41.813 million shares of 215 companies were traded in the stock exchange through 147,492 transactions. Despite the total transactions amounting to NPR 14.768 billion, the benchmark index dipped 0.04 percent or 1.200 point fall, settling at 2,815.40.

The index fell 0.06 percent or 0.28 points, ending 503.71 points. Sympathetically, the float index lost 0.13 percent or 0.24 points to 193.43 points.

The biggest loser was microfinance sector. The sector’s index nosedived by 191.69 points or 3.41 percent to 5,435.06 points. This loss was due to Nepal Rastra Bank’s tightening the financial institutions’ secondary market investment rules and regulations.

Earlier this week, NRB curtailed banking and finance institutions (BFI) from investing bin “D” class financial institutions. Microfinance enterprises come under the D class institutions. The Nepali central bank also restricted BFI from short-term stock trading. The BFI sectors are to hold the shares and debentures for a year before trading them.

Tingeing this record turnover was gained experienced by the industries in the hydropower sector. Khani Khola Hydropower, United Modi Hydropower, and Nepal Hydro Developers led the pack of winners.

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Even though the coronavirus cases in the country are low, Nepal has witnessed severe socioeconomic implications due to the pandemic.

The nationwide lockdown has halted almost all economic activities including mining, restaurants, tourism, Everest expedition, and sports events, among others leading to huge financial loss.

According to the Nepal Rastra Bank (NRB), Nepal has NPR 168 billion du e to the coronavirus pandemic in two months.

Meanwhile, the foreign remittance worth NPR 627 entered Nepal by April 12 in the current FY, down by 4% from last FY.

According to the NRB, the remittance will further go down by 10% in the coming FY.

The foreign remittance has decreased drastically after the Nepali migrant workers in various countries have suffered a financial crisis due to the pandemic.

Meanwhile, the inflation rate has increased by 2.3% by April 12 in the current FY.

In contrast, foreign investment has increased despite the ongoing coronavirus crisis in the country.

According to the NRB, the Foreign Direct Investment (FDI) worth NPR 16.48 billion has entered Nepal in a period of nine months of the current FY.

So far, Nepal has reported 402 coronavirus positive cases and two death cases. However, 36 patients were discharged after a successful recovery.

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Despite the Nepali Government’s target to check the consumer price index at maximum 6%, the average inflation has already surpassed the target and reached 6.82% in mid-January 2020.

According to the Nepal Rastra Bank (NRB), the increase in inflation in the first six months of the current FY 2019-20 is primarily due to the rise in prices of the consumable goods in the country.

However, the recent rise in prices of non-food items due to coronavirus outbreak has started taking their toll on the economy.

According to the NRB Spokesperson Gunakar Bhatta,  the rise in prices is primarily attributed to the fall in Nepali currency value against the US dollar and supply bottlenecks due to coronavirus epidemic.

The exchange rate of Nepali currency against the US dollar has declined to NPR 118.28 per dollar on March 9, 2020, reaching close to the record of NPR 119.33 per dollar on October 10, 2018.

Bhatta said the NPR has been falling after the local market placers started investing in gold and dollar against stocks and businesses on the back of COVID-19 threat.

“Investors have been considering also the successive cuts in interest rates by the US Federal Reserve and declining price of crude oil in the international market as indicators of the slump in business confidence,” exclaimed Bhatta.

Moreover, the adverse impact of coronavirus outbreak on the supply chain have further affected the inflation rate in Nepal.

The trade movement restrictions imposed by the Chinese Government have disrupted the imports from China to Nepal.

Nepal imports most of the raw materials and capital goods from various countries, mainly China and India.

So far, coronavirus has spread to at least 109 countries across the world killing 3,831 people and infecting 110,092 people.

China, the epicenter of coronavirus outbreak, has reported 3,120 death cases and 80,738 infection cases.

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According to NRB’s data, Nepal received a total of NPR 784 billion in remittance from as many as 189 countries in FY 2075-76, an increase of NPR 8 billion from around NPR 776 billion in FY 2074-75.

