinguished between smaller projects with a capacity of less than 20 megawatts and larger projects within the government's portfolio. Smaller projects can now be developed without competitive bidding, making the development process more accessible and less complex. Larger projects, on the other hand, will continue to be subject to competitive bidding. These new regulations are also applicable to run-of-river and partial storage hydropower projects.
Additionally, the Nepal Electricity Authority has invited proposals for the purchase and sale of electricity licenses, specifying threshold capacities for different project types. Furthermore, Nepal is poised to export a greater volume of hydroelectricity to its southern neighbor, India. This potential export surge is attributed to India's latest regulatory adjustment, which permits Indian electricity distributors to include imported hydroelectric power within their mandated renewable energy targets. In a recent policy update, India's power ministry unveiled a fresh quota outlining the renewable energy obligations for distribution companies commencing from the fiscal year 2024-25.
For the first time, the Securities Board of Nepal (SEBON) has allowed IPO issuance through book building, a historic leap in the field of shares and bonds. On October 16, Sarbottam Cement received approval for an IPO issuance through book building at NPR 401 per share, shifting from traditional fixed pricing to market-driven valuation. This move reflects SEBON's commitment to modernizing Nepal's capital markets, encouraging transparency and innovation in IPO pricing. It sets a precedent for future IPOs, potentially attracting a broader investor base and incentivizing other private companies to go public.
Timeline of Major Events
| Date | Events |
| 3 October 2023 | NEA invites proposals for PPA of hydropower. |
| 16 October 2023 | SEBON allowed book building process for the first time. |
| October 2023 | Nepal Oil Corporation (NOC) decreased the price of petroleum products twice in a month. |
Economic Indicators
Remittance inflows surged by 22.1% in the first two months of the current fiscal year, reaching NPR 228.37 billion. The increase is attributed to the rising number of Nepali workers seeking foreign employment, with 74,455 Nepalis leaving the country during this period.
The economy showed positive signs of recovery, with foreign exchange reserves increasing by 3.9% to NPR 1,598.90 billion compared to the same period last year. Meanwhile, consumer price inflation remained stable at 8.19%. Merchandise exports declined by 7.8%, primarily due to lower exports to India and China. However, the overall trade deficit narrowed by 4.7%.
A comprehensive study by the Nepal Rastra Bank (NRB) in Lumbini Province found that remittances have a positive impact on Nepali families, with an increasing trend towards using formal banking channels for remittance transfers. Remittances are also primarily invested in household construction and property purchases, accounting for more than 68% of the funds received.
Nepal's Hydro Sector Makes Positive Strides
The Government of Nepal has recently introduced significant regulatory changes in the hydropower sector, affecting how project licenses are issued and managed. These changes are outlined in the fourth amendment to the Electricity Project Permit Guide-2075. One of the most significant changes is that companies are now required to guarantee their capital and investment loans when obtaining licenses for hydropower projects. Additionally, the government has distinguished between smaller projects with a capacity of less than 20 megawatts and larger projects within the government's portfolio. Smaller projects can now be developed without competitive bidding, making the development process more accessible and less complex. Larger projects, on the other hand, will continue to be subject to competitive bidding. These new regulations are also applicable to run-of-river and partial storage hydropower projects.Additionally, the Nepal Electricity Authority has invited proposals for the purchase and sale of electricity licenses, specifying threshold capacities for different project types. Furthermore, Nepal is poised to export a greater volume of hydroelectricity to its southern neighbor, India. This potential export surge is attributed to India's latest regulatory adjustment, which permits Indian electricity distributors to include imported hydroelectric power within their mandated renewable energy targets. In a recent policy update, India's power ministry unveiled a fresh quota outlining the renewable energy obligations for distribution companies commencing from the fiscal year 2024-25.
Book Building Process Approved
For the first time, the Securities Board of Nepal (SEBON) has allowed IPO issuance through book building, a historic leap in the field of shares and bonds. On October 16, Sarbottam Cement received approval for an IPO issuance through book building at NPR 401 per share, shifting from traditional fixed pricing to market-driven valuation. This move reflects SEBON's commitment to modernizing Nepal's capital markets, encouraging transparency and innovation in IPO pricing. It sets a precedent for future IPOs, potentially attracting a broader investor base and incentivizing other private companies to go public.
CESIF Nepal