June 17: Nepal Rastra Bank (NRB) has published Current Macroeconomic and Financial Situation of Nepal based on Ten Months' Data of 2015/16 on June 16. NRB has indicated a gradual improvement in economic activities with a pickup in credit off take of banks and financial institutions (BFIs), government revenue and capital spending.

 According to NRB, the current rebound in economic activities including a pick up in construction activities is expected to underpin the growth target of 6.5 percent as set in the annual budget for the fiscal year 2016/17. The NRB claims that with the increase in economic activities, the revenue collection will surpass the expected target of Rs. 475 billion for the current fiscal year 2015/16.

The 10 month data of NRB has shown return of double digit inflation rate of 10 percent in Mid-May which was 9.7 percent in Mid-April. However, the rate is less than Mid-January which was 12.1 percent. The central bank accredited the rise in inflation to raise in housing rent and education related expenses in the review month despite the improved supply of fuel and other consumable items following the return of normalcy in the southern customs points.

In the review period, the growth in price indices of pulses and legumes subgroup and vegetable sub-group continued to remain at a higher level by 23.4 percent and 20.1 percent respectively.

Geographically, the Kathmandu Valley witnessed a relatively higher rate of inflation at 11.5 percent followed by Hilly region at 11 percent, Mountain region at 9.1 percent and Terai region at 8.6 percent in the review period. Last year, the Kathmandu Valley, Hilly region and Terai region had experienced the inflation rate of 6.8 percent, 7.7 percent and 6.9 percent respectively.

Current Account and BOP Position

According to NRB, the current account registered a surplus of Rs. 134.30 billion in the review period compared to Rs. 71.39 billion surplus in the same period of the previous year. Similarly, the overall BOP recorded a significant surplus of Rs. 166.83 billion in the review period compared to a surplus of Rs. 101.15 billion in the same period of the previous year.

Workers' Remittances

In the review period, the workers' remittances grew 10.2 percent to Rs. 538.87 billion compared to a growth of 10 percent in the previous year.

Foreign Exchange Reserves

 The gross foreign exchange reserves stood at Rs. 1013.44 billion as at Mid-May 2016, an increase of 23 percent from Rs. 824.06 billion in Mid-July 2015. Of the total foreign exchange, reserves held by NRB held the reserves of Rs. 870.99 billion and other BFIs held the reserves of Rs. 142.45 billion.