In FY 2070-71, the total remittance received by Nepal was NPR 543 billion, which increased significantly by NPR 200 billion (33.9 percent) in FY 2075-76 to NPR 783 billion.

The total remittance received by Nepal contributed to 29 percent of the country’s Gross Domestic Product  (GDP)

The report also mentions individual countries contribution to Nepal remittance, which has grown significantly over the years.

Since all of the remittance to Nepal from various countries are routed via USA, NRB’s report shows that US is the only source of remittance to Nepal, explained NRB spokesperson Laxmi Panna Niraula.

In FY 2075-76, Nepal received a total of 187 billion from US alone.

Meanwhile, the remittance from India increased from NPR 500 billion to NPR 700 billion over a period of 5 years, projecting an increase of more than NPR 2 billion.

The report further states that remittance are sent by all levels of Nepalese workers – skilled or unskilled. These include Nepali businesses and top professionals working in various countries across the world.

The following table depicts the amount of remittance Nepal received from various countries:

Total Remittance to Nepal Over the Last Five Years FY 2070-76

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Nepal Rastra Bank (NRB) launched the Nepal Financial Inclusion Portal developed in collaboration with the United Nations Capital Development Fund (UNCDF) with an aim to give a realistic picture about financial access and usage of related services in Nepal.

The portal provides:

• Consolidated analytical reports on financial inclusion for policy intervention driven by data
• Helps regulatory in effective reporting of their financial data in a systematic manner
• Support to central bank and governmental bodies in preparing a national financial structure to increase financial access

“The availability of data and information on banking and financial access and inclusion helps the government in formulating necessary policies and programmes targeted to the rural areas. It is very important for policymakers as they can develop policies and financial strategies by looking at this portal,” NRB Governor Chiranjibi Nepal.

According to NRB, the portal will also list the data of remote rural areas that are not easily accessible even for the government and regulatory bodies.

Chiranjibi feels that the portal will help both the central and state governments in developing an efficient financial structure that would enhance financial access, thus driving overall economic growth of the country.

By bringing in a financial inclusion, the new portal is expected to increase the ability of local levels in gaining complete access to government services.

UNDP on Nepal’s Financial Inclusion
Speaking on the side-lines of the portal launch, UNDP Deputy Country Director Ayshanie Medagangoda-Labe pitched on the need for literacy and technology as means to achieve financial inclusion.

Illiteracy, connectivity, lack of savings & income, and distrust in banking or financial institutions are some of the key barriers for financial inclusion, she added.

In this regard, she said the new portal is definitely an opportunity for Nepal in achieving its Sustainable Development Goals (SDGs) under the 2030 agenda.

“One of the aims of the SDGs is to leave no one behind. The challenge that we have in front of us is how to get the financial access, literacy, infrastructure and technology to these 753 local units,” adds Ayshanie.

“If the data is available, you can know the needs and behaviors of consumers,” said Francois Coupienne of the UNCDF, while adding that as a tremendous opportunity for policy makers.

“There is a huge gap between the different needs and aspirations of each individual and the ‘one size fits all’ approach of the financial services providers. Innovation, technology and data will play a key role in filing this gap,” adds Francois.

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• NRB Estimates Nepal’s Gasoline Spend at Rs 170 billion for FY 2017-18

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The new Nepali law, likely to be in force from August 17, 2018, considers it as a crime causing damage to currency notes and coins by any means of writing, drawing, burning, tearing, and drawing lines, among other activities.

As the reports say, Nepal Rastra Bank (NRB) has already directed the country’s banks and financial institutions to put the new law into practice across the country.

In a public notice, NRB also informed the public about the new legal provision.

Going forward, any citizen violating the law will be subjected to three months imprisonment and a fine of NPR 5000 under the Nepal Criminal Procedure Code Act 2017.

