You are on page 1of 164

NEPAL RASTRA BANK

ECONOMIC REPORT

2007/08
NEPAL RASTRA BANK

ECONOMIC REPORT

2007/08
Published By:
Nepal Rastra Bank
Central Office
Research Department
Statistics Division
Baluwatar, Kathmandu
NEPAL
Telephone: 4419804, 4419805, Ext. 357
Web Site: http://www.nrb.org.np
E-mail: statistics@nrb.org.np
Acronyms Used

ABBS Any Branch Banking System


ADB/N Agricultural Development Bank of Nepal
ALCO Asset Liability Committee
ASYCUDA Automated System for Custom Data
ATS Automated Trading System
BIMSTEC Bay of Bengal Initiative for Multi-Sectoral Technical and Economic
Cooperation
BOP Balance of Payments
CBS Central Bureau of Statistics
CGISP Community Groundwater Irrigation Sector Project
CIB Credit Information Bureau
CIT Citizen Investment Trust
CoE Committee of Experts
CPI Consumer Price Index
CRR Cash Reserve Ratio
CRRDB Central Region Rural Development Bank
DAP Document Against Payment
DFID Department for International Development (UK)
DICGC Deposit Insurance and Credit Guarantee Corporation
EPF Employees Provident Fund
ERRDB Eastern Region Rural Development Bank
EWS Early Warning Signal
FISIM Financial Intermediation Services Indirectly Measured
FNCCI Federation of Nepalese Chambers of Commerce and Industry
FWRRDB Far-western Region Rural Development Bank
GDP Gross Domestic Product
GHC Grievance Hearing Cell
GNDI Gross National Disposable Income
GON Government of Nepal
GWH Giga Watt Hours
HR Human Resource
IC Indian Currency
IMF International Monetary Fund
IOC Indian Oil Corporation
IPO Initial Public Offering
IRD Internal Revenue Department
IT Information Technology
L/C Letter of Credit
Ll Broad Measure of Liquidity
LMFF Liquidity Monitoring and Forecasting Framework
LTO Large Tax Payers Office
M1 Narrow Money Supply
M2 Broad Money Supply
MRA Masters Purchase Agreement
MT Metric Tons
MTEF Medium Term Expenditure Framework
MWRRDB Mid-Western Region Rural Development Bank
NBBL Nepal Bangladesh Bank Limited
NBFI Non-bank Financial Institution
NBL Nepal Bank Limited
NDA Net Domestic Assets
NEFT National Electronic Funds Transfer
NEPSE Nepal Stock Exchange
NFA Net Foreign Assets
NGOs Non-governmental Organizations
NNML Net Non-monetary Liabilities
NOC Nepal Oil Corporation
NPL Non-performing Loans
NRB Nepal Rastra Bank
NRN Non-resident Nepali
NTB Non-tariff Barrier
NWPI National Wholesale Price Index
OBIs Other Banking Institutions
OPEC Organization of the Petroleum Exporting Countries
OTC Over the Counter
PPA Power Purchase Agreement
PRGF Poverty Reduction and Growth Facility
RBB Rastriya Banijya Bank
RDBs Rural Development Banks
Repo. Repurchase
RMDC Rural Microfinance Development Centre
Rs. Rupees
RSRF Rural Self Reliance Fund
SAARC South Asian Association for Regional Cooperation
SDRs Special Drawing Rights
SEBON Securities Board of Nepal
SFCL Small Farmers' Cooperative Limited
SFDB Small Farmers' Development Bank
SITC Standard International Trade Classification
SLF Standing Liquidity Facility
TBs Treasury Bills
TLP Trade Liberalization Program
US$ US Dollar
VAT Value Added Tax
VRS Voluntary Retirement Scheme
WAN Wide Area Network
WRRDB Western Region Rural Development Bank
WTO World Trade Organization
y-o-y year-on-year

2
Contents
Pages
1. World Economic and Financial Development 1
2. An Overview of Macroeconomic Situation 4
3. Economic Growth 6
Sectoral Composition of Gross Domestic Product 7
Activities of Economic Sectors 9
Agriculture 9
Rainfall 9
Irrigation 9
Improved Seeds 9
Chemical Fertilizers 9
Agricultural Production 9
Cereals and Other Crops 9
Vegetables, Horticultural and Nursery Products 10
Fruits, Nuts, Beverages and Spice Crops 11
Farming of Domestic Animals 11
Other Animals Farming and Production of Animal Products 11
Forestry, Logging and Related Services 12
Fisheries 12
Industry 12
Services 13
Aggregate Demand 14
Domestic Demand 14
Net Foreign Demand 14
Gross National Disposable Income 14
4. Inflation 16
Consumer Price Index 16
Seasonal Price Movement 17
Price Movement of Sub-groups of Commodities 17
National Wholesale Price Index 18
Wholesale Price Indices of Some Important Commodities 18
Foodgrains 18
Cash Crops 19
Pulses 19
Petroleum Products and Coal 19
Salary and Wage Rate 19
Wages 19
5. Fiscal Sector Development 21
Fiscal Performance (Revised estimates) 21
Fiscal Stance 21
Government Expenditures 22
Revenue Mobilization 24
Tax Revenue 24
Foreign Grants 26
Public Debt 26
Ownership Pattern of Government Domestic Debt 26
Budget 2007/08 27
Major Fiscal Reform Measures 28
Tax Policy Provisions 29
Tax Rates 29
Status of the Public Enterprises 30
Privatization and Dissolution of Public Enterprises 30
6. External Sector Development 31
Assessment of Policy Developments 31
Merchandise Trade 34
Balance of Payments 37
Income and Expenditure of Convertible Foreign Exchange 38
Foreign Assets and Liabilities of the Banking Sector 39
Foreign Aid Agreements 40
Transactions with the IMF and IMF Liabilities 41
7. Monetary Sector Development 42
Monetary Policy of 2007/08 42
Objectives 42
Intermediate Target 43
Operating Target 43
Monetary Instruments 43
Bank rate and Refinance rate 43
Cash Reserve Ratio (CRR) 44
Open Market Operations 44
Standing Liquidity Facility 45
Inter bank Transactions 45
Sick Industries Refinancing 46
Liquidity Injection through Foreign Exchange Interventions 46
Interest Rates 47
Monetary Aggregates 47
Sources of Monetary Growth 48
Structure of Domestic Credit 48
Reserve Money 49
Money Multiplier and Income Velocity 49
Banking Survey 50
8. Financial Market 51
Overall Development 51
Primary Market 51
Secondary Market 51
Financial Institutions 53
Growth of Financial Institutions 53
Financial Structure 54
Development Banks 55
Finance Companies 56
Microfinance Institutions 56
Rural Self Refinance Fund 57
NRB Licensed Financial Cooperatives 58
NRB Licensed Non-government Organization 58
Money Transfer Companies 58
Money Changers 58
Insurance Companies 59
Employees' Provident Fund 59
Citizen Investment Trust 60
Postal Savings Bank 60
Deposit Insurance and Credit Guarantee Corporation 60
Credit Information Bureau 60
9. Commercial Banking 62
Number of Banks 62
Assets and Liabilities of Commercial Banks 63
Deposit Growth and Composition 63
Paid-up Capital and General Reserve 64
Loans and Advances 64
Non-performing Loans 65
Profitability 66
Sectorwise and Securitywise Credit Flows 66
Priority Sector and Deprived Sector Lending of Commercial Banks 67
10. Financial Sector Reform Program 69
Reengineering of Nepal Rastra Bank 69
Restructuring of Nepal Bank Ltd. and Rastriya Banijya Bank Ltd. 70
Capacity Enhancement of Overall Financial Sector 71
Regulatory Measures 71
Supervisory Actions 74
11. Microfinance 76
Rural Self-Help Fund 76
Activities of Rural Development Banks and Their Share Divestment 77
World Economic and Financial Development 1

1
World Economic and Financial Development
1.1 According to the World Economic Outlook (Updated) published by the
International Monetary Fund (IMF) in January 2009, the world output growth is expected
to slow down from 5.2 percent in 2007 to 3.4 percent in 2008. The Fund projects such
growth to be 0.5 percent in 2009. The contraction of the world economy will remain
subdued primarily owing to the spill-over effect of the financial turmoil emanating from
the sub-prime mortgage in the US to the other advanced economies through trade and
financial system. This would be the first annual contraction during the postwar period,
although the downturn is broadly comparable in the magnitude to those that occurred in
1975 and 1982.
1.2 The continuing deterioration of financial crisis in the United States and Euro area
will remain a drag on demand and a source of uncertainty for financial markets. The U.S.
economy will suffer, as households respond to depreciating real and financial assets and
tightening financial conditions. Consequently, the US economy is projected to tip into
recession in 2009. Other advanced economies will also slow in the face of trade and
financial spillovers, with housing markets a source of drag in some European countries.
Growth in the Euro area will be hard hit by the tightening financial conditions and
declining confidence. In the case of Japan, the support to growth from net exports is
expected to decline. Moreover, the growth rates of Japan and Euro area are projected to
remain low in 2009 compared to that of the preceding year.
1.3 In the fourth quarter of 2008, markets have entered into a vicious cycle of asset
deleveraging, price declines, and investor redemptions. Credits spread spiked to
distressed levels and major equity indices dropped by about 25 percent in October. Weak
global demand is depressing commodity prices. Oil prices have declined by over 50
percent since their peak, retreating to levels not witnessed since early 2007 reflecting the
major global downturn, the strengthening of the U.S. dollar and the financial crisis
despite the decision by the Organization of Petroleum Exporting Countries (OPEC) to
reduce production.
1.4 The economic growth of the emerging and developing economies is expected to
remain buoyant on account of lesser impact of the financial instability underpinned by the
mild recession in India and China.
1.5 Developing Asia is estimated to register a growth of 7.8 percent in 2008 and is
projected to decrease by 5.5 percent in 2009. Likewise, South Asia is estimated to post a
2 Economic Report

growth of 7.6 percent in 2008 and is projected to contract by 6.4 percent in 2009. The
neighboring countries, India and China, are estimated to witness a growth of 7.3 percent
and 9.0 percent respectively in 2008. The economic growth of India is projected at 5.1
percent and that of China at 6.7 percent in 2009.
1.6 The financial market strains and its adverse impact on the expansion of the global
economy, the higher price rise of the petroleum products and food-grains in mid-July of
2008 together with the persistent global imbalances have created challenges for the world
economy.
1.7 World trade volume decelerated at the rate of 7.2 percent in 2007 as compared to a
growth of 9.3 percent in 2006 and is estimated to decelerate by 4.1 percent in 2008.
Imports are estimated to register a growth of 1.5 percent in advanced economies and 10.4
percent in other emerging markets and developing economies in 2008. Likewise, exports
are estimated to rise by 3.1 percent in advanced economies and 5.6 percent in other
emerging markets and developing economies in 2008. The imports are projected to
decrease by 3.1 percent in advanced economies and 2.2 percent in other emerging
markets and developing economies in 2009; likewise, exports are projected to decline by
3.7 percent and 0.8 percent in the respective economies in 2009.
1.8 Inflation rate stood at 2.1 percent in the advanced economies and 6.4 percent in
other emerging markets and developing economies in 2007. The inflation in the advanced
and developing economies is estimated to accelerate to 3.5 percent and 9.2 percent
respectively in 2008. Most of the economies are estimated to experience higher headline
inflation in 2008 owing to the higher price rise in the food and energy products on
account of the strong demand growth in the emerging and developing economies.
Inflation in South Asia is estimated to remain at 6.9 percent in 2007 and is estimated to be
8.8 percent in 2008 and 8.8 percent in 2009.
1.9 The net private capital flows to emerging market and developing economies are
estimated to decline to US$ 528.6 billion in 2008 from US$ 632.8 billion in 2007.
Similarly, such flows are projected to be at US$ 286.6 billion in 2009.
1.10 Unemployment rate in the advanced economies was estimated to remain at 5.7
percent compared to that of 3.3 percent in the newly industrialized Asian economies in
2008. The unemployment rate was estimated to be 5.6 percent in the United States, 7.6
percent in the Euro area, 4.1 percent in Japan and 5.4 percent in the United Kingdom in
2008. The unemployment rate in the advanced economies is projected to go up to 6.5
percent while such rate is expected to remain at 3.3 percent in the newly industrialized
Asian economies in 2009.
1.11 The fiscal imbalances as percent of gross domestic product (GDP) in the United
States and Japan was estimated to remain at 4.1 percent and 3.4 percent respectively in
2008. The net debt to GDP ratio was estimated at 101.3 percent in Italy followed by
Japan (94.3 percent), Germany (56.1 percent), France (55.5 percent), the United States
(46.3 percent), the United Kingdom (37.6 percent) and Canada (21.5 percent) in 2008.
World Economic and Financial Development 3

Table 1.1
Overview of the World Economic Outlook Projections
(Annual percent change unless otherwise stated)

S.No. Particulars 2006# 2007¡ Current Projection


2008¡ 2009¡
1. World Output 5.1 5.2 3.4 0.5
Advanced economies 3.0 2.7 1.0 -2.0
United States 2.8 2.0 1.1 -1.6
Euro Area 2.8 2.6 1.0 -2.0
Japan 2.4 2.4 -0.3 -2.6
Newly industrialized Asian economies 5.6 5.6 2.1 -3.9
Other emerging market and developing countries 7.9 8.3 6.3 3.3
Developing Asia 9.8 10.6 7.8 5.5
China 11.6 13.0 9.0 6.7
India 9.8 9.3 7.3 5.1
ASEAN–5 (Indonesia, Malaysia, Philippines, Thailand & 5.7 6.3 5.4 4.2
Vietnam)
South Asia @ 9.2 8.7 7.6 6.4
2. World Trade Volume (Goods and Services) 9.3 7.2 4.1 -2.8
Imports
Advanced economies 7.5 4.5 1.5 -3.1
Other emerging market and developing countries 14.9 14.4 10.4 -2.2
Exports
Advance economies 8.4 5.9 3.1 -3.7
Other emerging market and developing countries 11.2 9.6 5.6 -0.8
3. Commodity Prices (US dollar)
Oil* 20.5 10.7 36.4 -48..8
Non-fuel (average based on world commodity export weights) 23.2 14.1 7.4 -29.1
4. Consumer Prices
Advanced economies 2.4 2.1 3.5 0.3
Other emerging market and developing countries 5.4 6.4 9.2 7.1
South Asia @ 6.5 6.9 8.8 8.8
5. London Inter-bank Offered Rate (LIBOR, percent)**
On U.S. dollar deposits 5.3 5.3 3.0 1.3
On Euro deposits 3.4 4.3 4.6 2.2
On Japanese yen deposits 0.4 0.9 1.0 1.0
6. Private Capital Flows, Net (Emerging Market and Developing 223.0 632.8 528.6 286.6
Countries, billions of US$) @
7. Unemployment (percent of labor force)
Advanced economies 5.7 5.4 5.7 6.5
United States 4.6 4.6 5.6 6.9
Euro Area 8.7 7.4 7.6 8.3
Japan 4.1 3.8 4.1 4.5
United Kingdom 5.4 5.4 5.4 6.0
Newly industrialized Asian economies 3.7 3.4 3.3 3.3
Notes: * Simple average of prices of UK Brent, Dubai, and West Texas Intermediate Crude Oil.
** Six-month rate for the United States and Japan. Three-month rate for the Euro Area.
Sources: # IMF. 2008. World Economic Outlook (Updated). IMF. October, p. 3.
@ IMF. 2008. World Economic Outlook. IMF. October, pp. 52, 65, 273 and 283.
¡ IMF. 2009. World Economic Outlook (Updated). IMF. January, p. 6.
4 Economic Report

2
An Overview of Macroeconomic Situation
2.1 In 2007/08, the Nepalese economy displayed a satisfactory performance in terms of
economic growth. The robust performance of agriculture sector together with the
satisfactory expansion of services sector placed the overall growth to a peak of four year
high. The industrial performance however remained lackluster. Strikes, roadblocks,
paucity of petroleum products, load shedding and turmoil in Terai region continued to
drag down the pace of industrial growth in 2007/08. Overall, the real GDP at producers'
prices grew by 4.7 percent in 2007/08 compared to a growth of 3.2 percent in the
previous year.
2.2 The average annual consumer inflation moderated to 7.7 percent in 2007/08 from
the level of 6.4 percent in 2006/07. This was attributed primarily to the upsurge in the
price of food articles and petroleum products.
2.3 Despite the political turmoil and transition phase of the economy, fiscal situation
remained broadly stable in 2007/08. Fiscal deficit stood at 2 percent of GDP as against
the estimate of 2.7 percent in the budget of 2007/08. Such a prudent fiscal situation was
made possible primarily due to the impressive revenue mobilization and foreign grants. A
host of reforms in tax administration, growing imports and consumption induced by the
rise in remittances, the increasing imports of high tax yielding vehicles and spare parts
and increase in non tax revenue were among the responsible factors for the encouraging
growth of revenue mobilization.
2.4 In 2007/08, trade deficit continued to widen as in the previous years. However,
there was a surplus in the current account primarily owing to large remittance inflows.
The balance of payments also posted a surplus.
2.5 Ratio of exports to imports declined to 26.7 percent in 2007/08 from 30.5 percent in
the preceding year, demonstrating the declining import financing capacity of exports. The
share of India in Nepal's total trade went up to 64.3 percent in the review year from 62.0
percent in the previous year.
2.6 Total foreign exchange reserves of the banking system amounted to Rs. 212.62
billion as at mid-July 2008, an upsurge by 28.8 percent compared to the figure of the
previous year. This level of reserves was adequate for financing merchandize imports of
11.3 months and merchandize and service imports of 9.1 months.
An Overview of Macro Economic Situation 5

2.7 Broad money rose by 25.2 percent and narrow money by 21.2 percent largely due
to the significant rise in the remittance inflows in the last two quarters of 2007/08
together with the increase in foreign assistance.
2.8 For managing the Indian Currency reserves, the NRB purchased Indian Currency
(IC) 70.6 billion by selling US$ 1.7 billion in the review year compared to a purchase of
IC 39.9 billion by selling US$ 920 million in the previous year. A widening current
account deficit with India and higher amount of payments made to Indian Oil Corporation
(IOC) by Nepal Oil Corporation (NOC) contributed to such a rise in IC purchase in the
review year.
2.9 The stock market experienced impressive growth in 2007/08. The y-o-y NEPSE
index increased by 40.8 percent to 963.36 points in mid-July 2008. Similarly, market
capitalization to GDP ratio reached 44.6 percent in mid-July 2008 from 25.8 percent a
year ago.
2.10 Overall, in terms of the macroeconomic performance, the Nepalese economy
displayed a mixed performance in 2007/08. While real GDP posted a higher growth
compared to the previous year, the annual average inflation remained high. Although the
trade deficit expanded, the current account and the balance of payments remained in
surplus primarily due to the significant remittance inflows.
6 Economic Report

3
Economic Growth
3.1 The performance of Nepalese economy in terms of economic growth remained
satisfactory in 2007/08. The real GDP at producers' prices grew by a four-year high of 4.7
percent in 2007/08 compared to a growth of 3.2 percent in the previous year. In terms of
basic price, the real GDP grew by 5.6 percent in the review year (Figure 3.1). The robust
performance of agriculture sector coupled with the satisfactory expansion of services
sector placed the overall growth to a peak of four year. The industrial performance
however remained lackluster. The strikes, lockouts and roadblocks, scarcity of petroleum
products, load shedding and turmoil in Terai region continued to drag down the pace of
industrial growth in 2007/08.
3.2 The agriculture sector that contributes almost one-third share in GDP grew by 5.7
percent in the review year. Such growth in the previous year was a meager 1.0 percent.
The acceleration in the growth of agriculture can be attributed to the significant rise in
paddy production and a satisfactory performance of other agriculture crops.

Figure 3.1 : Economic Growth Rate


7.0

6.0

5.0
Percentage

4.0

3.0

2.0

1.0

0.0
2002/03 2003/04 2004/05 2005/06 2006/07 2007/08

Fiscal Year

Agriculture Non-agriculture GDP at basic prices


Economic Growth 7

3.3 The non-agriculture sector reported a growth of 5.6 percent in the review year
compared to a growth of 4.1 percent in the previous year. Despite the sluggish
performance of industrial sector, the expansion of services sector contributed to improve
the overall performance of the non-agriculture sector. The industrial growth slowed to 1.8
percent that is nearly a half of previous year’s growth rate. This slowdown was mainly on
account of the slackening in the growth of manufacturing sector.
3.4 The performance of services sector remained robust in the review year. It grew by
6.9 percent in the review year compared to a 4.2 percent growth in the previous year. The
growth in financial intermediation; hotel and restaurant; transport, storage and
communication; wholesale and retail trade; and health and social work sectors played an
important role in the growth of this sector.
3.5 The review year is also the first year of the ongoing ‘Three-Year Interim Plan.’ The
plan has targeted an annual growth of 5.5 percent with 3.6 percent growth in agriculture
and 6.5 percent in non-agriculture. The targeted growth seems to be attainable provided
that the law and order situation in the country remain conducive for additional investment
and also the monsoon remains favourable. In 2007/08, except in industrial sector, the
overall growth including agriculture and services exceeded the Plan’s targeted growth
(Table 3.1).
Table 3.1
Actual and Targeted Sectoral Growth Rates of GDP (at 2000/01 prices)*
Sectors 2006/07 2007/08 Plan’s Target
Agriculture 1.0 5.7 3.6
Non Agriculture 4.1 5.6 6.5
Industries 3.9 1.8 6.8
Services 4.2 6.9 6.4
GDP at basic price 3.0 5.6 5.5
*Before deduction of financial intermediation services indirectly measured (FISIM)
Source: National Planning Commission and Central Bureau of Statistics.

Sectoral Composition of Gross Domestic Product


3.6 The sectoral GDP data of the last two decades revealed the ongoing structural
changes in the economy. The share of agriculture in GDP has registered a steady decline
while the services sector has taken a greater chunk in GDP. The industrial sector’s share
has, however, stagnated. The share of agriculture, industry and services to the real GDP
stood at 36.0 percent, 16.3 percent and 47.7 percent respectively in 2007/08. The
corresponding shares in 1987/88 were 48.7 percent, 16.3 percent and 35.0 percent (Figure
3.2).
3.7 The contribution of agriculture in real GDP increased marginally to 36.0 in the
review year from 35.9 percent in the previous year. This sector’s contribution to the
overall growth surged by more than three and half fold from 12.0 percent in the previous
year to 36.4 percent in the review year. A decline in the growth of industrial sector
dragged down this sector’s contribution to growth from 22.0 percent in the previous year
8 Economic Report

to 5.2 percent in the review year. Despite a robust growth of services sector, this sector’s
contribution to overall growth dropped to 58.4 percent from 66.0 percent in the previous
year (Table 3.2).