According to Laxmi Prapanna Niraula, Chief of the Currency Management Department at NRB, the new law helps in increasing the lifetime of currency notes and adds to NRB efforts in revenue savings.

The new law is the first such regulation from Nepal Government towards securing currency notes after the existing law in place, to penalize those making and circulating counterfeit currencies.

As NRB reports, Nepal had NPR 458 billion (USD 4.15 billion) worth currency notes currently circulating in the market with 30 percent of them being dirty because of lines or words written on them.

To address the concern, NRB has also stopped issuing such dirty notes to increase the stock of clean notes.

“Using those notes in the market however will not be illegal for now,” says Niraula.

Hope, the new in place will increase NRB’s efforts to generate more clean currency notes while also addressing the menace of counterfeit currency distribution in the market.

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Stakeholders say that the country will need more than Rs 500 billion in the next fiscal year to meet the targeted economic growth rate of 8 percent.

Taking into perspective the targeted growth rate, they said that the suggested expansionary monetary policy will keep the money flow in the market and curb interest rates. Both of these aspects are important factors for achieving the targeted growth rate and keeping inflation within the targeted 6.5 percent.

“Amid lack of adequate investment funds, it will be tough for the government to achieve the targeted economic growth rate in 2018-19. In such a situation, the central bank should draft a monetary policy that is as expansionary as possible even if it adds to the inflationary pressure to some extent,” says Gyanendra Dhungana, President of Nepal Bankers Association (NBA).

Dhungana further asked the central bank to consider getting rid of the credit-to-core Capital Plus Deposit (CCD) ratio limitation in the banking sector through the enaction of the monetary policy explaining that liquidity could be restrained even by maintaining the Cash Reserve Ratio (CRR) and Statutory Liquid Ratio (SLR).

What Key Stakeholders Said

Private sector representatives present at the meeting encouraged NRB to address various lapses of the budget that have eaten away at the business sector through monetary policy.

 “Among others, the government’s policy to scrap the VAT rebate system on different essential goods and the inability of the budget to ensure stability in interest rates in the banking sector are discouraging. The monetary policy should address these bottlenecks of doing business in Nepal,” says Shekhar Golchha, Senior Vice-President of the Federation of Nepalese Chambers of Commerce and Industry.

The Vice-President of Nepal Chamber of Commerce (NCC) Kamalesh Kumar Agrawal also expressed his views on the plan saying that the monetary policy should also facilitate production and supply of goods.

Kumar stressed on the need to limit interest rates within the 9 percent limit on loans in the banking sector, redefine productive & non-productive sectors and permit the usage of high-denomination Indian currency in the domestic market.

Speaking to the members, Nara Bahadur Thapa, Executive Director of NRB, said that the monetary policy for FY 2018-19 will focus on:

• Accelerating the present economic growth momentum
• Narrowing down the trade deficit
• Increasing the flow of loan to Small Medium Enterprises (SMEs)
• Controlling rising interest rate
• Increasing public access to financial services

“The market is already witnessing inflationary pressure and it will likely increase in the next fiscal year. The monetary policy will be prepared by adopting cautious measures to control inflation,” says Thapa.

Addressing the event, NRB Governor Chiranjibi Nepal said that the monetary policy will fuel the budget’s target of achieving the expected economic growth in FY 2018-19 and restricting inflation to 6.5 percent.

“Nepal has witnessed an economic growth rate of over 6 percent for two consecutive years despite political instability and frequent changes in government. As the country now has a stable government and the supply-demand situation is improving, the 8 percent economic growth target in 2018-19 is achievable,” says Chiranjibi.

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Nepali Ambassador to India Deep Kumar Upadhyay yesterday urged the Government of India to address the issues Nepali citizens are facing because of demonetized currency notes.

In this regard, the official urged India to consider a special window that allows Nepali citizens to exchange their demonetized notes.

“There are pensioners, also almost every Nepali family has a member in India. During festival seasons, when they return, they take money for needs that may be medical. It is my moral obligation. Nepal must be provided with some kind of window,” read an official statement by Deep Kumar.