Table 3.2
Sectoral Contribution to GDP and Overall Growth*
(at 2000/01 Prices)
In percent
Sectors Share in real GDP Growth Rate Contribution to
Growth Rate
2006/07 2007/08 2006/07 2007/08 2006/07 2007/08
Agriculture 35.9 36.0 1.0 5.7 12.0 36.4
Non-agriculture 64.1 64.0 4.1 5.6 88.0 63.6
Industry 16.9 16.3 3.9 1.8 22.0 5.2
Services 47.2 47.7 4.2 6.9 66.0 58.4
Total 100.0 100.0 3.0 5.6 100.0 100.0
* Basic price prior to deduction of FISIM.
Source: Central Bureau of Statistics and NRB’s calculations.
Economic Growth 9

Activities of Economic Sectors


Agriculture
3.8 The agriculture sector grew by an encouraging rate of 5.7 percent in the review
year. This is the highest growth rate so far in the last fourteen years. The growth rate in
the previous year was meager 1.0 percent. A sharp rise in paddy production along with a
satisfactory performance of other agriculture crops and livestock played an important
role.
Rainfall
3.9 The monsoon plays a crucial role in agricultural production in Nepal. The monsoon
remained quite favourable for paddy plantation in the review year. The country received
98 percent of average rainfall in June, 125 percent in July, 101 percent in August and 159
percent in September. Except June, all other months received more than average rainfall.
This contributed positively in the production of paddy in the review year.
Irrigation
3.10 Irrigation facility increased by 7.0 thousand hectares to 1202 thousand hectares in
2007/08. The total irrigated land as a percentage of cultivated land reached 45.5 percent
by the end of 2007/08.
Improved Seeds
3.11 The supply of improved seeds from National Seeds Company Ltd. increased by
20.4 percent to 3.8 thousand metric tones from 3.2 thousand metric tones in the previous
year. The supply of improved seeds of paddy and wheat grew encouragingly by 35.6
percent and 17.6 percent respectively. However, the supply of improved seeds of maize
and other crops declined substantially by 89.7 percent and 44.6 percent respectively.
Chemical Fertilizers
3.12 The supply of chemical fertilizer declined by 41.0 percent to 53.6 thousand metric
tons from 90.9 thousand metric tones in the previous year. Since the deregulation of
fertilizer trade in 1997, the share of Agriculture Inputs Company Limited (AICL) has
registered a steady decline.
Agricultural Production
Cereals and Other Crops
3.13 The production index of cereal and other crops that occupies nearly a fifty percent
share in the overall agricultural production increased by 7.3 percent in the review year.
This upsurge in the index was largely because of a significant rise in the production of
paddy by 16.8 percent. Paddy is an important crop that accounts for nearly a 21 percent
share in agricultural production and almost 42 percent share in the cereal and other crops
group. The cultivated area of cereal and other crops expanded by 2.8 percent to 4,152
thousand hectares in the review year from 4,040 thousand hectares in the previous year.
3.14 The production of paddy, after a continuous decline over last three years, reported a
significant growth of 16.8 percent to 4,299 thousand metric tones in 2007/08. It had
10 Economic Report

dropped by 12.6 percent to 3,680.8 thousand metric tones in the previous year. The
cultivated area under paddy expanded by 7.6 percent to 1,549 thousand hectares in the
review year. This is 37.3 percent of total cultivated land under cereals and other crops
group. The production yield of paddy surged by 8.5 percent to 2.78 metric tons per
hectare in the review year from 2.56 metric tons per hectare in the previous year.
3.15 The production of maize grew moderately by 3.2 percent in 2007/08 compared to a
growth of 4.9 percent in the previous year. The cultivated area under maize stagnated at
870 thousand hectares in the review year. The total production of maize increased to
1,879 thousand metric tons in the review year. The yield of maize increased slightly to
2.16 metric tons per hectare in the review year.
3.16 The production of wheat increased by 3.8 percent in the review year compared to a
growth of 8.7 percent in the previous year. With a marginal increase of 0.5 percent in the
cultivated areas, the production of wheat increased to 1,572 thousand metric tons in the
review year from 1,515 thousand metric tons in the previous year. Consequently, the
yield of wheat surged to 2.23 metric ton per hectare in the review year from 2.16 metric
tons per hectare in the previous year. The production of millet posted a growth of 2.2
percent in the review year contrary to a decline of 2.1 percent in the previous year.
3.17 With an increase of 2.1 percent to 156.7 thousand hectares in the area coverage, the
production of potato surged by 5.7 percent in the review year. Consequently, the
production yield of potato surged by 3.6 percent to 13.11 metric ton per hectare from
12.66 metric ton per hectare in the previous year. The production of sugarcane posted a
decline of 4.4 percent in the review year compared to a growth of 5.6 percent in the
previous year. The area coverage of sugarcane also dropped marginally to 63 thousand
hectares from 64 thousand hectares in the previous year. The production yield dropped
by 2.8 percent to 39.48 metric ton per hectare in the review year.
3.18 Despite a marginal drop in the area coverage, the production of jute posted a
marginal growth of 2.7 percent in the review year. The production had dropped
significantly by 10.1 percent in the previous year. The production yield of jute improved
marginally to 1.62 metric tones per hectare in the review year. The production of tobacco
continued to decline, falling by 1.3 percent in the review year.
3.19 Despite a marginal growth in the area cultivated, the production of pulses dropped
by 1.7 percent in the review year compared to a growth of 2.6 percent in the previous
year. The production yield of pulses dropped by 2.0 percent to 0.81 metric tones per
hectare in the review year. Similarly, the production of soybeans dropped marginally by
1.7 percent compared to a significant growth of 7.3 percent in the previous year. The
production of other crops continued to decline in the review year. It declined by 2.5
percent compared to a decline of 2.7 percent in the previous year.
Vegetables, Horticultural and Nursery Products
3.20 The production index of vegetables, horticultural and nursery products registered a
growth of 9.6 percent in the review year compared to a growth of 6.3 percent in the
previous year.
Economic Growth 11

3.21 The production of vegetables that comprises a significant share in the group
increased by 9.6 percent in the review year compared to a 6.3 percent growth in the
previous year. This growth can be attributed to the expansion of area cultivated under
vegetables. The area cultivated under vegetables grew by 11.0 percent to 220.1 thousand
hectares in the review year. The production yield of vegetables however increased
marginally by 1.0 percent to 8.65 metric ton per hectare in the review year. The
production of other crops in the group posted a decline of 1.9 percent in the review year.
Fruits, Nuts, Beverages and Spice Crops
3.22 The production index of fruits, nuts beverages and spice crops registered a growth
of 5.4 percent in the review year compared to a growth of 5.8 percent in the previous
year.
3.23 The production of fruits other than mango grew significantly in the review year.
Mango, that has a significant share in the group, registered a decline of 2.4 percent in the
review year contrary to an increase of 5.4 percent in the previous year. The cultivated
area under fruits increased marginally by 0.9 percent to 57.4 thousand hectares. The
production yield of fruits however dropped by 2.8 percent to 2.76 metric tone per hectare
in the review year.
3.24 The production of spice crops, tea and coffee registered the growths of 9.6 percent,
7.7 percent and 39.7 percent respectively in the review year. The corresponding growths
in the previous year were 3.9 percent, 8.2 percent and 19.3 percent. The cultivated area
under tea grew by 6.1 percent to 17.5 thousand hectare in the review year. The production
yield of tea also grew by 6.8 percent to 0.28 metric tonne per hectare in the review year.
The production of other crops in the group reported a growth of 2.0 percent in the review
year compared to a growth of 4.8 percent in the previous year.
Farming of Domestic Animals
3.25 The production index of domestic animals with nearly a quarter share in
agricultural production grew by 2.6 percent in the review year compared to a growth of
3.1 percent in the previous year. The production of buffalo’s meat and mutton surged by
3.2 percent and 2.6 percent respectively in the review year. The respective growths in the
previous year were 3.5 percent and 4.7 percent.
3.26 The production of milk with the highest share in the group surged by 2.7 percent in
the review year compared to a growth of 2.9 percent in the previous year. The production
of other crops in the group posted a growth of 1.3 percent compared to a growth of 1.9
percent in the previous year.
Other Animals Farming and Production of Animal Products
3.27 The production index of other animal farming and animal products grew by 3.1
percent in the review year compared to a growth of 7.8 percent in the previous year. The
production of pigs’ meat grew to a two-year high of 2.4 percent compared to a growth of
1.7 percent in the previous year. The production of poultry meat grew by 3.1 percent in
the review year compared to a growth of 3.3 percent in the previous year.
12 Economic Report

3.28 The production of eggs surged by 2.7 percent in the review year compared to a
growth of 2.3 percent in the previous year. The production of hides and skins increased
by 5.2 percent in the review year compared to a growth of 44.3 percent in the previous
year.
Forestry, Logging and Related Services
3.29 The production index of forestry, logging and related services activities accelerated
marginally by 0.2 percent compared to a growth of 1.7 percent in the previous year. The
sluggish growth of the index was mainly because of a decline in the production of
firewood that alone occupies more than 60 percent share in the group. The production of
firewood continued to decline in the review year. It declined further by 1.2 percent in the
review year compared to a decline of 0.2 percent in the previous year. The production of
timber grew by 2.2 percent in the review year compared to a growth of 2.7 percent in the
previous year.
3.30 The medicinal and herbal products and other commodities in the group posted a
decline of 1.5 percent in the review year as against a growth of 1.8 percent in the previous
year. The growth of production of other products that has a quarter share in the group
slowed at 2.3 percent in the review year compared to a growth of 5.7 percent in the
previous year.
Fisheries
3.31 The fisheries sector grew by 7.1 percent in the review year compared to a growth of
3.0 percent in the previous year.
Industry
3.32 The performance of the industrial sector did not remain satisfactory in the review
year due mainly to the poor performance of manufacturing sector. The sluggish
performance of manufacturing sector can be attributed to the unfavorable situation in
terai, industrial unrest, frequent lockout and strike, load shedding and lack of petroleum
products. The industrial sector grew by 1.8 percent in the review year compared to a
growth of 3.9 percent in the previous year.
3.33 The production of manufacturing sector measured in annual manufacturing
production index declined by 0.9 percent in the review year against a growth of 2.6
percent in the previous year. The production of dairy products; grain mill products and
animal feeds; other food products; beverage; tobacco products; textiles, pashmina; wood
sawn; paper and paper products; newspapers; other chemical products; and other
fabricated metal products grew in the review year while the production of vegetable oils
and fats; other textiles; garment; plastic products; non-metallic mineral products; and
domestic metal products recorded a negative growth. The production of vegetable ghee
and oil, garment and plastic products decelerated significantly by 14.1 percent, 15.0
percent and 8.7 percent respectively in the review year.
3.34 Electricity, gas and water sector recorded a growth of 3.4 percent in the review year
compared to a high growth of 13.0 percent in the previous year. The performance of this
Economic Growth 13

sector did not remain satisfactory in the review year due to the non-commencement of
additional hydro projects.
3.35 The hydropower generation grew by 1.7 percent to 2,768.3 GWH in the review
year compared to a growth of 8.3 percent in the previous year. Nepal imported 412.4
GWH electricity from India in the review year compared to 328.8 GWH in the previous
year. Nepal exported 31.5 GWH electricity to India compared to 76.9 GWH in the
previous year.
3.36 The construction sector grew by 3.1 percent in the review year compared to a
growth of 2.5 percent in the previous year. The sector recorded a slightly high growth in
the review year compared to the previous year owing mainly to the increase in the
domestic production of construction materials.
3.37 The growth of mining and quarrying sector remained normal in the review year. It
grew by 2.8 percent compared to a growth of 1.5 percent in the previous year.
Services
3.38 The services sector grew by 6.9 percent in the review year compared to a growth of
4.2 percent in the previous year. The high growth of the sector was attributed primarily to
the better performance of wholesale and retail trade; hotel and restaurant; transport,
storage and communication; financial intermediation; public administration and defense;
and other community, social and personal services sectors.
3.39 The wholesale and retail trade sector grew significantly at the rate of 6.4 percent in
the review year contrary to 4.5 percent decline in the previous year. This was largely
ascribed to the rise in the production of tradable agriculture commodities and a surge in
import. The hotel and restaurant sector grew by 7.5 percent in the review year compared
to a growth of 3.5 percent in the previous year. The surge in the influx of tourists played
an important role in the growth of this sector during the review year.
3.40 The performance of tourism sector remained satisfactory in 2007/08. The number
of tourists visiting Nepal in the review year grew significantly by 37.2 percent to 526,705
compared to 383,926 in the previous year. The number of Indian tourists grew by 2.4
percent to 96,010 compared to a decline of 2.8 percent in the previous year. However, the
number of tourist arrivals from third countries increased notably by 48.4 percent to
430,695 in the review year compared to a growth of 4.0 percent in the previous year. The
share of Indian and third country tourists in total tourist arrivals was 18.2 percent and
81.8 percent respectively in the review year compared to 24.4 percent and 75.6 percent
respectively in the previous year.
3.41 In the review year, per capita tourist expenditure increased by 34.3 percent to Rs.
35,415 from Rs. 26,373 in the previous year. The average duration of stay of the tourists
in the review year increased by 17.3 percent to 12.0 days compared to 10.2 days in the
previous year.
3.42 Transport, storage and communication; financial intermediation; and real estate,
renting and business activities sectors grew by 6.6 percent, 13.8 percent and 4.4 percent
respectively in the review year. The growth rates of these sectors were 4.4 percent, 11.4
percent and 11.8 percent respectively in the previous year. Likewise, public
14 Economic Report

administration and defense; education; health and social work; and other community,
social and personal services sectors grew by 5.6 percent, 4.6 percent, 7.4 percent and 11.1
percent respectively in the review year. The growth rates of these sectors were 1.3
percent, 6.2 percent, 6.7 percent and 11.8 percent respectively in the previous year.
Aggregate Demand
Domestic Demand
3.43 Gross domestic demand at current price witnessed a growth of 15.0 percent in
2007/08 compared to a growth of 11.6 percent in the previous year. The growth of
investment played an important role in the rise of gross domestic demand. The total
consumption increased by 10.7 percent and stood at 88.5 percent of GDP in 2007/08
compared to 90.3 percent of GDP in the previous year. The private as well as public
consumption grew by 9.4 percent and 21.9 percent respectively in 2007/08 compared to a
growth of 9.3 percent and 17.7 percent in the previous year.
3.44 The gross capital formation (total investment) grew by 28.9 percent and remained
at 32.0 percent of GDP in the review year compared to 28.0 percent of GDP in the
previous year. The gross fixed capital formation grew by 16.4 percent to 21.0 percent of
GDP in the review year from 20.4 percent of GDP in the previous year.
Net Foreign Demand
3.45 The foreign demand (export) of the Nepalese goods and services registered a
growth of 4.1 percent in the review year compared to a growth of 8.0 percent in the
previous year. Likewise, the domestic demand (import) of foreign goods and services
grew by 17.3 percent in the review year compared to a growth of 11.3 percent in the
previous year (Table 3.3). The net foreign demand (net export), which had remained
negative, could not improve in the review year.
Gross National Disposable Income
3.46 Gross national disposable income at current prices witnessed a growth of 14.6
percent in 2007/08 compared to a growth of 10.0 percent in the previous year (Table 3.3).
The GNDI accounted for 120.5 percent of GDP compared to 118.8 percent of GDP in the
previous year. The workers' remittances registered a growth of 42.5 percent in the review
year compared to a growth of 2.5 percent in the previous year. The workers' remittances
as a percent of GDP stood at 17.4 percent in the review year compared to 13.8 percent in
the previous year.
Economic Growth 15

Table 3.3
Gross National Disposable Income
(At current prices)
Rs. in million Percentage Change
Particulars 2005/06 2006/07 2007/08 2006/07 2007/08
Total Consumption 595327 656276 726685 10.2 10.7
Gross Capital Formation 175603 203741 262582 16.0 28.9
Domestic Demand 770930 860017 989268 11.6 15.0
Import of Goods and Services 204828 227907 267290 11.3 17.3
Export of Goods and Services 87952 94979 98836 8.0 4.1
Net Export of Goods and Services -116876 -132928 -168454 13.7 26.7
Gross Domestic Product 654055 727089 820814 11.2 12.9
Net Factor Income 4956 7432 10187 50.0 37.1
Net Transfers 126146 128992 158381 2.3 22.8
Workers Remittances 97689 100145 142683 2.5 42.5
Gross National Disposable Income 785156 863513 989382 10.0 14.6
Sources: Government of Nepal, Central Bureau of Statistics and Nepal Rastra Bank.
16 Economic Report

4
Inflation
Consumer Price Index
4.1 The average annual consumer inflation increased to 7.7 percent in 2007/08 from the
level of 6.4 percent in 2006/07 (Figure 4.1). The inflation, in the review period, was
mainly driven by the significant rise in price of food articles and petroleum products.

Figure 4.1 : Annual Inflation


9
8.0
7.7
8
7 6.4
6
4.8 4.5
Percent

5
4.0
4
3
2
1
0
2002/03 2003/04 2004/05 2005/06 2006/07 2007/08
Fiscal Year

4.2 The year-on-year (y-o-y) food and beverages index rose by 10.1 percent in the
review year compared to an increase of 7.2 percent in the previous year. Likewise, the
index of non-food and services group increased by 5.1 percent in 2007/08 compared to
5.5 percent in the previous year.
4.3 On point-to-point basis, inflation stood at 12.1 percent in mid-July 2008 compared
to 5.1 percent in the corresponding period of last year. During the review period, the
indices of food and beverages group and non-food and services group increased by 12.9
percent and 11.3 percent respectively. These rates were 6.9 percent and 3.1 percent in the
corresponding period of last year.
4.4 Region-wise, the y-o-y price level in Kathmandu Valley, Terai and the Hills rose
by 7.2 percent, 8.1 percent and 7.5 percent respectively in the review year. The respective
Inflation 17

rates were 6.1 percent, 6.7 percent and 6.0 percent in the previous year. A relatively
higher price level was observed in the Terai region mainly due to the effect of continuous
unrest in that region.
Seasonal Price Movement
4.5 The seasonal price fluctuations in the review year showed a higher variation in
comparison to 2006/07. The highest price index of 212.7 point was observed in mid-July
and the lowest of 194.2 point in mid-January. The indices can be analyzed into three
distinct phases as depicted by the monthly price movement (Figure 4.2).

Figure 4.2 : Seasonal Price Movement


220

210
Index

200

190

180
Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun Jul
2007 2008
Months
Overall Food & Beverages Non-food & Services

4.6 As shown in the above figure the overall index rose gradually in the period mid-
August to mid-November, reached 198.7 points from 194.7 points with an increase of 2.1
percent. It decreased by 2.3 percent and reached to 194.3 points in mid-January.
However, the index (from mid-January to mid-July) depicts an increase of 9.5 percent
from 194.2 points to 212.7 points.
4.7 Similarly, the above figure shows that the index of food and beverages group
increased in the first three months (mid-August to mid-October) from 191.9 points to
199.2 points and decreased from mid-October (199.2 points) to mid-January (187.7
points). The index witnessed a gradual increase again from mid-January to mid-July
from 187.7 points to 208.6 points. On the other hand, the index of non-food and services
group increased gradually every month from 197.9 points to 217.5 point. The above
scenario shows that the overall price index is affected by the movement in prices of both
the groups, that is, food and beverages as well as non-food and service groups.
Price Movement of Sub-groups of Commodities
4.8 On y-o-y basis, the price of sugar and related products showed a significant decline
of 10.1 percent in the review period. Likewise, the prices of grains and cereal products
accelerated to 14.6 percent on account of the international price rise of rice and rice
products. Similarly, the prices of some commodities of this group such as oil and ghee
showed an acceleration of 20.9 percent, pulses 14.2 percent, meat, fish and eggs 7.7
percent and vegetables and fruits 6.4 percent in the review period.
18 Economic Report

4.9 On y-o-y basis, the index of non-food and services group increased by 5.1 percent
in 2007/08 compared to 5.5 percent in the previous year. This moderation was mainly on
account of the elapse of the base effect of previous year's hike in petroleum prices.
National Wholesale Price Index
4.10 The annual average National Wholesale Price Index (NWPI) increased by 9.1
percent in 2007/08 compared to a rise of 9.0 percent in the previous year (Figure 4.3).
Such higher level of inflation was largely attributed to the increase in the prices of
agricultural commodities followed by domestic manufactured commodities and imported
commodities. The heavy price hike in the petroleum products in the fourth quarter of this
year was responsible for the increment of y-o-y wholesale price inflation.