Deep Kumar further informed that many Nepali citizens are not able to exchange demonetised notes because of the lack of a special provision for the same.

Nepalese living in the Indo-Nepal border areas could find a way, however, those living in hilly areas of the country are still holding the banned currency notes, he added.

According to Deep Kumar, Nepal had requested to allow Rs 25,000 exchange per account, but the Reserve Bank of India (RBI) had promised for Rs 4,500 per account and that did not happen yet.

This situation is seen despite the high-level discussions between officials of both the countries on the issue.

“There was almost a kind of an understanding between both the central banks (of both the countries) that India will provide a window for exchange of currency notes that Nepali people are holding. But I think, it has now been finalized and Nepal is waiting for the issue to be resolved. In our highest level also, we have again raised this issue,” read official statement by Deep Kumar.

Huge Loss to Nepali Citizens

This currency exchange issue has been concerning Nepali citizens since the time India announced ban of old currency notes of Rs 1000 and Rs 500.

Earlier in July 2017, a Nepal Rastra Bank official had said, “Nepalese stand to lose millions of dollars held in high-value Indian bank notes that India banned in 2016”.

Even though RBI responded, issues were not addressed yet.

“That was only a verbal assurance, but no formal decision from India has come to us. Even if this amount was exchanged, individuals holding more than INR 4,500 risk losing the excess,” said Chinta Mani Shivakoti, a Deputy Governor of the Nepal Rastra Bank in an earlier case.

According to Shivakoti, Nepali banks hold INR 78.5 million worth old currency notes. The Nepali businessmen also estimate that Rs 10 billion worth old Indian currency (USD 155 million) is stashed with the Nepali informal sector.

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Annual inflation in Nepal has declined to a 12-year low of 4.5 percent in fiscal year 2016-17 due to a moderate rise in costs of food and non-food items.

The inflation figure is lower than the Nepal Rastra Bank’s (NRB) estimate of 7.5 percent. This is the third time NRB had beaten its own inflation target inflation ever since it launched annual monetary policy in 2002-03. Prior to this, it was in 2003-04 and 2006-07.

The latest Macroeconomic Report of the Nepal Rastra Bank (NRB) informed that annual inflation of the previous fiscal year that ended on July 2017 is the lowest since 2004-05.

According to the report, consumer prices grew at a much slower pace than estimated in 2016-17 benefited by base prices of the fiscal year 2015-16, lower global commodity prices and improved supply situation.

However, there exists uncertainty on whether the inflation would continue to be moderate because of the recent floods that have damaged Rs 8.11 billion worth crops across 31 districts of the country.

As per the Ministry of Agriculture and Development (MoAD), the floods have so far damaged paddy Rs 3.18 billion, vegetables (Rs 2.96 billion), pulses (Rs 536 million), fishes (Rs 800 million), turmeric (Rs 340 million) and maize (Rs 241 million).

However, MoAD is is yet to calculate the total loss caused by floods, which is likely to boost country’s import volume thus triggering inflationary pressure.

Floods in Tarai Hike Vegetable Prices

Shortage of supply due to recent floods in Tarai resulted in skyrocketing of vegetable prices in the Kathmandu Valley.

Due to floods, vegetable supply in the Valley’s market has declined by almost 200 tonnes per day.

Recent floods in Nepal have affected more than 16,474 hectares of vegetable farmlands in Tarai districts wiping out vegetables worth Rs 3 billion, which resulted in fall of supply volume.

According to a local Kanchan Poudel, even Rs 500 seems insufficient to buy vegetables for a day.

“Majority of ready-to-harvest vegetables in Tarai farmlands were swept away by the floods, which has largely affected the supply,” said Binaya Shrestha, Information Officer at Kalimati Fruits and Vegetable Market Development Board (KFVMDB).

According to KFVMDB officials, increased transportation costs for traders, due to landslide-affected routes, is also a reason behind the rise of vegetable prices.

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