Figure 4.3 : National WPI


10 9.1
8.9 9.0
9
8 7.3
7
6
Percent

5 4.1
3.8
4
3
2
1
0
2002/03 2003/04 2004/05 2005/06 2006/07 2007/08
Fiscal Year

4.11 Group-wise, the wholesale price of agricultural commodities rose by 9.5 percent in
the review year compared to an increase of 11.6 percent in the previous year. This rise
was mainly attributed to the rise in the prices of pulses by 13.3 percent, foodgrains 12.9
percent and fruits and vegetables by 11.4 percent. The price of domestically
manufactured commodities also recorded a higher annual growth of 8.8 percent compared
to that of 8.5 percent in the previous year. This was mainly due to the significant rise in
the prices of construction material by 13.8 percent and the food-related products by 9.6
percent. The group of imported commodities also observed a significant acceleration in
the prices to 8.6 percent in the review year from 5.6 percent in the previous year. This
increase was on account of the price rise in the petroleum products and chemical fertilizer
and goods.
Wholesale Price Indices of Some Important Commodities
Foodgrains
4.12 In 2007/08, the index of foodgrains increased by 12.9 percent compared to the
increase of 10.9 percent in the previous year. In the review year, the price of rice
Inflation 19

increased due to the international price rise of food articles, use of foodgrains to produce
the bio-fuel as well as irregularity in supply situation.
Cash Crops
4.13 In the review year, on an annual average basis, the index of cash crops increased
marginally 4.8 percent in comparison to an increase of 14.8 percent in the preceding year.
This moderation was largely attributed to the decline in prices of potato by 28.1 percent
and vegetables by 28.8 percent despite an increase in the prices of oil seeds by 12.6
percent.
Pulses
4.14 In 2007/08, the index of pulses sub-group surged up by 13.3 percent. Such index
had risen by 20.4 percent in the previous year. The responsible factor for the hike in price
of pulses was the unfavorable weather that affected its supply and production.
Petroleum Products and Coal
4.15 In the review period, the lagged effect of the hike in the prices of petroleum
products in January 2008 contributed to the upward pressure in this sub-group index that
was pushed up by 11.8 percent. Such index increased by 9.3 percent in the previous year.
Salary and Wage Rate
4.16 The annual average National Salary and Wage Rate Index increased by 9.7 percent
in 2007/08. It had risen by 9.8 percent in the previous year. Such an increase was on
account of increase in the salary of civil servants and a rise in the wages of laborers
because of the supply constraints arising from the migration of youths from the rural
areas along with the increasing trend of Nepalese youths seeking employment abroad. In
the review year, both salary and wage rate indices rose by 10.9 percent and 9.4 percent
respectively compared to the respective increases of 6.3 percent and 10.9 percent in the
preceding year. Within the wage rate index, the index of industrial labor increased by a
higher rate of 11.6 percent, followed by 10.2 percent of construction labor and 7.7 percent
of agriculture labor in the review year.
Wages
4.17 In the review year, the overall wage rate in the selected four market centres i.e.
Kathmandu, Biratnagar, Birgunj and Bhairahawa showed an increasing trend. On an
average, the highest growth rate of 18.6 percent was witnessed in the wages of
agricultural labourer for both male and female in Bhairahawa.
4.18 The average growth rate in the wages of construction skilled mason laborer in
Birgunj and Bhairahawa had remained at par to that of the preceding year. In the other
centers, the average growth rate in the wages of construction skilled mason laborer
ranged from 1.7 percent (in Biratnagar) to 15.0 percent (in Kathmandu). The wage rate of
the mason unskilled laborer also observed a similar trend ranging from 0 (in Bhairahawa)
to 27.7 percent (in Kathmandu).
4.19 The wage rate of both skilled and unskilled carpenters in Birgunj and Bhairahawa
remained the same as that of the previous year. Despite these rates, the wage rate of
20 Economic Report

skilled carpenter ranged from 1.7 percent in Biratnagar to 11.4 percent in Kathmandu. In
the review year, the unskilled laborer of such field recorded a growth of 1.61 percent in
Biratnagar and 24.5 percent in Kathmandu.
4.20 As far as the growth rate of wages of laborer is concerned, the wages for both male
and female increased significantly in all the centres ranging between 0.7 percent in
Bhairahawa to 21.2 percent in Kathmandu for male and between 1.2 percent in
Bhairahawa to 20.8 percent in Kathmandu for female.
Fiscal Sector Developments 21

5
Fiscal Sector Development
5.1 Nepal experienced several historical political changes including Constituent
Assembly Election in 2007/08. Despite the political turmoil and transition phase of the
economy, fiscal situation remained broadly stable in 2007/08. The budget stance has been
cautious mainly on account of the sustainable fiscal deficit. Fiscal deficit stood at 2
percent of GDP as against the estimate of 2.7 percent in the budget of 2007/08. Such a
prudent fiscal situation was possible mainly on the ground of impressive revenue
mobilization and foreign grants. Several reforms in tax administration, growing imports
and consumption induced by the rise in remittances, the increasing imports of high tax
yielding vehicles and spare parts and increase in non tax revenue are mainly responsible
for the encouraging growth of revenue mobilization. Limited foreign borrowing and
prudent debt management helped reduce public debt to 43.0 percent of GDP.
5.2 Also the year 2007/08 witnessed an increase in government expenditure. Recurrent
expenditure climbed up mainly due to a rise in the salary of government employees,
peace related expenditure, non-budgetary expenses on various items and expenditure on
Constitution Assembly (CA) elections. The increase in capital expenditure was
impressive in 2007/08. However, continued loan investment to the Nepal Oil Corporation
posed a key threat to the government fiscal situation.
5.3 Net domestic financing of the budget deficit remained within the sustainable limit
of 1.5 percent (excluding the government cash balance with the NRB) which would not
threaten the macro economic stability of the country.
Fiscal Performance (Revised Estimates)
Fiscal Stance
5.4 The government budget remained prudent in 2007/08. The budget deficit (after
grants) soared only by 24.8 percent to Rs. 16.6 billion compared to a growth of 26.9
percent in the previous year (Figure 5.1). The budget deficit was estimated to grow by
67.2 percent in budget 2007/08. The lower rate of growth of budget deficit was attributed
to the revenue mobilization and foreign grants. The ratio of budget deficit to GDP
increased to 2.0 percent in 2007/08 from 1.8 percent in the previous year.
22 Economic Report

Figure 5.1: Government Budgetary Operation for 2007/08


(Budgeted and Revised Estimate)

160.0 152.1
144.2
140.0 129.8 127.6

120.0

100.0
Rs. in billion

80.0

60.0

40.0
22.3
16.6
20.0

0.0
Expenditure and Investment Revenue and Grants Deficit

Budgeted Revised Estimate

5.5 Of the total budget of 2007/08, the government mobilized Rs. 12.0 billion through
net internal borrowings and Rs. 3.5 billion through net external borrowings. Such figures
were Rs. 8.7 billion and Rs. 2.5 billion respectively in the previous year.
5.6 In 2007/08, the gross external loan grew by 12.7 percent to Rs.11.3 billion
compared to an increase of 22.4 percent in the previous year. Such loan was
Rs. 10.1 billion in 2006/07. Since both the receipt and repayment of external loan went up
by lower rates of 12.7 percent and 4.4 percent respectively, the inflows of net external
loan increased at a lower rate of 37.4 percent compared to an increase of 105 percent in
the previous year. The gross internal borrowings (excluding overdraft) augmented by 14.6
percent to Rs. 20.5 billion compared to a growth of 51.2 percent in the previous year. The
amount of gross internal borrowings was Rs. 17.9 billion in 2006/07. Since the principal
repayments on internal loan declined by 7.6 percent and also the gross internal
borrowings increased by a lower rate of 14.6 percent, net internal borrowings increased
by a lower rate of 38.1 percent compared to an increase of 90.5 percent in 2006/07. The
ratio of gross internal and external borrowings to GDP stood at 2.5 percent and 1.4
percent respectively in 2007/08. Such ratios were the same in the previous year.
Government Expenditure
5.7 The total government spending including loans and investment recorded a growth
of 24.5 percent to Rs. 144.2 billion in 2007/08 compared to a growth of 21.8 percent in
2006/07 (Figure 5.2). A slightly high growth of recurrent expenditure accounted for such
a high growth of total government expenditure in the review year. The revised estimate of
total government expenditure was lower by 5.2 percent than the budget estimate. The
Fiscal Sector Developments 23

ratio of total government expenditure to GDP remained higher at 17.6 percent compared
to that of 15.9 percent in the previous year.

5.8 Of the total government expenditure, recurrent expenditure registered a growth of


18.5 percent in 2007/08 compared to a lower growth of 15.1 percent in the previous year.
A rise in the salary of civil servants, peace related expenditure, non-budgetary expenses
on various items, expenditure on CA election as well as payments of liabilities of public
enterprises accounted for such a growth of recurrent expenditure. The revised estimate of
recurrent expenditure was 6.9 percent lower than the budget estimate of 2007/08. The
ratio of recurrent expenditure to GDP stood at 11.1 percent in 2007/08.
24 Economic Report

5.9 Capital expenditure grew by 22.4 percent to Rs. 48.6 billion compared to a growth
of 43.3 percent in the previous year. A pick-up in capital spending was on account of
investment in public enterprises and the disbursement of funds to local authorities for
rural infrastructure development. The revised estimate of capital expenditure was 9.6
percent lower than the budget estimate. The ratio of capital expenditure to GDP stood at
5.9 percent in 2007/08 compared to that of 5.5 percent in 2006/07.
5.10 The ratio of recurrent and capital expenditure in total expenditure stood at 65.3
percent and 34.7 percent respectively in 2007/08. Such ratios were 66.0 percent and 34.0
percent respectively in the previous year (Figure 5.3).
Revenue Mobilization
5.11 Revenue mobilization (excluding the principal refund) registered a growth of 21.0
percent to Rs. 104.9 billion in 2007/08 compared to a growth of 22.5 percent in the
previous year (Figure 5.4). Reforms in tax administration, evolution of corporate culture
in banking and financial institution, increase in remittance inflows as well as increase in
non-tax revenue in the form of sales of government properties and principal refund
contributed to such a revenue growth in the review year. The revised estimate of revenue
was higher by 2.5 percent than the budget estimate. The revenue to GDP ratio increased
to 12.8 percent from 11.9 percent in 2006/07. Of the total revenue, the share of tax
revenue and non-tax revenue stood at 81.1 percent and 18.9 percent respectively in
2007/08. Such ratios were 82.1 percent and 17.9 percent respectively in 2006/07
5.12 In Nepal the tax system is inelastic with greater than unitary buoyancy coefficients
(Box 5.1).
Box 5.1: Tax Elasticity and Buoyancy
A time series analysis (sample period from 1975-2007) of tax elasticity and buoyancy
demonstrates that the tax system in Nepal is inelastic (less than unity) with a more than unitary
buoyancy coefficients reflecting a significant revenue collection emanating from the discretionary
changes in the tax policy. Total tax revenue, which forms approximately 81 percent of the total
revenue mobilization in Nepal, has elasticity co-efficient of 0.50 which is half of the buoyancy co-
efficient of 1.10. From these results, it can be easily concluded that there is very low automatic
growth of the tax revenue reflecting a very inelastic tax structure.

Tax Revenue
5.13 Tax revenue showed a growth of 19.5 percent in 2007/08 compared to a growth of
23.9 percent in the previous year. The revised estimate of tax revenue was 5 percent
higher than the budget estimate. The ratio of tax revenue to GDP remained at 10.4 percent
in 2007/08 compared to that of 9.8 percent in the preceding year. Of the total tax revenue,
value added tax (VAT) occupied the highest share followed by income tax. In the review
year, the share of direct and indirect tax in total tax revenue stood at 27.1 percent and
72.9 percent respectively. Such ratios were 26.7 percent and 73.3 percent respectively.
The major components of direct tax are corporate income tax, house and land registration
tax, investment and other tax and remuneration tax, whereas VAT, customs duties and
excise duties are the major components of indirect tax revenue.
Fiscal Sector Developments 25

5.14 Of the total tax revenue, VAT constituted the highest share (28.4 percent), followed
by income tax (21.9 percent) and customs duties (20.1 percent) in the review year (Figure
5.5). In the previous year also, VAT had the highest share of 30.1 percent followed by
income tax (21.9 percent) and customs duties (19.3 percent). The revised estimate of
VAT revenue registered a growth of 14.0 percent in the review year compared to an
increase of 20.7 percent in the previous year and remained higher than the budget
estimate by 0.3 percent. Income tax grew by 21.2 percent compared to a growth of 35.9
percent in the preceding year. The revised estimate of income tax was higher by 8.0
percent than the budget estimate.
26 Economic Report

5.15 In 2007/08, customs duties observed a growth of 25.9 percent compared to a


growth of 8.9 percent in the previous year. Reforms in customs administration and
increase in the imports of high tax yielding vehicles/spare parts boosted the customs
revenue in the review year. The revised estimate of customs revenue was more than 7.9
percent than the budget estimate.
5.16 Excise duties increased by 20.3 percent in the review year compared to a growth of
43.5 percent in the previous year. The revised estimate of excise revenue was higher by
6.8 percent than the budget estimate.
5.17 The non- tax revenue witnessed a growth of 27.5 percent in 2007/08 compared to a
growth of 16.6 percent in 2006/07. Such an impressive growth of non-tax revenue was
ascribed to the increase in dividend paid by some public enterprises including the NRB as
well as the amount received by the government in the form of principal repayment from
Nepal Telecom, Nepal Electricity Authority and Civil Aviation Authority.
Foreign Grants
5.18 In 2007/08, foreign grants reported a growth of 43.9 percent to Rs. 22.7 billion
compared to a growth of 14.3 percent in the previous year. The revised estimate of
foreign grants was lower by 17.2 percent than the budget estimate. The foreign grants to
GDP ratio stood at 2.8 percent in 2007/08 compared to that of 2.2 percent in 2006/07.
Public Debt
5.19 Total outstanding public debt (both internal and external) stood at Rs.353.3 billion
as at mid July 2008, with a growth rate of 11.8 percent. The share of total external and
internal debt in total outstanding debt remained at 68.5 percent and 31.5 percent
respectively in the review year. Such ratios were 68.6 percent and 31.4 percent
respectively in 2006/07. Of the total outstanding debt, internal debt increased by 12.0
percent to Rs. 111.2 billion compared to an increase of 10.4 percent in the previous year.
The ratio of internal debt, external debt and total outstanding debt to GDP remained at
13.6 percent, 29.5 percent and 43.0 percent respectively in 2007/08. These ratios were
13.7 percent, 29.8 percent and 43.5 percent respectively in the previous year.
Ownership Pattern of the Government Domestic Debt
5.20 In 2007/08, the government bonds (excluding TBs) in the holdings of the NRB
stood at 4.8 percent of the total bonds. Such ratio was 7.5 percent in the previous year.
The government bonds held by commercial banks declined by 1.7 percentage point to
27.4 percent of the total bonds in the review year. The government bonds held by
financial institutions increased to 25.6 percent of the total bonds in the review year from
18.7 percent in the previous year. Conversely, Provident Fund Corporation's holdings of
government bonds declined to 18.9 percent from 22.2 percent. In the review year
government business enterprises and private business enterprises did not hold the
government bonds. Holding by individual increased to 14.9 percent from 9.2 percent of
the total holdings. But holdings of bonds by non-profit organization declined to 8.4
percent from 12.0 percent in the previous year.
Fiscal Sector Developments 27

5.21 In 2007/08, total outstanding treasury bills increased by 14.2 percent to Rs. 85.0
billion compared to an increase of 18.2 percent in the preceding year. The share of TBs in
the NRB holdings in total rose to 20.7 percent in the review year from 18.5 percent in the
previous year. However, such share of commercial banks declined from 78.7 percent in
the review year from 76.4 percent in the previous year. Financial institutions did not hold
the TBs in the review and previous year where as others' share increased from 2.8 percent
to 2.9 percent.
Budget 2007/08
5.22 The budget estimate of government expenditure including net loans and investment
stood at Rs. 152.1 billion which was 31.3 percent higher compared to that of the previous
year. Of the total expenditure, recurrent expenditure was estimated at Rs. 98.2 billion
(64.6 percent) and capital expenditure was of Rs. 53.8 billion (35.4 percent) in the budget
of 2007/08. Both the recurrent and the capital expenditure were estimated to increase by
27.3 percent and 35.5 percent respectively in 2007/08 compared to that of the previous
year. A rise in the allocation in social services expenditures especially in education,
health, miscellaneous items, economic services and constitutional bodies were mainly
responsible for such an increase in the estimate of recurrent expenditure.

5.23 Of the total recurrent expenditure, Rs. 39.8 billion (40.5 percent) was allocated to
social services, Rs. 19.4 billion (19.8 percent) to defense and security, Rs. 21.8 billion
(22.2 percent) to miscellaneous expenditures, Rs. 10.2 billion (10.4 percent) to economic
services and Rs. 6.9 billion (7.0 percent) to general administration and constitutional
bodies (Figure 5.6).
5.24 Of the capital expenditure, Rs. 27.6 billion (51.2 percent) was allocated to
economic services Rs. 23.7 billion (44.0 percent) to social services, Rs. 1.3 billion (1.3
28 Economic Report

percent) to defense and security and the rest was allocated to economic administration
and planning and unclassified expenditure.
5.25 The budget of 2007/08 estimated to mobilize revenue of Rs. 102.3 billion of which
Rs. 81.0 billion (79.1 percent) was estimated to be received from tax revenue and Rs.
21.3 billion (20.9 percent) from non-tax revenue. Of the total tax revenue, Rs. 29.7 billion
(29.0 percent) was estimated to be mobilized from VAT, Rs. 19.5 billion (19.0 percent)
from customs duties, Rs. 21.3 billion (20.8 percent) from income tax and Rs. 10.5 billion
(10.3 percent) from excise duties.

5.26 Of the total non-tax revenue, miscellaneous (sales of government property, royalty,
donation and miscellaneous income) constituted a major portion of Rs. 7.7 billion
(35.9 percent). This was followed by dividend of Rs. 5.4 billion (25.2 percent). The rest
was estimated to receive from interest, departmental receipts and forest sectors.
Major Fiscal Reform Measures
5.27 The major fiscal reform measures were launched in the form of strengthening of
billing system, management of non filers (registered at VAT system), suspended returns
and outstanding, and expansion of Automated System for Customs Data (ASYCUDA).
The government is making rigorous efforts in the simplification in checking process,
developing transparency, making customs business friendly, increasing automation in the
process, managing the valuation database, managing the intra customs information
system, collecting information regarding low invoicing, purchasing the goods with low
invoicing, lowering the process of checking, developing e-customs, making the custom
administration of international standard and developing paperless trade transaction. On
Fiscal Sector Developments 29

the fiscal transparency front, also in this year, the government was effortful to implement
the recommendations made in the draft report on the fiscal transparency module (Report
on Standards and Codes-ROSC), prepared by the IMF staff.
Tax Policy Provisions
5.28 With regard to income tax, the exemption limit for personal income taxation of Rs.
100,000 for individual and Rs. 125,000 for family in 2006/07 increased to Rs. 115,000
and 140,000 respectively in 2007/08.
5.29 Tax on interest income went down to 5 percent in 2007/08 from 6 percent in the
past.
5.30 On the excise front, excise duties on cigarette, liquor and cement increased. Excise
duties on vehicles import soared from 32 percent to 35 percent.
5.31 Custom duties on vehicle parts increased to 80 percent from 55 percent.
Tax Rates
5.32 Personal income tax and corporate income tax rates were not changed in the review
year. However, the existing provision of Rs. 75,000 above the tax exemption limit subject
to income taxation of 15 percent was expanded to Rs. 85,000 in 2007/08. Thereafter, the
rate is 25 percent, that is, the highest marginal rate of 25 percent plus 1.5 percent that was
applied in 2006/07, and has remained constant also in 2007/08.
5.33 In the excise front, excise rates of 4, 5, 15, 32, 35 and 53 are prevalent in 2007/08.
Such rates were 2, 4, 5, 15, 32 and 53 in 2006/07. In 2007/08, customs rates on imports
remained at 5, 10, 15, 20, 25, 30, 40, 55 and 80, which were the same in 2006/07. In
2007/08, customs rates on exports remained at 0.5, 1,4, 8, 70 and 200 which were only
0.5, 1, 8, 70 and 200 in the previous year (Table 5.1).
Table 5.1: Tax Rates
Description 2006/07 2007/08
1. Import Duties (Percent) 5,10,15,25,35,40,80 5,10,15,20,25,30,40,55,80
2. Export Duties (Percent) 0.5, 1, 8, 70, 200 0.5, 1, 4,8, 70, 200
3. Excise (Percent) 4, 5, 15, 32,53 4, 5, 15, 32,35,53
4. VAT (Percent) 13 13
5. Income Tax
(a) Limit of Exemption
(i) Individual Rs. 100,000 Rs. 115,000
(ii) Family Rs. 125,000 Rs. 140,000
(b) Rate of Tax (Percent)
(i) First Rs. 75,000 after Exemption 15 percent 15 percent
(First Rs. 75,000) (First Rs. 85,000)
(ii) After Tax 25+1.5 percent 25+1.5 percent
Corporate Tax
(a) Flat Rate at Corporate Net Income
(i) Bank and Financial Institutions 30 percent 30 percent
(ii) Others 25 percent 25 percent
(b) Partnership Firm 25 percent 25 percent
30 Economic Report

Status of the Public Enterprises


5.34 Of the 36 state owned (fully owned /partially owned) enterprises, 22 enterprises
had earned profit and 14 enterprises had incurred losses in 2006/07.
5.35 Public Enterprises earned net profit of Rs. 8.0 billion in 2006/07. They had earned
net profit of Rs. 2.5 billion in the previous year. Net profit of Rs. 6.0 billion earned by
Nepal Telecom and net profit of Rs. 1.1 billion earned by ADB/N contributed to such an
increase in overall net profit in 2006/07.Similarly, a decline in net loss of Nepal Oil
Corporation from Rs. 3.7 billion in 2005/06 to Rs. 1.9 billion in 2006/07 contributed to
such an increase in net profit of the public enterprises. However inability to adjust the
local price of petroleum products with an increase in international price was expected to
increase the overall net profit of the enterprises to Rs. 7.2 billion. Likewise, net profit of
enterprises was expected to remain Rs. 3.5 billion in 2007/08.
5.36 Total shareholders' fund of all public enterprises remained Rs. 39 billion in
2006/07 which was the same in the previous year. In 2006/07, share investment of the
GON was 75.8 billion. However, 49 percent of the capital has been eroded. The GON
earned a dividend of Rs. 1.5 billion which was 2.0 percent of total share investment in
2006/07. Similarly, total outstanding loan investment to the enterprises remained Rs. 65.1
billion in 2006/07. Of this, internal loan was of Rs. 6.3 billion and external loan was of
Rs. 58.8 billion.
5.37 Even among the profit earning public enterprises, the economic condition, capacity
utilization and employee productivity of most of them did not remain satisfactory. A very
low rate of return, lack of regular and updated audit, inadequate professional human
resources, lack of funds for the provisions to meet employee-related facilities, political
interference, lack of autonomy to determine the price of their product as per the change in
market price, lack of clear policy and mechanism for the monitoring and inspection of the
enterprises are the main challenges of public enterprises in Nepal. As a result, most of the
public enterprises have negative net worth.
Privatization and Dissolution of Public Enterprises
5.38 With the objective of minimizing the administrative and budgetary burden of the
GON, strengthening productivity by increasing business skill of the industries and
business enterprises, minimizing the possibility of crowding out private investment by the
unproductive investment in government enterprises, increasing private sector
participation in economic development, the GON had started privatization process since
1994. Up to mid-April, 2008, 30 public enterprises were privatized through liquidation,
assets and business sales, share and equity sales, management contract and equity sales
and lease. However, privatization is not free of problem. Problems in getting receivables
easily by the GON through privatization, problems in settlement of enterprises' obligation
and GON's compulsion to pay for such obligation, problems in sale of assets,
embezzlement of land given on rent in the process of privatization are the major
challenges of privatization.
External Sector Development 31

6
External Sector Development
Assessment of Policy Developments
6.1 In 2007/08, a host of meetings and other activities took place pertaining to the
external sector. In the regional context, various issues related to the implementation of
the South Asian Free Trade Area (SAFTA) Agreement were discussed at length in the
last Committee of Experts (CoE) meeting held in Delhi on March 1-2, 2008. The
Nepalese delegation made its country position clear on various matters including the
implementation of the trade liberalization program (TLP), reviewing of the sensitive lists,
discussion on the modalities of tariff reduction on the tariff lines which are removed from
the sensitive list, consideration of matters relating to SAFTA Sub-group on Non-Tariff
Measures, consideration of matters relating to elimination of quantitative restriction under
Article 7 (5) of SAFTA Agreement etc. Some excerpts of the issues discussed in the
meeting and Nepal’s position are given in Box 6.1.
Box 6.1: Nepal's Position on SAFTA Discussed at CoE Meeting, March, 2008
Nepal has already reduced tariffs (in terms of percentage and items) higher than its tariff reduction
commitment/obligation under SAFTA TLP programme, and already notified SAARC Secretariat
about its tariff reductions. In SAARC region, on average, tariff rates are lowest in Nepal and it is
committed to further reduce tariff rates. Therefore, Nepal requested other contracting states to
reduce their tariff rates in an accelerated manner.
With regard to reviewing the sensitive list, Nepal had already started consultation with
stakeholders to formulate a criterion to select sensitive products, with intention to reducing the
number of items in the Sensitive List. Nepal also requested Non-LDCs to review their sensitive list
for LDCs prior to the scheduled timeline of four years.
Nepal has already revised its sensitive list based on HS 2007 and forwarded it to the SAARC
Secretariat.
Nepal is imposing quantitative restrictions (QRs) on importations of puppy seed only, which was
feared to be used as narcotics and can remove it if necessary. Nepal also requested other
contracting parties to eliminate all QRs applied on imports to their territories from SAARC region.
Nepal stressed the need of technical assistance for LDCs for capacity building (especially to
establish/operationalize) electronic database and notification system for issuance of certificate of
origin.
Nepal has committed to favour all initiatives to be undertaken for elimination of non-tariff barriers
(NTBs). However, the nature and coverage of NTBs is diverse which includes, among others,
standards related, customs related, taxation and subsidies.
32 Economic Report

6.2 The 16th Meeting of Bay of Bengal Initiative for Multi-sectoral Technical and
Economic Cooperation (BIMSTEC) Trade Negotiating Committee was held from March
17-21, 2008 in New Delhi. The Working Groups on Rules of Origin, Customs
Cooperation, Services and Investment were held prior to the plenary session. It was
agreed that next meeting would deliberate on all outstanding matters on the Agreement on
Trade in Good and continue discussions on Trade in Services and Investment. Even
though the Trade Negotiations Committee (TNC) has held 16 meetings for the BIMSTEC
FTA in goods so far, the target date (that is July 1, 2006) set for the implementation of the
agreement has been missed by more than two years owing to unresolved differences
among the contracting parties with respect to the size of the negative lists, setting criteria
for rules of origin and a mechanism for dispute settlement.
6.3 With respect to transfer of remittances from India to Nepal, Nepalese citizens
working in India are eligible to remit funds to their families in Nepal with the use of the
National Electronic Funds Transfer (NEFT) system (Box 6.2). The scheme envisages
concessional charges as it is targeted at poor migrant workers of Nepalese origin in India
who desire to remit money to their kith and kin.
Box 6.2: New Arrangement for Remittance Transfer from India to Nepal
As the Nepalese workers residing in India are facing difficulties in remitting funds through formal channel, an
interim provision has been made with the joint initiative of Nepal Rastra Bank and Reserve Bank of India for
remitting funds from India to Nepal through NEFT (National Electronic Fund Transfer) system. Remittances
can be sent through any of 40, 000 NEFT enabled bank branches in India which would then be disbursed to
beneficiary in Nepal through local commercial bank branches and money transfer agencies. Under this
system, a Nepali worker can remit fund up to Indian Rupees (IRs.) 50,000 at a time and will be allowed a
maximum of 12 remittances a year. For this purpose, Nepal SBI Bank and Prabhu Money Transfer in Nepal
and State Bank of India in India have been designated. For transfer of fund from India there would be no
charges if an account is maintained with Nepal SBI Bank. If not, for remittances up to IRs. 5000, a fee of IRs.
50 and for remittances above Indian Rs. 5000 and up to IRs. 50000, a fee of IRs. 75 is charged. The entire
amount of charges collected from the remitter would be remitted to Nepal.

6.4 Non-Resident Nepali (NRN) Act has been formulated with a view to attract
investment from non-resident Nepalese (Box 6.3). The Act has made provisions for
NRNs such as approval of 10-year visa and permission for sale/purchase of property and
operation of industry or businesses like a Nepali citizen within Nepal. However, several
laws and by-laws related to the Act are yet to be formulated and implemented.
Box 6.3 : Non-Resident Nepalese (NRN) Act, 2007
According to the Act, 'Nepalese Living Abroad' is defined as any Nepalese residing and taking up any
job, business or employment in a foreign country for a minimum of two years. The 'Non-Resident
Nepali' denotes both 'Nepalese Living Abroad' as well as 'People of Nepali Origin'. The Act has made a
provision for preparing a record of non-resident Nepalis and providing them with identity cards as well
as permitting a 10-year visa for people of Nepali origin and their family. It allows NRNs to invest
convertible foreign currency in sectors that are open for foreign investment, to open an account in
convertible foreign currency and to repatriate any earnings from such proceedings in convertible foreign
currency. Similarly, the Act entitles People of Nepali Origin to buy/sale property in Nepal. Besides,
with a view to attract NRN investment, the Act has granted tax exemption to NRN on their invested
capital fund, fund remitted to close relative (up to Rs. 1.5 million per year) and donations made for
social, religious, cultural and non-profit works. Overall, the Act has made provision for providing
business rights to NRNs similar to that provided to foreigners investing convertible currency and
permitting people of Nepali origin to operate industry/business in Nepal like a Nepali citizen.
External Sector Development 33

6.5 Along with the foregoing developments, some reform measures pertaining to the
external sector in general and foreign exchange sector in particular that were adopted in
2007/08 included the following:
• A provision has been made whereby foreign exchange facility for living expenses to
students going abroad for study, which used to be granted by the NRB on
recommendation from the Ministry of Education and Sports, could be directly granted
by commercial banks on recommendation of the said Ministry from now onwards.
• The number of items that could be imported from India on payment of convertible
currency has been raised from existing 91 to 124 and the policy of increasing the
number of such items as per the necessity and demand has been continued.
• A provision has been made allowing the import of silver under the same circular that
govern gold import.
• While the existing provision is such that it is possible to import from other countries
excluding India only through L/C and Draft/TT, an arrangement has been made
whereby it is now possible to import also through the mechanism of Documents
against Payments (DAP).
• The exchange facility of US$ 5000 per individual as settlement expenses for
Nepalese citizens migrating on immigrant visa to developed countries like USA,
Canada, Australia, New Zealand and UK can be acquired directly from the banks and
financial institutions.
• A provision has been made whereby Nepalese companies working under Global
Tender and receiving payment in foreign currency are allowed to open foreign
currency deposit account.
• The existing provision of 2 percent service charge on sale of foreign currency in cash
by banks and financial institutions to the NRB has been reduced to one percent.
• In order to manage the risk emanating from fluctuation in exchange rate of
convertible currencies, a provision has been made whereby banks and financial
institutions can themselves provide a facility of forward exchange transaction
working under the policy directive approved by its Board of Directors.
• With a view of managing Indian Currency (IC) transactions and reducing IC cash
transactions, banks and financial institutions and money changers along the border
regions of Nepal have been allowed to open NOSTRO account in Indian banks.
• As per the decision dated April 30, 2008 of Nepal Government, the necessary
directive for banning the export of paddy, rice and wheat from Nepal has been issued.
• A provision has been made allowing agencies involved in remittance of income
earned by Nepalese people working in India in Indian rupees through banking
channel to open account in Indian rupees on condition that they could maintain the
remitted Indian rupees in their account for up to seven days.
34 Economic Report

• The provision that required commercial banks dealing in L/C transactions open a
separate L/C deposit account in the NRB has been abolished requiring the concerned
bank to deal in L/C deposit transactions through its main account.
6.6 With respect to intervention in the foreign exchange market, the NRB intervened
93 times, purchasing US$ 1.59 billion and selling US$ 17.7 million with a net purchase of
US$ 1.57 billion.
6.7 In aggregate, Nepal's external sector exhibited a mixed performance in 2007/08.
While the export growth rate increased only marginally, the rate of growth of import was
significant leading to a considerable expansion in the trade deficit. Yet, there was a
significant surplus in both the current account as well as the overall balance of payments
emanating from the significant rise in remittances. Consequently, there was an
augmentation in foreign exchange reserves that facilitated in maintaining external sector
stability.
Merchandise Trade
6.8 Based on customs data, trade in nominal value increased by 10.7 percent to Rs.
281.20 billion in 2007/08 in comparison to the growth of 8.6 percent in the previous year.
In proportion to GDP, total trade in the review year stood at 34.3 percent compared to
34.9 percent a year earlier. Similarly, on the basis of US dollars, total trade posted a
growth of 20.0 percent compared to the previous year's growth of 11.4 percent. The
composition of total trade revealed that trade with India and other countries constituted
64.3 percent and 35.7 percent, respectively, of total trade during the review year. The
respective shares in the previous year were 62.0 percent and 38.0 percent, respectively.
During the review year, the import sustainability of exports went down to 26.7 percent
from 30.5 percent a year earlier. While import sustainability of export to India went down
from 36.0 percent in the previous year to 27.1 percent in the review year, import
sustainability of export to overseas countries increased from 22.4 percent in the previous
year to 26.0 percent in the review year.

Figure 6.1: Exports, Imports and Trade Balance

290 Total Exports Total Imports Trade Balance


240

190

140
Rs. in Billion

90

40

-10
/04 /05 /06 /07 /08
03 04 05 06 07
-60 20 20 20 20 20

-110

-160

-210
External Sector Development 35

Figure 6.2: Trade With India Figure 6.3: Trade With Other
(Rs in billion) Countries
(Rs in billion)
160
Expo rts Impo rts Expo rts Impo rts
140 90
120 80
70
100
60
80
50
60 40
30
40
20
20 10
0 0
2003/ 04 2004/ 05 2005/ 06 2006/ 07 2007/ 08 2003/ 04 2004/ 05 2005/ 06 2006/ 07 2007/ 08

6.9 In 2007/08, total exports decreased by 0.2 percent to Rs. 59.27 billion compared to
a decline of 1.4 percent a year earlier (Figure 6.1). Destination-wise, exports to India
went down by 7.6 percent in the review year compared to a rise of 2.5 percent in the
previous year (Figure 6.2). Exports to other countries, on the other hand, surged by 17.3
percent in contrast to a decline of 9.6 percent in the previous year (Figure 6.3).
6.10 In dollar terms, total exports went up by 8.2 percent to US$ 911.5 million in
2007/08 in comparison to a marginal growth of 1.1 percent a year earlier. On the basis of
US dollar, exports to India rose by 0.2 percent in comparison to the growth of 5.2 percent
in the previous year. Exports to other countries, on the other hand, soared by 27.2 percent
in the review year as against a decline of 7.2 percent a year earlier.
6.11 As percent of GDP, exports accounted for 7.2 percent during the review year in
comparison to 8.2 percent a year earlier. Of the total exports, exports to India and other
countries comprised 65.1 percent and 34.9 percent, respectively, in the review year while
their respective shares were 70.3 percent and 29.7 percent a year earlier.
6.12 The exports of zinc sheet, copper wire rod, polyster yarn, noodles and juice
increased while that of vegetable ghee, textiles, chemicals, readymade garments and rosin
declined to India during the review period. Despite the decline in exports of readymade
garments, pashmina, woolen carpets and handicrafts, the exports to other countries
increased mainly due to surge in exports of wheat and pulses.
36 Economic Report

Figure 6.4 : Major Exports to Other Countries

23%

33% 32%

53%

Woolen Carpet 21%


5% Readymade Garments
Pashmina. 3%
30%
Others
FY 2006/07 FY 2007/08

6.13 With respect to the composition of exports based on the Standard International
Trade Classification (SITC), the first position was held by manufactured goods classified
chiefly by materials (SITC-6) which formed 50.0 percent of total exports despite its
decline by 31.0 percent. Food and live animals (SITC-0) secured second position with a
share of 22.2 percent and registering a growth of 86.6 percent. In the previous year,
manufactured goods classified chiefly by materials, and food and live animals constituted
51.2 percent and 11.9 percent, respectively, of total exports. Exports of miscellaneous
manufactured articles (SITC-8) comprised 15.7 percent of total exports in comparison to
18.1 percent a year earlier and remained in third position. The share of animal and
vegetable oil and fats (SITC-4) in total exports declined to 3.5 percent in the review year
from 7.5 percent a year earlier. Chemicals and drugs (SITC-5) comprised 4.8 percent of
total exports compared to the share of 6.9 percent in the previous year. Overall, while
primary goods (SITC 0-4) formed 28.0 percent of the total exports in the review year,
manufactured and capital goods (SITC 5-9) constituted 72.0 percent. The respective
shares of primary and manufactured goods in the previous year were 21.7 percent and
78.3 percent.
6.14 During the review year, total imports rose by 14.0 percent to Rs. 221.94 billion in
comparison to the growth of 12.0 percent in the previous year. Imports from India went
up by 22.9 percent in the review year to Rs. 142.38 billion as compared to a growth of 8.1
percent in the preceding year. Imports from other countries increased by 0.9 percent to
Rs. 79.56 billion in comparison to a growth of 18.3 percent in the previous year.
6.15 In dollar terms, total imports registered a growth of 23.6 percent in the review year
as compared to an increase of 14.9 percent in the previous year. Imports from India
surged by 33.2 percent in comparison to the previous year's growth of 11.0 percent.
Likewise, imports from other countries rose by 9.4 percent in the review year in
comparison to an increase of 21.4 percent in the previous year.
6.16 The value of total imports in relation to GDP increased by 0.2 percentage points to
27.0 percent in the review year from 26.8 percent a year earlier. The relative share of
imports from India in total imports increased to 64.2 percent in the review year from 59.5
percent in the previous year. Likewise, the relative share of imports from other countries
went down to 35.8 percent in the review year from 40.5 percent a year ago.
External Sector Development 37

6.17 Product-wise, the major imports from India that witnessed an increase in 2007/08
included petroleum products, M.S. billet, vehicles & spare parts, cold rolled sheet in coil,
hot rolled sheet in coil, electrical equipment and M.S. wire rod. Similarly, the following
comprise some of the major imports from India that declined: rice, cement, chemical
fertilizer, bitumen and live animals. With respect to imports from third countries, the
principal items that registered an upsurge included telecommunication equipment & parts,
other machinery & parts, transport equipment & parts, video, television & parts and
polyethene granules. The major imports that declined from third countries were zinc
ingot, crude palm oil, readymade garments, textile dyes, textiles and raw wool.
6.18 With regard to the composition of imports on the basis of SITC, the major groups
were manufactured goods classified chiefly by materials (SITC-6), machinery & transport
equipment (SITC-7), and mineral, fuels & lubricants (SITC-3), whose respective shares
were 25.9 percent, 21.6 percent and 19.8 percent in total imports. In the preceding year,
manufactured goods classified chiefly by materials, machinery & transport equipment,
mineral and fuels & lubricants formed 24.7 percent, 18.7 percent and 18.7 percent of total
imports, respectively. The share of chemicals and drugs (SITC-5) declined to 12.1 percent
in the review year from 13.9 percent in the previous year whereas the share of food and
live animals (SITC-0) in total imports rose to 7.1 percent from 6.6 percent. Similarly,
while the share of miscellaneous manufactured articles went down to 4.8 percent in the
review year from 6.0 percent in the previous year, the corresponding share of animal and
vegetable oil & fat dropped to 4.2 percent from 6.2 percent. The share of crude materials,
inedibles except fuels (SITC-2) declined to 3.8 percent from 4.5 percent a year earlier.
Overall, while the share of imports of primary commodities (SITC 0-4) in total imports
decreased to 35.5 percent in the review year from 36.6 percent in the previous year, the
share of imports of manufactured and capital goods (SITC 5-9) rose to 64.5 percent from
63.4 percent.
6.19 Owing to the higher rate of growth of imports relative to exports, the total trade
deficit rose by 20.2 percent to Rs. 165.67 billion. In the previous year, trade deficit had
expanded by 19.2 percent. In dollar terms, trade deficit rose by 30.3 percent to US$ 2.50
billion as compared to its growth of 22.3 percent in the previous year.
6.20 While trade deficit with India rose by 40.0 percent as compared to the growth of
11.6 percent in the previous year, trade deficit with other countries declined by 3.8
percent in comparison to the growth of 29.8 percent in the previous year. Trade deficit
with India and other countries constituted 63.8 percent and 36.2 percent, respectively, of
the total trade deficit in the review year. In the preceding year, the corresponding shares
were 54.8 percent and 45.2 percent.
Balance of Payments
6.21 The overall BOP position of the country remained at a surplus of Rs. 29.67 billion
in 2007/08 as compared to a surplus of Rs. 5.90 billion in the previous year. Although
there was a rise in deficit on trade and services front, a surplus was registered in the BOP
primarily arising from the significant rise in the inflow of remittances.
6.22 In terms of the current account, total exports (at f.o.b. value) rose by 0.8 percent to
Rs. 61.97 billion in the review year. Total imports went up by 14.5 percent to Rs. 217.96
38 Economic Report

billion in comparison to a growth of 11.0 percent in the previous year. Consequently,


trade deficit rose by 21.0 percent to Rs. 155.99 billion in the review year. In the previous
year, the trade deficit had expanded by 17.2 percent.
6.23 On the services front, gross receipts soared by 31.7 percent to Rs. 42.24 billion in
comparison to a rise of 21.2 percent in the previous year. The increase in such receipts
was attributed to the rise in income under the three subheads—travel by 84.2 percent,
government n.i.e. by 7.8 percent and other services by 6.9 percent. On the payments side,
there was an increase in the payments on transportation and travel by 55.8 percent and
32.2 percent, respectively. Consequently, total payments increased by 31.8 percent to Rs.
53.33 billion as compared to a lower growth of 21.5 percent in the previous year.
Ultimately, net services income registered a deficit of Rs. 11.09 billion in the review year.
There was a deficit in the balance of goods and services account amounting to Rs. 167.08
billion in comparison to the deficit of Rs. 137.33 billion in the previous year.
6.24 In the review year, receipts under income account went down by 7.3 percent to Rs.
13.45 billion while payment dropped by 22.2 percent to Rs. 5.50 billion. As a result,
there was a deficit on balance on goods, services and income account amounting to Rs.
159.14 billion in the review year compared to a deficit of Rs. 129.89 billion a year earlier.
6.25 With regard to current transfers, net receipts in the review year rose by 39.2 percent
to Rs. 185.46 billion in comparison to a rise of 1.8 percent in the previous year. Grants
increased by 15.2 percent in the review year in comparison to a decline of 3.4 percent a
year earlier. Workers' remittances, on the other hand, increased by 42.5 percent to Rs.
142.68 billion in the review year as compared to a growth of 2.5 percent in the previous
year. Pensions rose by 45.2 percent in compared to a growth of 7.7 percent a year earlier.
Other transfers (that is, excise duty refund) surged by 58.0 percent in the review year in
contrast to a decline by 18.0 percent in the previous year. Consequently, the current
account posted a surplus of Rs. 23.68 billion in the review year as compared to a deficit
of Rs. 902.2 million in the previous year. The current account surplus in the review year
was about 2.9 percent of the nominal GDP.
6.26 With regard to the capital account, capital transfer of Rs. 7.91 billion was received
in the review year in comparison to an inflow of Rs. 4.45 billion a year earlier. Under the
financial account, trade credit assets increased by Rs. 853.2 million whereas other assets
increased by Rs. 12.25 billion. On the liability side, trade credit rose by Rs. 12.48 billion.
Government drawing amounted to Rs. 11.33 billion while amortization was recorded at
Rs. 7.87 billion. In the previous year, such drawing and amortization were recorded at Rs.
9.69 billion and Rs. 7.54 billion, respectively. Currency and deposit liability went up by
Rs. 6.26 billion in comparison to an increase of Rs. 4.78 billion in the previous year.
Reserve assets and related items recorded an increase of Rs. 35.93 billion in the review
year in comparison to an increase of Rs. 10.69 billion in the previous year. As a result, in
the review year the change in net foreign assets was favorable by Rs. 29.67 billion in
comparison to a surplus of Rs. 5.90 billion a year earlier.
Income and Expenditure of Convertible Foreign Exchange
6.27 On the income front, total income rose by 31.7 percent to Rs. 236.93 billion in
2007/08. This was primarily ascribed to the increased income under services (comprising
External Sector Development 39

remittances, tourist expenditure and interest receipts), merchandize exports, diplomatic


mission and foreign aid. In 2006/07, total income had risen by 14.4 percent to Rs. 179.97
billion.
6.28 On the expenditure side, total expenditure soared by 41.1 percent to Rs. 233.40
billion mainly owing to the increase in expenditure under merchandize imports. In
2006/07, total expenditure had increased by 22.4 percent to Rs. 165.47 billion.
Consequently, a surplus of Rs. 3.52 billion emanated from the transaction on convertible
foreign exchange in 2007/08 that was lower by 75.7 percent in comparison to the
previous year.
Foreign Assets and Liabilities of the Banking Sector
6.29 In the review year, net foreign assets (NFA) of the banking sector registered a rise
of 30.0 percent (Rs. 39.55 billion) to Rs. 171.46 billion in contrast to a decline of 5.4
percent (Rs. 7.53 billion) in the previous year. In US dollar terms, such assets rose by
23.1 percent (US$ 468.9 million) to US$ 2.50 billion in comparison to an increase of 8.1
percent (US$ 152.3 million) in the previous year. Likewise, gross foreign assets rose by
28.7 percent (Rs. 47.54 billion) to Rs. 213.25 billion in the review year in contrast to a
decline by 0.2 percent (Rs. 388.2 million) a year earlier. In dollar terms, on the other
hand, gross foreign assets went up by 21.8 percent (US$ 557.9 million) to US$ 3.11
billion in comparison to a rise of 14.0 percent (US$ 313.7 million) in the previous year.
6.30 The total foreign liabilities of the banking sector increased significantly by 23.7
percent (Rs. 7.99 billion) to Rs. 41.80 billion in the review year in comparison to a
growth of 26.8 percent (Rs. 7.14 billion) in the preceding year. Total foreign liabilities, in
dollar terms, rose by 17.1 percent (US$ 88.9 million) to US$ 610.2 million in comparison
to a growth of 44.9 percent (US$ 161.4 million) a year earlier.
6.31 As at mid-July 2008, the foreign exchange holding of the banking system amounted
to Rs. 212.62 billion, constituting 85.4 percent convertible currency and 14.6 percent
inconvertible currency (Figure 6.5). In the previous year, such foreign exchange holding
was recorded at Rs. 165.13 billion of which convertible and inconvertible currency
formed 94.1 percent and 5.9 percent, respectively.
Figure 6.5 : Foreign Exchange Reserves
Total Convertible In-convertible

200
Rs. in Billion

150

100

50

0
2006 2007 2008
Mid-July
40 Economic Report

6.32 Agencywise, the NFA of the monetary authorities increased by 30.4 percent (Rs.
38.37 billion) in the review year in contrast to a decline by 3.9 percent (Rs. 5.18 billion)
in the preceding year. Likewise, gross foreign assets of the monetary authorities increased
by 30.8 percent (Rs. 40.10 billion) to Rs. 170.31 billion in contrast to a decline of 2.1
percent (Rs. 2.82 billion) a year earlier.
6.33 In US dollar basis, the gross foreign assets of the monetary authorities was
equivalent to US$ 2.49 billion, which implied a growth of 23.8 percent (US$ 478.4
million) in the review year as compared to a growth of 11.8 percent (US$ 212.6 million)
in the previous year. The gross foreign assets of the monetary authorities comprised 79.9
percent of total gross foreign assets of the banking sector in the review year compared to
78.6 percent in the previous year. On a monthly basis, such official foreign assets
depicted a mixed trend. On a monthly average basis, the gross official foreign assets of
the monetary authorities aggregated Rs. 139.08 billion demonstrating a growth of 3.4
percent (Rs. 4.58 billion) in comparison to the 17.0 percent (Rs. 19.58 billion) growth in
the previous year.
6.34 In the review year, convertible and inconvertible currency holding of the NRB
increased by 15.4 percent (Rs. 19.09 billion) and 357.1 percent (Rs. 20.96 billion). In the
previous year, such holdings had declined by 0.3 percent (Rs. 391.9 million) and 24.9
percent (Rs. 1.95 billion). The SDRs increased by Rs. 43.1 million in comparison to the
decline by Rs. 76.2 million in the previous year. With respect to liabilities, foreign
liabilities of the NRB rose by 44.0 percent (Rs. 1.73 billion) in the review year compared
to a surge by 150.8 percent (Rs. 2.36 billion) in the previous year.
6.35 As at mid-July 2008, foreign assets held by commercial banks aggregated Rs. 42.94
billion, a growth of 21.0 percent (Rs. 7.44 billion) as compared to the growth of 7.4
percent (Rs. 2.43 billion) in the previous year. The total liabilities of commercial banks
rose by 21.0 percent (Rs. 6.27 billion) to Rs. 36.14 billion in the review year in
comparison to the growth of 19.0 percent (Rs. 4.78 billion) in the previous year.
Foreign Aid Agreements
6.36 In 2007/08, foreign grant agreements aggregating Rs. 48.30 billion were signed
with eleven countries and eight donor agencies under bilateral basis and multilateral
basis, respectively. Bilateral donors committed to provide grant worth Rs. 8.23 billion
while multilateral donors agreed to provide grant amounting Rs. 40.07 billion. Under
bilateral basis, Germany committed to provide Rs. 2.73 billion (5.6 percent of the total
grant) followed by Finland that agreed to provide Rs. 1.41 billion (2.9 percent).
6.37 Among the multilateral agencies, the World Bank was the largest donor agreeing to
provide Rs. 16.26 billion (33.7 percent of the total grant) followed by the Asian
Development Bank with Rs. 8.53 billion (17.7 percent).
6.38 There were four loan agreements totaling Rs. 8.76 billion signed with the donors in
2007/08. Among these, two were signed with OPEC while one each with India and Saudi
Fund for Development.
External Sector Development 41

Transaction with the IMF and IMF Liabilities


6.39 During 2007/08, transaction with the IMF resulted into a net balance of SDR
313,383 implying a net outflow with the total receipts of SDR 213,010 and payments
amounting to SDR 526,393. The total receipts of SDR 213,010 was the sum of quarterly
interest. Likewise, Nepal paid a total of SDR 526,393 consisting of allocation charges
amounting to SDR 295,790 assessment charge of SDR 576 and interest on PRGF
amounting to SDR 230,027.
6.40 At the end of 2007/08, the total liabilities to the IMF stood at Rs. 5.65 billion (SDR
49.9 million). This figure, the liability on the PRGF, was greater by Rs. 1.73 billion (SDR
10.7 million) than the total liabilities at the end of the preceding year.
42 Economic Report

7
Monetary Sector Development

Monetary Policy of 2007/08


7.1 The monetary policy of 2007/08 was announced on July 23, 2007. The policy was
formulated against the background of existing risks of high prices, low economic growth
as well as risks emanating from the unfavorable performance of the external sector and
foreign exchange reserves ensuing from the subdued inflow of remittances. The rising
petroleum prices had also posed as a risk factor for internal as well as external sector
stability. Moreover, the excess liquidity existed in the banking system even in 2007/08 on
account of the encouraging inflows of remittances in the third and fourth quarter of the
review year.
Objectives
7.2 As in the previous years, as envisaged by the NRB Act 2002, the monetary policy
of 2007/08 had objectives of supporting high and sustainable economic growth through
maintaining price stability, external sector stability and financial sector stability. The
soaring commodity prices in the international market, upward adjustment in petroleum
prices by Nepal Oil Corporation (NOC) and expenses at Constitution Assembly election
posed as risks to high prices. The monetary policy was geared towards managing liquidity
to contain inflation and preempt external sector risks likely to emanate from the excess
liquidity and sluggish performance of the economy of the developed countries in the face
of mortgage crisis that began in these countries in the first quarter of 2007/08.
7.3 The average inflation based on consumer price index was estimated to be more than
5.5 percent in 2007/08 compared to 6.4 percent in the previous year. As stated above,
annual average consumer price inflation remained at 7.7 percent in 2007/08, higher than
projected, due to both domestic as well as external factors (Table 7.1). However, the
depreciation of the US dollar, to some extent, helped to moderate inflation in the review
year.
7.4 The BOP surplus was targeted to remain at Rs. 8 billion. Despite the deficit up to
the first five months of the review period on account of lower inflow of remittances and
widening trade gap, the overall BOP registered a surplus of Rs. 29.7 billion in 2007/08
due to a substantial growth of remittance inflow and foreign assistance during the fourth
quarter of the review period.
Monetary Sector Development 43

Table 7.1
Inflation and Balance of Payments
Projection Actual
Inflation (Percent) Above 5.5 7.7
BOP Surplus (Rs. in billion) 8.0 29.7

Intermediate Target
7.5 The monetary policy determines the intermediate targets based on the projected
economic growth and the rate of inflation by taking the fixed exchange rate system of
Nepalese currency vis-à-vis Indian currency as a nominal anchor. Given the estimated
economic growth of 4.5 to 5 percent as per the budget statement for 2007/08 and inflation
of 5.5 percent, the broad money was projected to grow by 15.6 percent. However, the
broad money increased by 25.2 percent and narrow money by 21.6 percent on account of
an encouraging inflow of private sector remittances in the last two quarters of the review
year coupled with the upsurge in foreign assistance (Table 7.2).
Table 7.2
Evaluation of Ex-post Monetary Policy Stance
Projection Actual
Broad money 15.6 25.2
Narrow money 14.0 21.6

7.6 Compared to a growth of 16.7 percent in 2006/07, domestic credit was projected to
grow by 17.1 percent in 2007/08 on an assumption of likely increase in economic
activities and increase in credit demand by the private sector in the hope of improvement
in investment environment on account of ongoing peace process in the country. However,
domestic credit increased by 21.3 percent due to more than expected expansion in private
sector credit.
Operating Target
7.7 The excess liquidity of commercial banks as an operating target of the monetary
policy since 2004/05 was continued in 2007/08 as well. As in the previous years, liquidity
monitoring and forecasting framework (LMFF) was used to monitor as well as forecast
the existing excess liquidity of the commercial banks and, accordingly based on the
volume of liquidity indicated by LMFF, open market operations was conducted.
Monetary Instruments
Bank Rate and Refinance Rate
7.8 The bank rate, one of the indicators of signaling ex-ante monetary policy stance,
was kept unchanged at 6.25 percent in 2007/08, too. In case of systemic risk, the policy
had a provision of providing the lender of a last resort facility in the bank rate. The rate
44 Economic Report

has also been used to impose penalty on the amount of shortfall if any commercial banks
fail to maintain the CRR.
7.9 Considering the difficult situation faced by Nepalese exporters, the refinance rate
for export credit in Nepalese currency was lowered by one percentage point to 2.5 percent
in 2007/08. The commercial banks were required to charge the interest rate on such
facility a maximum of 5.5 percent. The sick industries refinancing was continued at the
existing rate of 1.5 percent and the refinance facility of Rs. 2 billion was earmarked for
the purpose of relieving and reviving the sick industries. Refinance rate for export and
agriculture credit in domestic currency was kept unchanged at 3.25 percent.
7.10 Considering the problems faced by small and cottage industries, a refinance facility
to these industries was introduced in 2007/08 at a refinance rate of 2.5 percent to
commercial banks and development banks. The commercial banks and development
banks were not allowed to charge an interest of more than 5.5 percent to the concerned
borrowers for such facility.
Cash Reserve Ratio (CRR)
7.11 The NRB had reduced the cash reserve requirements in the past with a view to
reduce the intermediation cost and release more financial resources. Considering the risks
in internal and external sectors on account of the excess liquidity with the commercial
banks and lower interest rates, the CRR rate of 5 percent was kept unchanged in 2007/08.
Open Market Operations
7.12 The NRB has been conducting open market operations for monetary management
since 1989. The OMOs has been effective to manage the liquidity. The bank has been
using purchase and sale auctions for managing medium-term liquidity whereas repo and
reverse repo auctions have been used for managing short-term liquidity. The OMOs have
been conducted based on the excess liquidity indicated by the liquidity monitoring and
forecasting framework (LMFF). Likewise, master repurchase agreement has been in place
in order to provide legal basis for repo and reverse repo transactions.
7.13 The OMOs, which indicate the ex-post monetary policy stance, had been
expansionary in 2007/08 compared to the previous year. Compared to a net liquidity of
Rs. 30.7 billion in 2006/07, a net liquidity of Rs. 12.4 billion was mopped up in 2007/08
on a turnover basis. In the review year, a total liquidity of Rs. 21.5 billion was mopped
up including Rs. 14.9 billion through sale auction and Rs. 6.6 billion through reverse repo
auction (Table 7.3). Liquidity of Rs. 9 billion was injected through repo auction on
account of liquidity shortfall in some commercial banks in the sixth and seventh months
of the review year. The shortfall in liquidity appeared during these two months due to a
higher cash deposit of the GON in the NRB, over subscription in initial public offering of
shares by ADB/N and the issuance of electricity bond by Nepal Electricity Authority in
the subsequent period.
Monetary Sector Development 45

Table 7.3
Secondary Market Operations
(Rs. in million)
2006/07 2007/08
Total Liquidity Injection 2,000.0 9,000.0
Outright Purchase Auction 0 0
Repo Auction 2,000.0 9,000.0
Total Liquidity Absorption 32,740.0 21,420.0
Outright Sale Auction 18,400.0 14,850.0
Reverse Repo Auction 14,340.0 6,570.0

Standing Liquidity Facility (SLF)


7.14 Compared to Rs. 47.0 billion in the previous year, commercial banks borrowed a
total of Rs. 103.8 billion under SLF in 2007/08. Liquidity shortfall in some commercial
banks and increase in demand of private sector credit increased the use of SLF in the
review year.
Figure 7.1: Status of Standing Liquidity Facility and Inter-bank Transactions

300.0

250.0

200.0
Rs in billion

150.0

100.0

50.0

0.0
2005/06 2006/07 2007/08
Year

Standing Liquidity Facility Inter Bank Transactions

Inter-bank Transactions
7.15 Inter-bank transactions increased in 2007/08 compared to that of the previous year.
Inter-bank transactions, which was Rs. 170.2 billion in the previous year, increased to Rs.
46 Economic Report

258.3 billion in the review year (Figure 7.1). Higher credit demand from the private
sector contributed to increase inter bank transactions in the review year.
Sick Industries Refinancing
7.16 The NRB earmarked a cumulative of Rs. 11.0 billion refinance facility to sick
industries since 2001/02. Till 2007/08, 162 hotels and 42 industries used total amount of
Rs. 3.3 billion under this facility. The use of such facility in 2007/08 remained subdued
compared to an allocation of Rs. 2.0 billion. In 2007/08, three hotels have used only Rs.
67.7 million.
Liquidity Injection through Foreign Exchange Interventions
7.17 In 2007/08, the NRB injected net liquidity of Rs. 102.4 billion by net purchase of
the US dollar 1.6 billion through foreign exchange intervention. In the previous year, the
NRB had injected net liquidity of Rs. 64.5 billion by net purchase of the US$ 915.7
million. Such a higher foreign exchange intervention was attributed to the elevated level
of remittance inflows in the review year.
7.18 For managing the reserves of Indian Currency, the NRB purchased Indian
Currency (IC) 70.6 billion by selling US$ 1.7 billion compared to a purchase of IC 39.9
billion by selling US$ 920 million in the previous year (Table 7.4). A widening current
account deficit with India and higher amount of payments made to Indian Oil Corporation
(IOC) by Nepal Oil Corporation (NOC) contributed to such an increase in IC purchase in
the review year.
Table 7.4
Net Purchase of US Dollar from Commercial Banks and IC Purchase from Indian
Money Market through Sale of US dollar
(Rs. in billion)
2006/07 2007/08
Mid-Months Net purchase of Net purchase of Net purchase of Net purchase of
US dollar from IC through the US dollar from IC through the
commercial sale of US commercial sale of the US
banks dollar banks dollar
August 6.55 2.33 2.25 3.64
September 4.75 2.79 4.39 3.68
October 5.59 3.21 7.39 5.54
November 5.13 3.60 6.60 3.93
December 6.88 2.69 9.12 5.53
January 5.42 3.11 5.92 3.94
February 2.85 1.33 6.48 5.13
March 7.26 3.09 12.83 4.78
April 3.53 3.46 10.99 5.62
May 4.5 4.95 10.62 6.47
June 5.4 5.29 12.50 7.68
July 6.6 4.07 13.30 14.63
Total 64.46 39.92 102.41 70.60
Monetary Sector Development 47

Interest Rates
7.19 In 2007/08, the weighted annual average rate of 91-day Treasury bill increased to
4.21 percent from 2.44 percent a year ago (Figure 7.2). Likewise, weighted annual
average inter-bank rate remained at 4.2 percent in the review year compared to 2.26
percent in the previous year. The interest rate on saving deposits increased to a maximum
of 6.0 percent in the review year from a maximum of 5.5 percent in the previous year.
Similarly, the interest rate on one-year fixed deposit also increased to a maximum of 6.75
percent in the review year from a maximum of 5.5 percent in the previous year. On the
other hand, the interest rate of industrial credit moderated from a maximum of 13.5
percent in the previous year to 13.0 percent a year ago. Similarly, the interest rate of
agriculture credit came down to 12.0 percent in the review year from of 13.0 percent in
the previous year. The increased competition in the financial market helped bring about
changes in interest rate structures in the review year.
Figure 7.2: Average Weighted 91-day Treasury Bill Rate
(in percent)

91-day Weighted Average Treasury Bill Rate


2006/07
8.0 2007/08
Percent

6.0
4.0
2.0
0.0
1 2 3 4 5 6 7 8 9 10 11 12
Mid-Month

Monetary Aggregates
7.20 In 2007/08, monetary aggregates expanded significantly. Broad money (M2) grew
by 25.2 percent compared to an increase of 14.0 percent in the previous year. Likewise,
narrow money (M1) registered a growth of 21.6 percent in the review year compared to
the growth of 12.2 percent a year ago. A significant increase in both net foreign assets
(NFA) and net domestic assets (NDA) contributed to such a substantial increase in
monetary aggregates in the review year.
7.21 Compared to a growth of 7.4 percent in the previous year, the currency in
circulation increased by 19.9 percent in the review year. Such a higher increase of
currency in circulation was attributed to a higher flow of remittances to rural areas and
increased government expenditures on relief related programs and constituent assembly
(CA) election.
7.22 The demand deposits grew by 25.0 percent in the review year compared to an
increase of 22.8 percent in the previous year on account of a higher growth of private
sector credit. Likewise, the time deposits grew substantially by 27.0 percent in the review
year due to an elevated level of remittance inflows. Such deposits had increased by 14.9
percent a year ago.
48 Economic Report

Sources of Monetary Growth


7.23 NFA (after adjusting exchange valuation gain/loss) increased significantly by Rs.
29.7 billion (22.5 percent) in the review year compared to Rs. 5.9 billion (4.2 percent) in
the previous year. Higher remittance inflows and expansion in foreign assistances as well
as high tourism sector income contributed to such a significant rise in NFA in the review
year.
Structure of Domestic Credit
7.24 Domestic credit increased by 20.9 percent in the review year compared to a growth
of 16.7 percent a year ago. Such an increase in domestic credit was on account of a
higher growth of private sector credit. In the review year, the credit to financial
institutions also registered a significant growth. Expansion of such credit was Rs. 1.1
billion in the review year compared to that of Rs. 40.3 million a year ago.
7.25 In the review year, net claims on government rose by Rs. 7.5 billion compared to
that of Rs. 7.4 billion in the previous year. Net claims on government increased at a
lower rate on account of higher revenue mobilization of the government in the review
year. The GON had a cash deposit of Rs. 3.9 billion with the NRB as at mid-July 2008.
7.26 Claims on non-financial government enterprises registered a lower growth of 10.4
percent in 2007/08 compared to a growth of 12.1 percent in the previous year. A partial
loan payment by Nepal Oil Corporation, National Trading Ltd. and Nepal Airlines
Corporation contributed to the lower growth of claims on non-financial government
enterprises in the review year.
7.27 Credit to private sector increased by 24.3 percent in the review year. Commercial
banks' credit to the private sector increased by Rs. 71.4 billion (25.4 percent) in the
review year. Commercial banks, in addition to deposits mobilization, have increased
loans and advances also through an additional capital mobilization of Rs. 11.7 billion in
the review year. The credit-deposit ratio increased marginally to 82.6 percent at mid-July
2008 from 82.1 percent a year ago.
7.28 Credit flows to production, residential and non-residential construction, wholesale
and retail trade and real estate increased significantly in the review year. In the review
year, bank credit to food processing industries increased by Rs. 2.5 billion and to iron and
steel production sector by Rs. 2.7 billion. Likewise, credit to construction sector and real
estate increased by Rs. 12.6 billion and Rs. 8.3 billion respectively in the review period.
Credit to real estates had increased by Rs. 1.1 billion last year. In the review year, other
credit including the credit against share and trust receipt increased by Rs. 17.5 billion
compared to Rs. 6.6 billion a year ago.
7.29 Net non-monetary liabilities with adjustment in foreign exchange valuation
gain/loss grew by 5.4 percent in the review year contrary to a decline by 4.3 percent in the
previous years. The NRB's directives requiring commercial banks to increase the paid-up
capital up to Rs. 2.0 billion by 2070 B.S. (2012 AD) contributed to the increase in such
liabilities at a higher rate than that of the previous year.
Monetary Sector Development 49

Reserve Money
7.30 The reserve money increased substantially in the review year. The reserve money
grew by 21.2 percent in 2007/08 compared to a growth of 7.5 percent in the previous
year. The absorption of less volume of liquidity from the secondary market in the review
year compared to that of the previous year and a significant increase in NFA of the
monetary authority contributed to a higher growth of monetary base in the review year.
On the uses side, currency in circulation increased by 19.9 percent, which had increased
by 7.4 percent in the previous year. Likewise, currency held by commercial banks
increased by 71.9 percent compared to a growth of 21.6 percent in the previous year.
Deposits of commercial banks with the NRB increased by 5.6 percent in 2007/08 in
contrast to a decline of 1.4 percent in 2006/07. The deposits of financial institutions with
the NRB increased at a marginally lower rate of 37.3 percent compared to an increase of
38.6 percent in the previous year.
Money Multiplier and Income Velocity
7.31 In the review year, both narrow money and broad money multiplier grew at a lower
rate compared to the previous year. For example, compared to 1.06 in the previous year,
narrow money multiplier increased to 1.07 in 2007/08. Likewise, compared to 3.32 in the
previous year, the broad money multiplier increased to 3.43 in 2007/08. Such a growth of
multiplier in the review period was due to a low reserve-deposit ratio of commercial
banks and a marginal increase in currency deposit ratio.
7.32 The velocity of money is an average frequency with which a unit of money is spent
for buying goods and services in a specific period of time. Velocity affects the amount of
economic activity associated with a given money supply. Income velocity witnessed a
declining trend for both narrow and broad money, implying that M2 and M1 increases are
reflected in an increasing number of money and financial transactions per unit of M2 and
M1 but high turnover in these aggregates are not reflected in similar measure of increase
in nominal income. It shows the increasing preference of the Nepalese people to hold
more proportion of income in money as an asset due to a lower level of interest rate.
Besides this, structural factors such as increasing financial deepening and improvement in
payment system have also accounted for a slight fall down in income velocity of money.
Figure 7.3: Trend of Income Velocity of Monetary Aggregates

8.0
6.0
4.0
2.0
0.0
1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Years

M1 M2
50 Economic Report

Banking Survey
7.33 Banking survey, derived from the monetary survey including the sectoral balance
sheet of development banks and finance companies gives a broad measure of liquidity. In
2007/08, broad measure of liquidity (L1) increased by 24.6 percent compared to a rise of
15.7 percent a year ago. A significant growth in net foreign assets (NFA) after adjusting
foreign exchange valuation gain/loss on account of elevated level of inflow of remittances
attributed to a higher expansion in broad measure of liquidity in the review year. In
2007/08, the NFA of monetary sector expanded by Rs. 29.7 billion (22.5 percent) against
a muted growth of Rs. 5.9 billion (4.2 percent) in 2006/07. However, the NFA of other
banks and financial institutions (OBI) declined by Rs. 1.4 billion in the review year as
against a growth of Rs. 800 million in the previous year.
7.34 Domestic credit including that of monetary sector and other banking institutions
registered a substantial growth of 26.5 percent compared to a growth of 13.6 percent in
2006/07. Domestic credit registered a higher growth in 2007/08 on account of a
substantial increase in private sector credit of both banking as well as OBIs.
7.35 Credit flow to the private sector remained expansionary in the review year
compared to that of the previous year. Such a credit flow from monetary sector expanded
by 24.3 percent (Rs. 66.4 billion) in 2007/08, while such a credit from OBI expanded by
63.1 percent (Rs. 32.4 billion) in the review year. The private sector credit from monetary
sector and OBI had increased by 18.9 percent (Rs. 45.9 billion) and 28.3 percent (Rs. 11.3
billion) respectively in the previous year.
7.36 The net non-monetary liabilities (NNML) increased by 28.3 percent in 2007/08 as
against a decline of 3.1 percent in the previous year. The NNML of monetary sector
increased substantially due to a higher level of capital expansion by banks and financial
institutions in order to meet a level of capital requirement stipulated by the NRB. The
entry of new banks and financial institutions also contributed to the increase in capital
and other reserves and therefore, the NNML in the review year.
Financial Market 51

8
Financial Market

Overall Development
8.1 The capital market has experienced an impressive growth in the last two years. The
progress of peace and security situation in the country as well as the mandatory
requirement of the NRB to increase the capital of different financial institutions
contributed to the growth of the capital market in the review year. Hence, there was a
significant growth in primary and secondary market activities in 2007/08.
Primary Market
8.2 In 2007/08, the Security Board of Nepal (SEBON), the regulatory body of the
securities market, granted the approval of Rs.11.57 billion to issue ordinary shares, right
shares & debentures for 72 companies. Among those companies were 15 commercial
banks, 17 development banks, 31 finance companies, 1 micro credit institution, 6
insurance companies and 2 hydro companies. In the previous year, the SEBON had
granted such permission amounting to Rs. 2.75 billion of 31 companies.
Secondary Market
8.3 Analogous to 2006/07, the Nepalese stock market expanded in 2007/08. The
NEPSE recorded 1064.09 points on December 17, 2007, which was a highest recorded
during the review period. This index was 963.36 points at the end of 2007/08.
8.4 The NEPSE listed ordinary shares amounting to Rs.7.49 billion of 13 new
companies comprising 5 development banks, 7 finance companies and 1 insurance
company. In the previous year, the NEPSE had listed the ordinary shares of 12 companies
amounting to Rs. 1.07 billion. The NEPSE listed additional securities of 78 listed
companies amounting to Rs. 30.68 billion comprising of right shares, bonus shares and
debentures. This amount was Rs. 2.81 billion of 57 companies in the preceding year.
8.5 The NEPSE listed five different government bonds amounting to Rs. 6.1 billion in
the review period. The total government bond listed has reached Rs.13.15 billion with 12
different maturity periods as at mid-July 2008. The government bonds were not traded in
the secondary market during the review period. The NEPSE delisted five companies in
2007/08.
52 Economic Report

8.6 The Nepalese stock market has expanded during the review period making a record
of highest NEPSE index (1064.09 points) on December 17, 2007. The year on year (y-o-
y) NEPSE market started with NEPSE 683.95 points and ended with 963.36 points
(Figure 8.1). Hence, the NEPSE increased by 40.85 percent in the review year. This was
largely because of the improvement in the peace and security situation in the country as
well as the central bank's policy pertaining to capital increment of financial institutions.

Figure 8.1 : NEPS E Index

1200
1000
800
Index

600
400
200
0
Mid Mid Mid Mid Mid Mid Mid Mid Mid Mid Mid Mid Mid
J uly Aug S e pt Oc t Nov De c J an Fe b Ma r Apr Ma y J une J uly
2007 2007 2007 2007 2007 2007 2008 2008 2008 2008 2008 2008 2008

Month

8.7 The y-o-y, market capitalization increased by 96.57 percent to Rs. 366.24 billion in
mid-July, 2008. The market capitalization to GDP ratio was 44.62 percent in mid-July,
2008; this figure was 25.89 in the preceding year. With regard to the stock market
performance, the commercial banks occupied the highest share in the total market
capitalization with 72 percent.
8.8 During 2007/08, the transactions of 136 companies amounting to Rs. 22.82 billion
took place in a period of 235 days. Among the total number of listed 321.13 million
listed shares, 28.6 million shares were traded at the NEPSE during the review year. Some
major developments that took place at the Nepal Stock Exchange Limited in 2007/08 are
examined in Box 8.1.
Box 8.1: Recent Developments in NEPSE
The NEPSE has changed its name to "Nepal Stock Exchange Limited". The previous name was Nepal Stock
Exchange in English & Nepal Dhitopatra Binimaya Bazar in Nepali. The NEPSE also has turned itself into a
profit seeking company.
The NEPSE adopted the Automated Trading System (ATS) instead of open out cry trading system from
August 24, 2007. The ATS has started on-line trading through Wide Area Network (WAN). Now, all the
brokers can trade from their own office via WAN. The NEPSE has started providing real time information
(live trading activity) to investors; any one can check share price online from anywhere during the trading
hours. As NEPSE became more systematic, it also introduced a new measuring instrument called "Market
Halt System" to stabilize the volatility of the stock market.
The NEPSE introduced a new market, Over the Counter (OTC), from June 4, 2008. If the stocks of the
companies which are not listed or delisted in the NEPSE, it can be traded through this OTC market. This
provision can help an investor to mobilize his asset as liquid fund. However, no transaction has been made
until the end of the fiscal year through the OTC market.
The NEPSE started trading of promoter's shares from March 31, 2008.
Financial Market 53

8.9 Two new corporate bonds amounting to Rs. 1.73 billion were listed in the review
period. The total listed corporate bonds and debentures stood at Rs. 3,535.00 million as
of mid-July 2008 (Table 8.1).
Table 8.1
Listed Corporate Bond and Debenture
S.N. Issuer Issue Amount Listing Date Maturity Coupon
(Rs. in million) Rate
1 Himalayan Bank Ltd. 360.00 June 15, 2003 7 years (July 11, 2009) 8.5%
2 Nepal Investment Bank 300.00 April 26, 2004 7 years (Nov. 23, 2010) 7.5%
Ltd.
3 Everest Bank Ltd. 300.00 Aug. 23, 2005 7 years (May 7, 2012) 6%
4 Bank of Kathmandu Ltd. 200.00 Mar. 21,2006 7 years (Nov. 3, 2012) 6%
5 Nepal Investment Bank 250.00 Nov. 27, 2006 7 years (June 25, 2013) 6%
Ltd.
6 Nepal Industrial and 200.00 Feb. 22, 2007 7 years (June 26, 2013) 6%
Commercial Bank Ltd.
7 Nepal SBI Bank Ltd. 200.00 Feb. 20, 2007 7 years (July 5, 2013) 6%
8 Nepal Investment Bank 225.00 Sep. 3, 2007 7 years (May 31, 2014) 6. 5%
Ltd.
9 Nepal Electricity Authority 1500.00 July 5, 2008 4 years (2012) 8%
Total 3535.00
Source: Nepal Stock Exchange Ltd.

Financial Institutions
Growth of Financial Institutions
8.10 There has been a significant growth in the number of banks and financial
institutions in the review period. The total number of commercial banks ('A' class
financial institutions) reached 25 in mid-July 2008. Similarly, the number of development
banks ('B' class financial institutions), finance companies ('C' class financial institutions)
and micro-finance institutions ('D' class financial institutions including Rural
Development Banks) reached 58, 78, and 12 respectively (Table 8.2). The number of
cooperatives licensed by the NRB to undertake limited financial transactions and the
number of Non-Government Organizations (NGOs) licensed by the NRB to undertake
micro-finance transactions decreased in comparison to the previous year and stood at 16
and 46 respectively. In total, the number of financial institutions as at mid-July 2008
stood at 263 including 25 insurance companies, Employees Provident Fund, Citizen
Investment Trust and Postal Savings Bank. In addition to the NRB licensed financial
institutions, a number of other institutions represent the Nepalese financial system.
54 Economic Report

Table 8.2
Number of Financial Institutions
Banks and Financial Institutions 2007 2008
NRB Licensed Financial Institutions
Commercial Banks 20 25
Development Banks 38 58
Finance Companies 74 78
Micro-Finance Institutions 12 12
Cooperatives (Licensed by NRB to undertake limited financial transactions) 17 16
Non-Governmental Organizations (NGOs) (Licensed by NRB to undertake micro-
finance transactions) 47 46
Money Transfer Firms 33 37
Money Changers 315 350
Institutions Other than NRB Licensed
Insurance Companies 21 25
Employees Provident Fund 1 1
Citizen Investment Trust 1 1
Postal Savings Bank 1 1
Total Number of Savings and Credit Cooperatives (Licensed by the Department of
Cooperatives, GON)* 3392 4448**
Deposit and Credit Guarantee Corporation 1 1
Credit Information Bureau 1 1
Stock Exchange 1 1
*These also include the NRB-licensed Cooperatives.
** Source: Department of Cooperative based on mid-April 2008.

Financial Structure
8.11 The ratio of total assets/liabilities of financial institutions including that of
contractual saving institutions to GDP was 124.3 percent in mid-July 2008. Including the
market capitalization of the shares listed in the Nepal Stock Exchange, this ratio stood at
168.94 percent.
8.12 The share of commercial banks in the total assets/liabilities of the financial
institutions was 53.8 percent. Such shares of the Nepal Rastra Bank, finance companies,
Employees Provident Fund, insurance companies and development banks were 20.8
percent, 7.9 percent, 6.7 percent, 3.9 percent and 3.9 percent respectively (Table 8.3).
Financial Market 55

Table 8.3
Structure of Nepalese Financial System
(Rs. in million)
Mid-July 2007 Mid-July 2008
Total Percen- Ratio of Total Percen- Ratio of
assets/ tage total assets assets/ tage total assets
liabilities share in to nominal liabilities share in to nominal
total GDP (in total GDP (in
percentage) percentage)
Financial institutions 703564.7 87.5 96.8 898735.3 88.1 109.5
Nepal Rastra Bank 174209.0 21.7 24.0 212449.8 20.8 25.9
Commercial Banks 439735.0 54.7 60.5 549090.2 53.8 66.9
Finance Companies 53466.4 6.7 7.4 80383.3 7.9 9.8
Development Banks* 22658.2 2.8 3.1 39868.8 3.9 4.9
Cooperatives 3590.0 0.4 0.5 4360.5 0.4 0.5
Micro-credit Financial 9906.1 1.2 1.4 12582.7 1.2 1.5
Institutions
Micro-credit Non-financial
Institutions 1842.2 0.2 0.3 2382.7 0.2 0.3
Contractual Savings
Institutions 100131.2 12.5 13.8 121685.8 11.9 14.8
Employees Provident Fund 59225.9 7.4 8.1 67940.3 6.7 8.3
Citizen Investment Trust 9541.2 1.2 1.3 13675.5 1.3 1.7
Insurance Companies 31364.0 3.9 4.3 40070.0 3.9 4.9
Postal Saving Bank 700.0 0.1 0.1 827.0 0.1 0.1
Total 803695.9 100.0 110.5 1020421.1 100.0 124.3
Nominal GDP (Rs. million) 727088 820815
Market Capitalization of
Stock Exchange (Rs. 186301.28 366247.56
million)
Ratio of Stock Market
Capitalization to GDP (in 25.8 44.6
percentage)

Development Banks
8.13 Many development banks have been set up with active participation of private
sector after the Development Bank Act 1996 came into effect. The main objectives of
this Act are enhancing agriculture, industry and commerce by extending credit facility to
the public. Prior to this Act, there were only two development banks, namely,
Agricultural Development Bank (which has already been converted into a commercial
bank in 2006) and Nepal Industrial Development Corporation, both owned by the
government. At present, development banks are operating under Bank and Financial
Institutions Act 2006 acquiring the status of "B" class financial institutions. The NRB
issues the necessary directives for the effective regulation of these banks. During the
review year, total assets/liabilities of these banks increased by 76.0 percent to Rs. 39.86
56 Economic Report

billion. Total deposit mobilization, the major source of fund for these banks, increased by
67.5 percent to Rs. 25.74 billion. Similarly, capital fund and borrowing increased by 61.4
percent and 13.5 percent respectively. On the uses side of the fund, loan and advance, the
major component, increased by 54.0 percent to Rs.23.67 billion in mid-July 2008.
8.14 The NPL of development banks in mid-July 2008 was 3.79 percent of the total loan
and advances amounting to Rs. 809 million. The total volume of NPL amount rose by 24
percent in comparison to the previous year. This was largely attributed to the volume of
NPL of Nepal Development Bank which grew by 66.21 percent in the review year. As a
ratio to GDP, the NPL stood at 9.86 percent. This figure was 4.96 percent in mid-July
2007.
Finance Companies
8.15 The number of finance companies in Nepal expanded significantly after the first
amendment of the Finance Companies Act 1986 in 1992. At present, these companies
operate under Bank and Financial Institutions Act 2006 as "C" class financial institutions.
Total assets and liabilities of these companies increased by 50.3 percent to Rs. 80.38
billion in 2007/08 compared to an increase of 37.6 percent in the preceding year. Out of
the total asset and liabilities, 79 percent or Rs. 63.47 billion was concentrated within
Kathmandu Valley only. Such concentration was 74.2 percent in the preceding year as per
data provided by the Banks and Financial Institutions Regulation Department. Total
deposit increased by 51.5 percent and stood at Rs. 52.28 billion. Capital fund and
borrowing reached Rs. 7.44 billion and Rs. 4.36 billion respectively in mid-July 2008. On
the assets side, loan and advances increased by 44.6 percent and stood at Rs. 51.52
billion. Investment of these companies decreased by 7.1 percent to Rs. 4.30 billion. The
liquid asset of finance companies rose by 136.1 percent and stood at Rs. 17.74 billion as
at mid-July 2008. Such liquid assets were Rs. 7.51 billion in the preceding year.
8.16 The total NPL of finance companies was 4.11 percent of the total loan amounting
to Rs. 211.8 million in the review year. This figure was 6.29 percent in the preceding
year. The total NPL of finance companies increased by 3.77 percent in comparison to the
previous year. The NPL to GDP ratio stood at 2.58 percent in the review year.
Microfinance Institutions
8.17 Micro-finance institutions consist of five Rural Development Banks (RDBs), five
rural bank replicates and two wholesale lending institutions. The RDBs have been
established in each of the five development regions of the country with an objective of
providing micro-finance access to the rural poor women under group guarantee without
collateral. The RDBs have been primarily established under the capital contribution of the
GON and the NRB. Out of them, Eastern, Central and Western Rural Development Banks
have already been privatized. However, the NRB still holds the 10 percent capital in
Western Rural Development Bank. It also holds 63.17 percent and 68.46 percent shares in
Mid-Western and Far Western Rural Development Banks respectively.
8.18 Five of the Grameen Bank replicates established by the private sector include
Nirdhan, Chhimek, Swabalamban, Deprosc, and Nerude. In addition to five rural
development banks and five Grameen Bank replicates, two of the micro-finance
Financial Market 57

institutions namely Rural Micro-finance Development Center (RMDC) and Small


Farmers' Development Bank (SFDB) have been providing wholesale banking services in
the area of micro finance. The RMDC was established on October 30, 1998 and has been
providing wholesale lending services to development banks, micro finance development
banks, cooperatives, and non-governmental organizations among others. The paid up
capital of RMDC, established under the share ownership of the NRB, commercial banks,
micro finance development banks and Credit Guarantee Corporation, was Rs. 320 million
in mid-July 2008. Total borrowings and loan investment of this Center were Rs. 1.82
billion and Rs. 1.25 billion respectively.
8.19 The Small Farmers Development Bank (SFDB) was established on July 6, 2001
under the share ownership of Agricultural Development Bank, the Government of Nepal,
Nepal Bank Limited, Nabil Bank and Small Farmers Cooperatives Limited (SFCLs). The
paid up capital of SFDB was Rs. 123.13 million as of mid-July 2008. The SFDB makes
wholesale lending to Small Farmers Cooperatives Limited (SFCL). The outstanding loan
of the SFDB granted to 219 SFCLs was Rs.1.45 billion. The SFDB borrowed from
Agricultural Development Bank and other commercial banks (Himalayan Bank Ltd. and
Nabil Bank Ltd.) amounting to Rs. 1.09 billion and Rs. 1.07 billion respectively.
Similarly, the borrowing from the NRB stood at Rs. 24.16 million during the review
period. This amount also included the amount for Community Ground Irrigation Supply
Project (CGISP). The total assets/liabilities of the above mentioned micro finance
institutions recorded a growth of 1.2 percent to Rs.12.58 billion as at mid-July 2008.
Rural Self Reliance Fund
8.20 Established by the GON on March 1, 1991 and promoted by this bank, the Rural
Self Reliance Fund (RSRF) has been providing wholesale lending to assist the micro
finance activities of the cooperatives and NGOs. As of mid-July 2008, the Fund has
disbursed Rs.193.4 million and collected the principal amount of Rs. 102.3 million (Table
8.4).
Table 8.4
Financial Activities of the Rural Self Reliance Fund
(Rs. in Million)

Description Mid-July 2007 Mid-July 2008


Loan Disbursement: Number of Districts 48 50
No of Institutions 277 334
No of benefited families 12228 14862
Loan Disbursed (in Rs. million) 132.6 193.4
Recollected Loan (in Rs. million) 81.2 102.3
Outstanding Loan (in Rs. million) 51.4 91.1
Overdue loan (as percentage of the total outstanding loan) 8.5 9.0
Loan Recovery (in percent) 91.6 91.0
Source: Micro Finance Department.
58 Economic Report

NRB Licensed Financial Cooperatives


8.21 Cooperatives are established under Cooperatives Act 1992. The NRB has licensed a
small number of these cooperatives to undertake limited financial transactions. Currently,
there are 16 cooperatives licensed by this bank. These cooperatives operate under the
directives issued by the NRB in 2002 (revised in 2003). Total capital fund of these
cooperatives was Rs. 400.9 million in mid-July 2008 compared to Rs. 355.3 million a
year ago. Total deposit and total loans and advances mobilized by these cooperatives
from group members stood at Rs. 3.02 billion and Rs. 2.66 billion respectively. Similarly,
the total investment on government securities, fixed deposits and others amounted to Rs.
223.1 million.
NRB Licensed Non-Government Organizations
8.22 There are altogether 46 NGOs licensed by this bank to undertake limited financial
transactions. These are registered under Institutions Registration Act 1977 and undertake
limited banking transactions in accordance with the provision of the Financial
Intermediation Related Institutions Act 1999. The outstanding micro-credit lending of
these NGOs was Rs. 982.5 million as of mid-July 2008.
Money Transfer Firms
8.23 With a view to canalize inflow of foreign currency, particularly earned by Nepalese
workers working abroad, through formal channel, the NRB started to grant license to
money transfer firms since 2001. The money transfer firms are licensed by this bank
under Foreign Exchange Regulations Act 2019 B.S. The NRB has adopted very simple
licensing procedures for those who are interested to undertake remittance business.
Remitting firms can work as an agent of other established firms or may establish their
own offices abroad. There were 37 money transfer firms as of mid-July 2008.
Money Changers
8.24 The NRB started granting license to money changers since 1995 to facilitate the
general public in the exchange of foreign currencies. The money changers are licensed
under Foreign Exchange Regulations Act 2019 B.S. The NRB had issued directives under
“Money Changers Directives” in 1995 A.D. in order to regulate the licensed
moneychangers. It made the provision of two types of licenses—one for Indian currency
and another for convertible currencies. A license holder of the convertible currency is
only permitted for the buying transaction and should surrender its foreign currency to the
bank in which it has a bank account whereas a license holder of Indian Currency (IC) is
allowed to engage in both buying and selling of the IC. As of mid-July 2008, there were
350 moneychangers operating throughout the country.
8.25 The NRB has granted licenses to some agencies, whose businesses, by nature, are
involved in foreign currency related transaction. These agencies include travel agencies,
airlines companies, trekking agencies, hotels and cargo companies. The number of hotels,
trekking agencies, travel agencies, cargo agencies and airlines companies licensed by this
bank was 253, 873, 1056, 270 and 35 respectively as of mid-July 2008.
Financial Market 59

Insurance Companies
8.26 The history of Nepalese insurance market dates back to 1947 when the first
insurance company, Nepal Mal Chalani Tatha Beema Company later named Nepal
Insurance Company was established as a subsidiary of Nepal Bank Limited. The main
objective of the company was to transport goods imported by the bank and to keep it in its
custody. The insurance sector was opened to the private sector in 1990. Until mid-July
2008, there were altogether 25 insurance companies operating in Nepal, which were
established under Insurance Act 1992. Among them 17 insurance companies were listed
in the NEPSE. The Insurance Board is the apex regulatory authority for insurance
companies. Among the total insurance companies, the number of life, non-life and
composite (both life and non-life) insurance companies were 8, 16 and 1 respectively.
According to the ownership structure, 1 insurance company is government owned, 18 are
owned by the private sector, 3 are foreign joint ventures, and 3 are foreign branches
(Table 8.5). The total assets of these companies increased by 27.8 percent from the
previous year and reached Rs. 40.07 billion in mid-July 2008. Likewise, the total
premium collection of these companies was Rs. 9.45 billion in mid-July 2008 compared
to Rs. 7.99 billion in the preceding year.
Table 8.5
Ownership Structure of Insurance Companies
Mid-July 2008
Nature of the Company Total
Ownership General Life Composite Number
Government Owned - - 1 1
Private Sector 13 5 - 18
Foreign 2 1 - 3
Joint Venture 1 2 - 3
Total number 16 8 1 25
Source: Insurance Board
Employees Provident Fund
8.27 The Employees Provident Fund (EPF) is an autonomous entity, established on
September 16, 1962 under the Employees Provident Fund Act 1962. The EPF mobilizes
the savings collected through the provident fund of the government employees, army,
police, teachers, government corporations and some private companies. In the review
year, the total assets/liabilities of the EPF increased by 14.7 percent and stood at Rs.
67.94 billion. This figure was Rs. 59.22 billion in the preceding year. The provident fund
collection, the major item in the liabilities side, increased by 14.6 percent and stood at Rs.
62.49 billion in mid-July 2008 compared to Rs. 54.50 billion a year ago (Box 8.2).
60 Economic Report

Box 8.2
Highlights of Employees Provident Fund
Mid-July 2008
Total Contributors : 426,000
Total Contributing Offices : 28,000
Provident Fund : Rs. 62.49 billion*
Reserve Fund : Rs. 3.57 billion *
Investment : Rs. 62.08 billion*
*Estimated figures.
Source: Employees Provident Fund
Citizen Investment Trust
8.28 The Citizen Investment Trust (CIT) was established on March 18, 1991 under the
Citizen Investment Trust Act 1991. This Trust mobilizes private as well as institutional
savings, extends loans and advances, and works as an issue manager. The CIT is
regulated by the Ministry of Finance. The total assets/liabilities of the CIT increased by
43.3 percent in comparison to the previous year and stood at Rs. 13.67 billion in mid-July
2008. The total assets/liabilities had stood at Rs. 9.54 billion a year ago. The fund
collection, the major component in the liabilities side, soared by 44.2 percent and stood at
Rs.12.36 billion in mid-July 2008. It was Rs. 8.57 billion in the previous year.
Investments, the major item in the assets side, increased by 45.2 percent and reached Rs.
9.58 billion in the review year from Rs. 6.60 billion a year ago.
Postal Savings Bank
8.29 The Postal Savings Bank, established under the Postal Service Department, came
into operation in 1976. There are altogether 117 offices of the Postal Savings Bank
engaged in collecting deposits. Total deposit collected by these offices was Rs. 820.7
million in mid-July 2008. It was Rs. 700 million in the preceding year. Total number of
accounts of this bank dropped to 33,762 in mid-July 2008 from 34,280 a year ago. The
total investment was Rs. 784.7 million in mid-July 2008. Out of 117 offices, 49 offices of
this bank have extended loan outstanding equivalent to Rs. 270 million.
Deposit and Credit Guarantee Corporation
8.30 The Deposit and Credit Guarantee Corporation (DCGC) was established on
September 20, 1974 to encourage commercial banks to extend loan to priority sector so as
to serve remote areas and poor families. The DCGC guarantees a number of loans
including priority sector loans, livestock loan, vegetable farming loan, foreign
employment loan, micro and deprived sector credit, and credit for small and medium
industries. Total loan guaranteed by DCGC was Rs. 421.9 million as of mid-July 2008.
Credit Information Bureau
8.31 The Credit Information Bureau (CIB) was established in 1989 under the initiation
of the Nepal Rastra Bank. It was registered as a company in September 2004 and started
Financial Market 61

its operation as a company from March 2005. The CIB is the prime organization in the
country acting as the repository of credit information of the consumer and commercial
borrowers of all the banks and financial institutions. It collects the credit information
from the banks and financial institutions and disseminates them on demand. The NRB
and other banks and financial institutions have invested their capital in the CIB. The NRB
holds 10 percent share, while commercial banks, development banks and finance
companies hold 60 percent, 15 percent and 15 percent respectively. As of mid-July 2008,
there were 3,423 borrowers blacklisted by the CIB and 1,295 borrowers were removed
from the list in the same period.
62 Economic Report

9
Commercial Banking

Number of Banks
9.1 The number of commercial banks stood at 25 at the end of 2007/08 compared to 20
a year ago. Out of the five new commercial banks established in the review year, three
were new and two upgraded into "A" class licensed institutions-one from "B" and another
from "C" class.
9.2 The expansion of commercial banks branches in rural areas has been rapid after the
initiation of peace process in the country following the People's Movement II in April
2006. The NRB has also issued new directives relating to the opening up branches by
commercial banks, which helped expand bank branches from a number of 452 in mid-
July 2007 to 555 in mid-July 2008, excluding one hundred bank branches of Agriculture
Development Bank/Nepal (ADB/N) involved in non-banking transactions.
9.3 The expansion of bank branches by commercial banks is concentrated in the urban
areas. For example, the number of bank branches in Kathmandu Valley increased by 24.6
percent in the review year from the total branches of 126 as at mid-July 2007 to 157 as at
mid-July 2008 followed by the expansion in the Terai region by 22.8 percent from 197
branches as at mid-July 2007 to 242 branches as at mid-July 2008 (Table 9.1). Realizing
the concentration of banking activities in the urban areas, the newly issued directives
required commercial banks to open a bank branch outside the Kathmandu Valley for
opening a branch within the valley.
Table 9.1: Distribution of Bank Branches in Nepal*
Regions 2007 2008
Eastern 90 111
Central 220 265
Western 88 107
Mid-Western 32 46
Far-Western 22 26
Kathmandu Valley 126 157
Terai 197 242
Hills 129 156
* Excludes one hundred bank branches of ADB/N involved in non-banking transactions
Commercial Banking 63

9.4 The distribution of bank branches shows that financial services provided by "A"
class institutions licensed by the NRB are largely urban centric as Kathmandu valley
alone has 159 bank branches (23 percent) compared to a meagre number of 46 and 26
bank branches operating in the Mid-Western and Far Western Development Regions
respectively. The Central Development Region has the highest number of bank branches.
Out of the total of 558 bank branches, 267 bank branches (47.8 percent) are operating in
the Central Development Region as at mid-July 2008 followed by 111 bank branches in
the Eastern Development Region. On the basis of the ecological regions, the hilly regions
with 52 districts have 156 bank branches whereas the Terai zones with 20 districts have
243 bank branches.
Asset and Liabilities of Commercial Banks
9.5 Assets/ liabilities of commercial banks increased by 24.9 percent in the review year
amounting to Rs. 549.1 billion as at mid-July 2008 compared to a growth of 11.1 percent
amounting to Rs. 439.7 billion in the previous year. The entry of five new commercial
banks and credit expansion by existing commercial banks increased the assets/liabilities
of commercial banks in the review year. The ratio of such assets/liabilities of commercial
banks to GDP reached 68.9 percent in the review year.
9.6 On the liability side of the commercial banks, total deposit has occupied a dominant
share followed by other liabilities. The share of total deposit to total liabilities reached to
76.7 percent in the review year from 76.1 percent in the previous year. Similarly, the
share of other liabilities of commercial banks to total liabilities stood at 22.7 percent in
the review year compared to 23.1 percent in the previous year.
9.7 Contrary to a decline by 3.7 percent, other liabilities of commercial banks increased
by 22.8 percent in the review year. Other liabilities of commercial banks increased at a
higher rate in the review year than that of the previous year owing to an increase in paid-
up capital through issuance of bonus and right shares by existing banks and establishment
of new five commercial banks in the review year. The borrowing from Nepal Rastra Bank
by commercial banks had increased by Rs. 1.5 billion in the previous year. However,
such borrowings declined by Rs. 1.2 billion in the review year because of a higher level
of capital expansion and deposits driven by encouraging inflows of remittances.
Deposit Growth and Composition
9.8 Deposits witnessed a significant growth in 2007/08 compared to that of the
previous year emanating from an elevated level of remittance inflows in the review year.
Total deposits increased by 26.0 percent in the review year amounting to Rs. 421.5 billion
compared to a growth of 15.3 percent to Rs. 334.5 billion in the previous year. Of the
components of total deposits, the saving deposits accounted for the highest share in the
total deposits. However, the share of saving deposits to total deposits has been gradually
declining. Such share was 52.3 percent as at mid-July 2006, which marginally declined to
52.2 percent in mid-July 2007 and stood at 50.2 percent as at mid-July 2008. Such
deposits, which had grown by 15.1 percent in the previous year, grew by 21.1 percent in
the review year. The share of fixed deposits to total deposits was 34.5 percent as at mid-
July 2006, 34.1 percent in 2007 and 36.1 percent as at mid-July 2008. The fixed deposits
witnessed a growth of 33.6 percent as at mid-July 2008 compared to a growth of 14.0
64 Economic Report

percent a year ago. The share of demand deposits in total deposits remained intact at 12.8
percent in the review year.
Paid-up Capital and General Reserve
9.9 Another sources of fund, the paid-up capital of commercial banks, increased by
58.6 percent (Rs. 11.7 billion) amounting to Rs. 31.8 billion in the review year following
a new provision of the NRB to increase paid-up capital by commercial banks to Rs. 2
billion by 2012. Such capital had grown by 17.4 percent in the previous year. General
reserves of commercial banks declined by 18.5 percent compared to a decline of 55.6
percent in the previous year.
Loans and Advances
9.10 Loans and advances of commercial banks occupied a major share in the total assets.
The share of loans and advances in total assets declined to 76.5 percent in the review year
from 81.0 percent in the previous year. Loans and advances of commercial banks
increased by 23.5 percent in the review year compared to a growth of 15.9 percent in the
previous year on account of an increasing private sector credit off-take in the review year.
9.11 Of the credit aggregates, the credit to the private sector has occupied a major share.
Such credit stood at 41.0 percent of GDP and 61.3 percent of total assets and liabilities of
commercial banks as at mid-July 2008. Compared to a growth of 17.1 percent in the
previous year, private sector credit grew by 26.9 percent in the review year amounting to
Rs. 336.8 billion as at mid-July 2008 owing to a higher credit demand in the private
sector.
9.12 The total holding of government securities by commercial banks reached Rs. 72.1
billion as at mid-July 2008 from Rs. 65.9 billion in mid-July 2007, with a growth of 9.5
percent in the review year compared to a growth of 11.9 percent in the previous year.
Similarly, commercial banks' claims on non-financial government enterprises increased
by 10.4 percent in the review year compared to a growth of 12.2 percent in the previous
year. The claims registered a lower growth on account of a partial loan repayment by
Nepal Oil Corporation, National Trading Ltd, Nepal Food Corporation and Nepal Airlines
Corporation to the banking sector.
9.13 Claims on financial institutions increased by Rs. 1.3 billion in the review year
compared to an increase of Rs. 381.8 million in the previous year on account of a
substantial growth of claims on non-government financial institutions. An increase of
short-investment to development banks and finance companies by commercial banks
contributed to the increase in the claims on financial institutions in the review year.
9.14 Liquid funds of commercial banks soared by 21.7 percent in the review year
compared to a growth of 5.0 percent in the previous year. A rise in foreign assets of
commercial banks owing to an elevated level of remittance inflows and capital expansion
contributed to the higher growth of liquid funds of commercial banks in the review year.
9.15 Of the components of liquid funds, balance held abroad registered a growth of 21.1
percent in the review year compared to a growth of 8.1 percent in the previous year.
Similarly, commercial banks' cash in hand, which had grown by 21.6 percent in the
Commercial Banking 65

previous year, went up by 71.9 percent in the review year, Compared to a growth of 1.4
percent last year, deposits of commercial banks with the NRB increased by 5.6 percent in
the review year.
Non-performing Loans (NPLs)
9.16 Compared to 10.3 percent as at mid-July 2007, the ratio of non-performing loan
(NPL) to total loan has declined to 6.1 percent as at mid-July 2008 (Table 9.2). The NPL
of Nepal Bank Ltd (NBL) came down to 8.9 percent as at mid-July 2008 from 13.5
percent in the previous year. Similarly, the level of NPL of Rastriya Banijaya Bank Ltd
(RBB) dropped to 21.6 percent as at mid-July 2008 from 27.6 percent as at mid-July
2007. Loan recovery along with a write off of Rs. 2.87 billion by NBL and Rs. 13.2
billion by RBB was instrumental in bringing down the level of the NPL of these banks in
the review year.
9.17 The NPL of the private sector banks alone stands at 3.1 percent excluding the NPL
of the commercial banks owned by the GON such as Agriculture Development Bank, the
NBL and the RBB. Likewise, the NPL of Nepal Bangladesh Bank Ltd and Nepal Credit
and Commerce Bank Ltd also declined to 31.4 and 16.4 percent respectively in the review
year from that of 39.8 and 31.4 percent in the previous year. The NPL of Lumbini Bank
Ltd also showed the improving trend as the NPL declined to 14.9 percent in mid-July
2008 from 20.4 percent a year ago and 32.0 percent in mid-July 2006.
Table 9.2: Non-performing Loans of Commercial Banks
(in percentage of total loans and advances as at mid-July)
2002 2003 2004 2005 2006 2007 2008
1. Nepal Bank Limited 56.3 60.5 53.7 49.6 25.1 13.5 8.95
2. Rastriya Banijya Bank 55.1 60.2 57.6 53.0 45.3 27.6 21.63
3. NABIL Bank Limited 7.1 5.5 3.4 1.3 1.3 1.1 0.79
4. Nepal Investment Bank Limited 4.8 2.0 2.5 2.7 2.3 2.4 1.12
5. Standard Chartered Bank Nepal Limited. 4.8 4.1 3.8 2.7 2.1 1.8 0.92
6. Himalayan Bank Limited 8.3 10.1 8.9 7.4 6.1 3.6 2.4
7. Nepal SBI Bank Limited 6.3 11.7 6.3 6.5 6.3 4.6 3.65
8. Nepal Bangladesh Bank Limited 15.8 12.7 10.8 19.0 12.3 39.8 31.38
9. Everest Bank Limited 1.0 2.2 1.7 1.6 1.2 0.8 0.64
10. Bank of Kathmandu Limited 8.1 8.7 6.7 5.0 2.5 2.5 1.75
11. Nepal Credit and Commerce Bank Limited 40.1 20.6 12.7 8.6 11.1 31.4 16.36
12. Lumbini Bank Limited 19.3 11.6 7.4 15.2 32.0 20.4 14.87
13. Nepal Industrial & Commercial Bank Limited 8.2 6.7 3.9 3.8 2.6 1.1 0.86
14. Machhapuchhre Bank Limited 10.5 2.1 1.0 0.4 0.3 0.7 1.04
15. Kumari Bank Limited 1.3 1.7 0.8 1.0 0.9 0.4 1.35
16. Laxmi Bank Limited 0.0 0.0 0.0 1.6 0.7 0.3 0.13
17. Siddhartha Bank Limited - 0.0 1.6 2.6 1.3 0.3 0.6
18. Agriculture Development Bank - - - - 21.2 14.9 11.63
19. Development Credit Bank Ltd - - - - - - 2.16
20. NMB Bank Ltd. - - - - - - 1.52
Total 30.4 28.8 22.8 18.9 14.2 10.25 6.1
66 Economic Report

Profitability
9.18 In the review year, the net profit of the commercial banks (based on unaudited
balance sheet of the respective commercial banks) increased by 33.3 percent amounting
to Rs. 7.6 billion from a net profit of Rs. 5.7 billion in the previous year. Except a loss
borne by Sunrise Bank Ltd, all other banks earned net profit in the review year. The net
profit of three government owned banks namely NBL, RBB and ADB/N increased to Rs.
845.2 million, 1.0 billion and 1.6 billion respectively as at mid July-2008 from Rs. 226.9
million, Rs. 1.7 billion and Rs.1.1 billion respectively in the previous year. Likewise, the
banks such as Nepal Credit and Commerce Bank Ltd, Nepal Bangladesh Bank Ltd,
Global Bank Ltd and Citizen Bank Ltd also earned net profit in the review year against a
net loss in the previous year.
Sectorwise and Securitywise Credit Flows
9.19 In 2007/08, outstanding credit of commercial banks increased by 32.2 percent
amounting to Rs. 306.5 billion in the review year compared to a growth of 16.7 percent in
the previous year (Table 9.3). Commercial banks' outstanding credit to agriculture sector
marginally subdued in the review year compared to the previous year. Such credit
declined by 0.01 percent (Rs. 1.7 million) in the review year compared to a decline of
12.1 percent (Rs. 1.9 billion) in the previous year. The outstanding credit to production
sector increased substantially from Rs. 62.4 billion in 2006/07 to Rs. 74.9 billion in
2008/09. The review year witnessed a significant growth of credit to iron and steel based
industries and food production of the production sector. The credit to the food production
sub-sector increased by Rs. 2.5 billion in the review year against a decline of Rs. 0.32
million in the previous year. Likewise, the credit to construction, metal productions,
transportation equipment productions and fittings, wholesale and retail business and real
estate increased significantly compared to that of the previous year. The credit to the real
estate expanded by Rs. 8.2 billion in 2007/08 compared to an expansion of Rs. 1.1 billion
in 2006/07.
Table 9.3: Sector-wise Outstanding Credit of Commercial Banks
Outstanding Credit (Rs. in million) Percentage Change
Heads 2006*
2006 (ADB) 2007 2008 2006/07 2007/08
1. Agriculture 4572.0 15784.2 13882.0 13880.2 -12.1 -0.0
2. Mines 477.7 477.7 1315.0 1954.9 175.3 48.7
3. Productions 56432.2 59771.8 62369.6 74889.7 4.4 20.1
4. Construction 13398 13708.5 19770.6 32368.8 44.2 63.7
5. Metal Productions, Machinery &
Electrical Tools & fitting 1590.9 1590.9 2919.4 5069.4 83.5 73.6
6. Transportation Equipment
Production & Fitting 2658.7 2658.7 3243.2 4340.2 22 33.8
7. Transportation, Communications
& Public Services 11697.5 11694.5 13130.8 16129.4 12.3 22.8
8. Wholesaler & Retailers 35073.6 40555.2 45635.7 55732.9 12.5 22.1
9. Finance, Insurance & Fixed Assets 10024 10024 13917.5 24913.5 38.8 79.0
10. Service Industries 14062.6 14163 18367.4 21163.3 29.7 15.2
11. Consumable Loan 5839.4 5848.4 8120.1 9437.2 38.8 16.2
12. Others 20542.9 22571.7 29149.3 46656.3 26.3 60.1
Total 176370 198849 231845 306535.7 16.6 32.2
*Including the condensed data of ADB/N.
Commercial Banking 67

9.20 As per security wise credit, the outstanding credit against a security of land and
house occupied a dominant share of 60.2 percent in the review year (Table 9.4). Such
outstanding credit against the collateral of house and land grew by 38.7 percent and stood
at Rs. 184.6 billion in mid-July 2008. Such credit had risen by 17.9 percent in the
previous year. Such credit against the collateral of non-government securities increased
by 82.5 percent compared to a growth of 107.6 percent in the previous year. Likewise, the
outstanding credit against the collateral of government securities declined by 20.7 percent
compared to a growth of 15.5 percent in the previous year. The outstanding credit against
the security of gold and silver registered a slower growth of 41.5 percent amounting to
Rs. 4.1 billion in the review year compared to a growth of 57.9 percent in the previous
year. Similarly, such credit against a security of rice and paddy products increased by 2.6
percent in the review year compared to a growth of 20.1 percent in the previous year. The
outstanding credit against the collateral of machinery, export bills and loans against
export bills increased in the review year in contrast to a decline in the previous year.
Table 9.4: Security-wise Outstanding Credit of Commercial Banks
Outstanding Credit Growth Share in Total
(Rs. in million) Outstanding Credit
Types of Security 2006 2007 2008 2007 2008 2007 2008
Gold & Silver 1820.8 2875.2 4069.5 57.9 41.5 1.2 1.3
Government Securities 3118.2 3602.6 2857.1 15.5 -20.7 1.6 0.9
Non-Govt. Securities 1324.4 2749.4 5017.7 107.6 82.5 1.2 1.6
Jute and Hessians 84.5 119.3 118.5 41.2 -0.7 0.1 0.0
Rice and Paddy 1088 1307.2 1341.5 20.1 2.6 0.6 0.4
Other Agricultural Products 1091.2 1717 1730.2 57.3 0.8 0.7 0.6
Cloth and Yarn 793.7 860.2 1590.7 8.4 84.9 0.4 0.5
Machinery 4708.1 4321.9 5169.5 -8.2 19.6 1.9 1.7
Other Goods 26536.2 30850.1 39256.6 16.3 27.2 13.3 12.8
Export Bills Purchased 938.9 492.8 1018.3 -47.5 106.6 0.2 0.3
Loans Against Export Bills 249.4 207.4 244.5 -16.8 17.9 0.1 0.1
Import Bills and L/C 7480.5 6425.3 5206.7 -14.1 -19.0 2.8 1.7
Other Foreign Bills
Purchased 155.3 161.9 208.4 4.2 28.7 0.1 0.1
Domestic Bills Purchased 180.8 272.4 506.1 50.7 85.8 0.1 0.2
Overdrafts and Guarantee 8533.7 9882.3 8959.7 15.8 -9.3 4.3 2.9
House and Land 112894.4 133060.1 184555.7 17.9 38.7 57.4 60.2
Miscellaneous 27850.5 32939.9 44685.0 18.3 35.7 14.2 14.6
Total 198848.7 231844.7 306535.7 16.6 32.2 100.0 100.0

Priority Sector and Deprived Sector Lending of Commercial Banks


9.21 With a view to provide freedom to commercial banks in the selection of their loan
portfolio, the NRB phased out the priority sector-lending program since 2007/08.
However, the NRB has continued deprived sector lending program in order to outreach
credit access to marginalized, backward, minorities, dalit, scheduled cast and deprived
people. The outstanding loan disbursement of commercial banks under deprived sector
68 Economic Report

credit stood at Rs. 7.7 billion (an increase of 13.2 percent) in 2007/08 compared to Rs. 6.8
billion in the previous year. Out of the total outstanding of the deprived sector credit,
direct and indirect credit investment stood at Rs. 1.1 billion and Rs. 6.6 billion
respectively as at mid-July 2008.
Financial Sector Reform Program 69

10
Financial Sector Reform Program
10.1 The financial sector reform program, one of the major components of economic
reform program, was continued in 2007/08. This program has emphasized on making the
financial system sound, efficient, competitive, professional and capable for contributing
to economic development. The second phase of financial sector reform program is
ongoing with the financial assistance of the World Bank and Department for International
Development (DFID). The reform program includes: a) reengineering of Nepal Rastra
Bank, b) restructuring of Nepal Bank Ltd and Rastriya Banijya Bank, and c) capacity
building of financial sector.
Reengineering of Nepal Rastra Bank
10.2 The reengineering program of the NRB has been continued with a view to make it
an efficient central bank in the present changing context. For this purpose, the program is
mainly directed towards developing human resource, strengthening its regulatory and
supervisory capacity, restructuring its organizational structure as per its functions,
standardizing auditing and accounting system as per international standard and
simplifying as well as mechanizing its functions. The second phase of the financial sector
reform program is now being implemented after the completion of the reengineering
programs undertaken in the first phase.
10.3 As envisaged by the program to make the bank's service delivery faster and
effective, emphasis has been laid on human resource development. An international
human resource advisor had been at work to design the bank's manpower plan, devise
required training needs and recognize appropriate level of manpower in the organization
in order to bring the policies recommended by IOS partners into implementation. In order
to retain the manpower level in the bank at a right size, voluntary retirement schemes
have been introduced three times besides a regular retirement process. Till now, 425
employees have been sent for training abroad under the financial sector reform program
in order to develop the bank's human resource.
10.4 The IT consultants appointed for enhancing IT capacity of the NRB under financial
sector reform program with the financial support of the World Bank had been requested
to incorporate necessary revisions on the bid specification documents relating to the
software and hardware, and communication and disaster recovery system submitted
separately to this bank. Since the consultants did not respond to submitting the revised
documents as per the requirements of this bank by March 20, 2008, a process has been
70 Economic Report

begun to cancel the agreement between the consultants and this bank with the consent of
the World Bank.
Restructuring of Nepal Bank Ltd. and Rastriya Banijya Bank Ltd.
10.5 For the purpose of restructuring Nepal Bank Limited (NBL) as outlined in the
financial sector reform program, the management of the NBL has been taken under the
control of Nepal Rastra Bank as per the Sub-article 1 (O) of Article 86 (C) of the NRB
Act 2002 until March 2008. The NRB has nominated its staff to look at the management
of the bank after ending a contract with the consulting firm ICC Consulting of Bank of
Scotland (Ireland) on July 21, 2007. Likewise, the tenure of the consulting team of
Rastriya Banijya Bank was extended, time after time, till Feb 13, 2008 from the initial
contract on Feb 14, 2003. After the end of the contract, the period was extended further,
first time, for the period of six months to July 15, 2008 and further 3 months to Oct 15,
2008. Again, the contract with the consulting team has been extended to Jan 15, 2010.
10.6 Analysis of the progress attained by these banks shows the positive impacts of the
restructuring programs in these banks. After the restructuring process, these banks have
been able to earn operating profit regularly since 2003/04. Contrary to a loss of Rs. 252.0
million of the NBL in 2003, the bank started realizing net profit since 2003/04 and such
profit of the bank stood at Rs. 529.0 million in 2007/08. Likewise, from a loss of Rs. 4.9
billion in 2002/03, the RBB also started realizing net profit since 2003/04 and such net
profit of the bank stood at Rs. 1.8 billion in 2007/08.
10.7 Likewise, the negative level of the capital fund of the banks has improved. The
negative level of capital fund of both banks has been gradually improving. The negative
level of the capital fund of NBL came down to Rs. 5.7 billion in 2007/08 from a level of
Rs. 6.3 billion as at mid-July 2007 and Rs. 9.8 billion as at mid-July 2003. Likewise, the
negative level of capital fund of RBB came down from Rs. 22.4 billion as at mid-July
2003 to Rs. 17.2 billion as at mid-July 2007 and further to Rs. 15.5 billion as at mid-July
2008.
10.8 Despite a slower than expected recovery of NPL in these banks, there has been
some positive indication of improvement. The level of NPL of NBL markedly fell down
to 8.05 percent in 2007/08 from 13.49 percent in 2006/07 and 60.5 percent in 2003. The
substantial decline in the NPL level of the NBL became possible on account of the credit
write-off by the bank in 2005/06 and 2006/07. However, the recovery of write-off loans
has remained a big challenge. Similarly, the ratio of NPL to total loan of the RBB came
down to 21.63 percent as at mid-July 2008 from 28.63 percent as at mid-July 2007 and
60.15 percent as at mid-July 2003.
10.9 Both banks introduced and implemented management plan, human resource
development plan, and skill enhancement plan in order to bring the banks' manpower
level at an appropriate level. The function related to staff-need assessment has been
completed. Likewise, both banks submitted capital and successor plans to the NRB. The
NBL reduced the manpower level to a number of 2,885 as at mid-July 2008 from a
number of 5,250 as at mid-July 2003 through introduction of voluntary retirement
schemes in various phases. Likewise, the RBB introduced performance based reward
system in order to motivate and enhance the productivity of its employee. As in the NBL,
Financial Sector Reform Program 71

the RBB introduced voluntary retirement scheme in order to bring its manpower level at
an optimum level. Through the scheme, the bank was able to bring down the number of
its staff from 5,402 as at mid-July 2003 to the number of 3,002 as at mid-July 2008.
However, this level of manpower in the bank is slightly higher than the target the bank
was given to reduce.
10.10 The management team of both banks introduced and implemented various policies,
plans and guidelines for making it internally strong and efficient. The NBL introduced
and implemented credit policy and credit guidelines for improving the credit management
along with the introduction of LLM guidelines of international standard for asset/liability
management of the bank. Asset-Liability Committee (ALCO) has been formed. New
credit manuals, internal audit manuals, account head classification manuals, credit
recovery guidelines, HR plan, skill enhancement plan, portfolio status and plan, budget
plan, strategic plan, problematic loan guidelines, successor plan, capital plan etc have
been formulated and implemented in order to follow modern system of credit and human
resource management. The bank has introduced credit write-off bylaws and accordingly,
necessary actions have been taken to write-off bad loans.
10.11 The RBB also introduced anti-money laundering policy, investment and treasury
operation policy, revision of internal audit manual, trade finance manual in addition to
credit guidelines, credit manuals and credit write-off bylaws formulated for improving the
credit management of the bank. The bank formulated IT plan for undertaking the banking
transactions timely, effectively and systematically through computer system. The bank
has already computerized its 44 branches and additional 38 branches have been identified
and tasks are at work for their computerization. Similarly, the bank introduced 'Any
Branch Banking System' (ABBS) in 27 branches. The bank brought 73 and 86 percent of
its deposits and credits transactions respectively under computer system. Likewise, the
RBB introduced IT plan and accordingly its two departments in the central office as well
as 40 branches have been furnished with Pumori Plus software for accelerating banking
transactions. Its 37 branches outside Kathmandu Valley have been working with
RBBSYS software. The tasks relating to ABBS have been completely brought under
implementation. More than 94 percent of deposits and 84 percent of credits of the bank
have been computerized.
Capacity Enhancement of Overall Financial Sector
10.12 Under the financial sector reform programs, emphasis has been accorded to unite
and simplify the existing acts and laws governing banks and financial institutions in order
to make the regulatory and supervisory functions of the NRB effective and compatible to
the modern-day environment, simplify operating procedures of all financial institutions of
similar nature and improve the legal structure of the financial sector along with
formulating necessary acts and laws requiring for a strong central bank.
Regulatory Measures
10.13 A Grievance Hearing Cell (GHC), established on April 24, 2005 under the
chairmanship of Deputy Governor of the NRB to settle the grievances resulting from
misunderstanding and disputes between customers and financial institutions was
continued in 2007/08. Following the decision made by the Council of Ministers on
72 Economic Report

December 15, 2006, the GHC formed at central level under the leadership of the Deputy
Governor was revised and extended on January 4, 2007 by including representatives from
Ministry of Finance and Nepal Bankers’ Association as members and representative from
the FNCCI as an observer. The GHC settled 289 cases till mid-July 2008 out of 364 cases
filed and circular has been issued to concerned banks and financial institution to look into
the remaining 75 cases.
10.14 "A" class licensed institutions are required to provide a credit of 3 percent of the
total outstanding loans and advances (including bills purchased and discounted) to the
deprived sector. Likewise, "B" class licensed institutions are required to provide a credit
of one percent of their outstanding loans and advances (including bills purchased and
discounted) to the deprived sector. The "A" and "B" class banks and financial institutions
licensed in 2006/07 and newly opened or upgraded institutions are required to provide a
deprived sector credit on the basis of six month previous outstanding loans and advances
from the period of the quarter after one year of their operation.
10.15 The NRB and the GON have done their best to recover the bad loans from the bank
defaulters. Accordingly, various stringent actions have been taken against them. As per
the decision of the Council of Ministers taken on September 25, 2007, the actions taken
against the bank defaulters as well as other persons related to the loan of more than Rs.
50.0 million include the following: a) seize the passport as well as prevent to issue new
ones; b) prevent from becoming a member of a board of directors in any company or a
company in a process to be registered as per the Company Act; c) prevent the sale of
movable as well as fixed property except for settling the debt; d) prevent the sale and
purchase of shares except for settling debt, e) seize the holding of government securities
and use such securities for the settlement of debt, f) prevent the withdrawal of deposits
(domestic as well as foreign) except for the settlement of debt, and g) prevent the use of
property in locker by defaulters and other persons related to the loan.
10.16 Banks and financial institutions while providing margin lending to the concerned
borrowers on the security of shares of the listed companies in Nepal Stock Exchange
Limited are required to follow certain provisions. In the first place, the amount of margin
lending to be provided on the security of shares is limited to the fifty percent of the
average price of closing price of last 180 working days or fifty percent of the current
market price, whichever is lower. The amount of margin lending once accepted to the
borrower cannot be further extended through revaluation of the shares under securities. If
the amount of the margin lending exceeds the stipulated limit of 50 percent, the lending
should be regulated to the limit of 50 percent by mid-July 2008 or the maturity period
whichever is the earlier. Secondly, the maturity period of the margin lending should not
be more than a year and such lending is not allowed for renewal, rescheduling and
restructuring. Thirdly, banks and financial institutions cannot accept the margin lending
to the shares of banks and financial institutions, which have a level of capital less than
that fixed by the NRB, have negative net worth, are delisted by Nepal Stock Exchange
Ltd, and are unable to complete annual audit even after one year from the end of the fiscal
year.
10.17 Margin lending can be provided to the limit of the core capital of banks and
financial institutions. However, margin lending on the security of shares of a single
Financial Sector Reform Program 73

institution should not cross the limit of 25 percent of the core capital. The concerned
banks and financial institutions need to maintain 100 percent loan loss provisions for such
lending, except when the lending is in a status of good loan. While providing the margin
lending, banks and financial institutions need to keep the original certificate of shares in
the securities. If margin lending has been provided against the securities relating to shares
other than original certificate, the concerned banks and financial institutions are required
to keep the original certificate for such lending till mid-February 2007/08.
10.18 The single obligor limit of the loans to the hydro power related projects has been
relaxed from existing limit of 25 percent to 50 percent of core capital including fund
based loans and non-fund based facility. For this, Power Purchase Agreement (PPA) must
be done with the concerned agency while investing in hydropower projects. Banks and
financial institutions can provide loans to the hydropower project to the limit of 25
percent of core capital on their own credit manual/policy. However, the PPA is a must in
the case of the loans exceeding 25 percent but below or equal to 50 percent of core
capital.
10.19 Banks and financial institutions are required to open an equity revaluation fund and
sanction the total invested amount of all stocks and debentures of the public limited
company established for running the hydropower project in the fund if the share of such
company is not listed within three years from the time of equity investment. The amount
of investment in such stocks and debentures sanctioned in the fund is not allowed to be
used for any purpose until the stocks and debentures are listed in the securities market.
10.20 The promoters' shares in a cross holding of banks and financial institutions can be
sold and purchased in Nepal Stock Exchange Ltd. and the individual/institutions
purchasing the promoter share from Nepal Stock Exchange Ltd. will remain as the
promoter of the concerned institutions. While selling or transferring the ownership of the
promoter share, the provision of granting priority to other member of the promoter
shareholder as stated by the unified directive number 10 will not be applicable for this
purpose. However, the purchaser of the promoter share should not be blacklisted in the
Credit Information Bureau and is required to submit the self-declaration at a time of
purchasing the share that s/he is not ineligible to purchase such shares as per the
prevailing laws and the directives issued by the NRB.
10.21 The promoter shareholders of banks and financial institutions holding more than
51 percent such shares are allowed to sell, if they wish, over and above 51 percent of
promoter shares as per ordinary shares through Nepal Stock Exchange Ltd. Only banks
and financial institutions with the completion of five years from the initiation of financial
transactions can sell promoter shares. The promoter shares of more than 51 percent
should be transferred into the ordinary shares on pro-rata basis for purchase and sale in
Nepal Stock Exchange Ltd. The promoters are allowed to sell only 50 percent of their
holding of promoters shares that are eligible for transfer into ordinary shares by mid-July
2008, and the remaining shares could be sold at a time or gradually.
10.22 The promoter shares, once transferred into ordinary shares, cannot be transferred
back to promoter/promoter group shares. If a sale of shares after transferring the promoter
shares into ordinary shares is carried on by an individual/group who is blacklisted, such
74 Economic Report

shares are allowed to be sold only for the purpose of repaying the loans of banks and
financial institutions. The concerned banks and financial institutions should themselves
determine whether a seller is in blacklist or not. The banks and financial institutions of
class "A", "B", and "C" licensed by the NRB and the cooperatives are not allowed to
purchase the shares of any banks and financial institutions.
10.23 Banks and financial institutions are not allowed to provide loans against the receipt
of application submitted for the purchase of shares through initial public offering (IPO).
If any banks and financial institutions have provided loans of such nature prior to this
provision, such loans are to be recovered within a month since this provision has been
made effective. Otherwise, loans are to be rescheduled with enough securities and in case
the loans are not fully backed up by the securities, banks and financial institutions are
required to make provisions for such loans by the full amount of the loan.
Supervisory Actions
10.24 The corporate level on-site supervision of 23 commercial banks, including
Agriculture Development Bank, was accomplished in 2007/08. In this process, on-site
supervision of 149 branches of the following commercials banks were completed (Table
10.1).
Table 10.1: On-site Supervision of Banks
Bank Number of Branches
1. Nepal Bank Limited 17
2. Rastriya Banijya Bank 14
3. NABIL Bank Limited 9
4. Nepal Investment Bank Limited 9
5. Standard Chartered Bank Nepal Limited. 3
6. Himalayan Bank Limited 7
7. Nepal SBI Bank Limited 6
8. Nepal Bangladesh Bank Limited 1
9. Everest Bank Limited 12
10. Bank of Kathmandu Limited 6
11. Nepal Credit and Commerce Bank Limited 1
12. Lumbini Bank Limited 3
13. Nepal Industrial & Commercial Bank Limited 5
14. Machhapuchhre Bank Limited 10
15. Kumari Bank Limited 6
16. Laxmi Bank Limited 3
17. Siddhartha Bank Limited 7
18. Agriculture Development Bank 25
19. Global Bank Ltd 1
20. Citizens bank Ltd 1
21. Bank of Asia 1
22. Sunrise Bank Ltd 1
23. Prime Bank Ltd 1
Total 149
Financial Sector Reform Program 75

10.25 In addition to corporate level supervision of 23 commercial banks, special on-site


supervision of 17 branches of 12 commercial banks was conducted in the review year.
These banks included the following: Lumbini Bank Ltd., Nepal Credit and Commerce
Bank Ltd., Rastriya Banijya Bank Ltd., Kumari Bank Ltd., Machhapuchchhre Bank Ltd.,
Nepal Bank Ltd., Bank of Kathmandu Ltd., Nepal Bangladesh Bank Ltd., Citizens Bank
Ltd., Sunrise Bank Ltd., and Bank of Asia Ltd.
10.26 Banks were obliged to incorporate necessary corrections of the discrepancies and
inconsistencies as indicated by the report prepared by the NRB based on macro, special
and targeted on-site inspection. For this, necessary directives were issued.
10.27 Following the improvement in the management of Nepal Bangladesh Bank Ltd.,
Nepal Credit and Commerce Bank Ltd. and Lumbini Bank Ltd., the NRB's micro
surveillance of these banks have been relaxed at the end of the review year.
10.28 The preparation of off-site report based on the quarterly financial statements of
commercial banks was accomplished in 2007/08. The task of supervision as per the
CAELS Rating in the report and the system of Early Warning Signal (EWS) has also been
continued in the review period. Accordingly, each desk has prepared quarterly reports and
has undertaken periodic review and performance appraisal of the banks.
10.29 Interaction program among the staff regarding the implementation of self-
assessment of Basel Core Principle in Nepal was conducted in Kathmandu. Interaction
among the staff regarding risk based supervision and contemporary issues were held in
each quarter.
10.30 In order to enhance the capacity of related staff, a two-day seminar on "Legal
Compliance" was conducted. Similarly, in order to enhance the effectiveness of internal
audit and other subjects related to it, a one-day interaction program among the heads of
the internal audit of all commercial banks was also conducted.
10.31 A one-day seminar program related to long form audit report (LFAR) was
conducted among the external auditors of all commercial banks.
10.32 SEACEN Centre-Toronto and Nepal Rastra Bank jointly conducted a four-day
international seminar on "Leadership Seminar for Senior Bank Management of Central
Banks on Financial System Oversight".
10.33 With regard to implementing the BASEL II in Nepal, a revised Capital Adequacy
Framework, 2007 has been prepared and accordingly, the circular has been issued
notifying all commercial banks that the new framework would be fully implemented from
2008/09. Altogether 10 interaction programs relating to capital adequacy among the
officers of the commercial banks were held in 2007/08.
10.34 With a view to manage the database of big borrowers of the commercial banks and
include them in the various reports, software has been prepared and the training program
was conducted for the staff of the commercial banks.
76 Economic Report

11
Microfinance
11.1 The NRB has been conducting various microfinance programs in order to uplift the
economic conditions of the poor, marginalized, minorities and backward people.
Microfinance institutions have been encouraged to expand their activities in the backward
regions through availing credit at a concessionary rate in addition to supervising the
microfinance related projects. As of mid-July 2008, there were 5 regional rural
development banks and 12 microcredit development banks. Two national level
institutions (Rural Microfinance Development Centre and Small Farmer Development
Bank) have been engaged in wholesale financing for microcredit in Nepal. In addition, 16
cooperatives and 46 NGOs have been allowed to undertake the limited banking activities.
11.2 The status and progress of wholesale credit through Rural Self-Reliance Fund
(RSRF) and rural development banks are given below.
Rural Self-Help Fund
11.3 RSRF was established in 1991/92 with a view to providing wholesale credit
through NGOs/Cooperatives working in rural areas to rural people of the deprived
classes, who are out of access to institutional credit, to undertake income generating self-
employed business. With joint contribution of Rs. 90 million by the Government of Nepal
(GON) and Rs. 253.4 million by the NRB in different phases, the total seed capital of the
Fund reached Rs. 343.4 million as of mid-July 2007/08. From this capital, the Fund can
provide credit up to Rs. 1.5 million on the first instalment with a condition of not
exceeding twenty-fold of its primary capital (share capital, general reserves and profits).
On the second instalment, credit up to Rs. 2 million and on third instalment credit up to
Rs. 2.5 million can be provided. For improving their living status, the deprived classes
can receive loan of Rs. 40,000, Rs. 50,000 and Rs. 60,000 in first, second and third
instalments respectively from the Fund for micro enterprise business.
11.4 The Fund can provide credit to those institutions, which are involved in deposit
collection and credit mobilization for at least a year from their registration and have
regularly collected deposits from at least 70 percent of its members. For undertaking
income-generating self-employment projects, the Fund has been providing credit facility
through NGOs and Cooperatives to the rural people who own land up to 15 ropanis in
hilly regions and 1 bigaha in terai, and have no regular sources of income of any family
Microfinance 77

member to meet their basic needs, and have no outstanding credit received under income
generating programs from banks and financial institutions.
11.5 The Fund provides wholesale credit to the NGOs/cooperatives at the interest rate of
8.0 percent. However, 75 percent of the interest rate charged by the Fund is paid back to
the respective institution for its development provided that the borrowing institutions
repay the principal and interest timely. Thus, the net interest rate stands at only 2 percent
for the Fund. Further, of the total sanctioned credit, interest payment is exempted for 6
months on the first instalment of the credit.
11.6 Arrangements have been made to provide wholesale credit from the NRB through
Agriculture Development Bank and microcredit development banks to provide long term
capital to enterprises especially those pertaining to tea and big cardamom cultivation, and
cold storage since 2002/03. The Fund provided total credit of Rs. 50 million with Rs. 10
million each to Eastern Rural Development Bank, Central Rural Development Bank,
Mid-western Rural Development Bank and Rs. 30 million to Small Farmer Development
Bank as of mid-July 2008. The Eastern Rural Development Bank and Central Rural
Development Bank have repaid the entire amount whereas the credit amount of Rs. 3.3
million of Mid Western Rural Development Bank and Rs. 13.3 million of Small Farmer
Development Bank remained outstanding as at mid-July 2008. Further, credit amount of
Rs. 119.2 million provided to Agriculture Development Bank has remained outstanding
as of mid-July 2008.
11.7 As of mid-July 2008, credit disbursement of 53 NGOs and 281 cooperatives stood
at Rs. 193.5 million benefiting 14,862 households. Likewise, the loan recovery of 47
NGOs and 220 cooperatives aggregated Rs. 102.4 million in principal and Rs. 13.6
million in interest. Total investment in microfinance enterprises by 19 NGOs and 186
cooperatives remained at Rs. 91.1 million as of mid-July 2008 (Table 11.1)
Table11.1: Status of Microcredit Disbursement in 50 Districts as of Mid-July, 2008
Particulars NGOs Cooperatives Total
Credit Disbursement
a) Institutions 53 281 334
b) Credit amount (Rs. in thousand) 21196.0 172268.0 193464.0
c) Beneficiaries (households) 3958.0 10904.0 14862.0
Loan Recovery
a) Institutions 47 220 267
b) Principal (Rs. in thousand) 17366.0 85001.0 102367.0
c) Interest (Rs. in thousand) 2270.0 11314.0 13584.0
Investment
a) Institutions 19 186 205
b) Principal (Rs. in thousand) 3830.0 87267.0 91097.0
Due date
a) Institutions 17 59 76
b) Principal (Rs. in thousand) 2509.0 7640.0 10149.0
78 Economic Report

Activities of Rural Development Banks and Their Share Divestment


11.8 With a view to enhance the economic condition of rural people, especially women,
the Rural Development Banks established in the five development regions of the country
have extended the credit of Rs. 17.0 billion to 169,998 women members as of mid-July
2008. Of the total credit disbursed, Rs. 15.2 billion has been recovered while Rs. 1.8
billion has remained outstanding. As of mid-July 2008, these banks have provided
microfinance services in 1,092 Village Development Committees of 50 districts through
4,749 centres. These banks have played an instrumental role in reducing rampant poverty
by increasing income earning activities through micro-enterprises.
11.9 With an objective of privatising rural development banks, the NRB has sold 51
percent share out of 61 percent in Western Rural Development Bank to the private sector.
Likewise, the NRB has also divested the share of 34.95 percent in Eastern Rural
Development Bank and 74.0 percent in Central Rural Development Bank.
APPENDIX TABLE
Note
The following months of the Gregorian calendar year are the approximate equivalents of the
months of the Nepalese Calendar Year:

Gregorian Months Nepalese Months


Mid-Apr/Mid-May Baishakh
Mid-May/Mid-June Jestha
Mid-June/Mid-July Ashadh
Mid-July/Mid-Aug Shrawan
Mid-Aug/Mid-Sept Bhadra
Mid-Sept/Mid-Oct Ashwin
Mid-Oct/Mid-Nov Kartik
Mid-Nov/Mid-Dec Marg
Mid-Dec/Mid-Jan Paush
Mid-Jan/Mid-Feb Magh
Mid-Feb/Mid-Mar Falgun
Mid-Mar/Mid-Apr Chaitra

The fiscal year in Nepal generally begins on July 16 and ends on July 15.

Symbols Used
e = estimate
p = provisional
r = revised
- = nil or negligible
Table of Contents
Real Sector
1. Gross Domestic Product (at 2000/01 Prices)
2. Gross Domestic Product (at Current Prices)
3. Aggregate Demand and Supplys (at Current Prices)
4. Gross National Disposable Income and Saving
5. Agriculture Production Index
6. Production of Major Agricultural Commodities
7. Area under Major Agricultural Commodities
8. Production Yield of Principal Agriculture Commodities
9. Irrigation and Supply of Agricultural Inputs
10. Annual Manufacturing Production Index
11. Tourism Indicators
12. Generation, Imports and Exports of Electricity (GWH)
Price and Wage Rate
13. National Urban Consumer Price Index (Point to Point Change)
14. National Urban Consumer Price Index
15. Consumer Price Index : Kathmandu Valley
16. Consumer Price Index : Hills
17. Consumer Price Index : Terai
18. National Wholesale Price Index (By Groups and Sub-groups Commodities)
19. National Urban Consumer Price Index (Point to Point Annual Change)
20. National Salary and Wage Rate Index
21. National Wholesale Price Index (Point to Point Annual Change)
22. Townwise Average Wage Rate
Government Finance
23. Government Budgetary Operation
24. Revenue
25. Recurrent Expenditures
26. Capital Expenditure
27. Foreign Aid and Debt Servicing
28. Outstanding Internal and External Debt of GON
29. Ownership Pattern of Government Bonds
30. Ownership Pattern of Treasury Bills
31. Foreign Assistance
External Sector
32. Direction of Foreign Trade
33. Foreign Trade
34. Commoditywise Classification of Foreign Trade
35. Commoditywise Classification of Foreign Trade with India
36. Commoditywise Classification of Foreign Trade with Other Countries
37. Exports of Major Commodities to India
38. Imports of Major Commodities from India
39. Exports of Major Commodities to Other Countries
40. Imports of Major Commodities from Other Countries
41. Items Imported from India on Payment of Convertible Foreign Exchange
42. Summary of Balance of Payments
43. Receipts and Expenditure of Convertible Foreign Exchange
44. Foreign Assets and Liabilities of the Banking System
45. Gross Official Foreign Assets
46. Intervention in Foreign Exchange Market
47. Foreign Loan Agreements
48. Foreign Grant Agreements
49. Commitment of Foreign Aid in 2007/08
50. SDR Holding Transactions with the IMF
Monetary Sector
51. Monetary Survey
52. Monetary Authorities Account
53. Condensed Assets and Liabilities of Commercial Banks
54. Banking Survey
55. Interest Rate Structure of Commercial Banks
56. Credit-Deposit and Liquidity-Deposit Ratios of Commercial Banks
Financial Market
57. Stock Market Indicators
58. Consolidated Sources and Uses of Fund of Other Financial Institutions
59. Sources and Uses of Fund of Development Banks
60. Sources and Uses of Fund of Finance Companies
61. Status of Non-performance Loan of Development Banks and Finance
Companies
62. Sources and Uses of Fund of Rural Development Banks
63. Sources and Uses of Fund of Micro-Finance Development Banks
64. Sources and Uses of Funds of Cooperative Societies (with Limited Banking
Transaction)
65. Structure of Nepalese Financial System
66. Sources and Uses of Fund of Micro Finance NGO
67. Aggregate Sources and Uses of Fund of Insurance Companies
68. Sources and Uses of Fund of Employees Provident Fund
69. Sources and Uses of Fund of Citizen Investment Trust
Table 1
GROSS DOMESTIC PRODUCT
(at 2000/01 Prices)

Sector 2005/06 2006/07R 2007/08P 2006/07 2007/08


Rs. in million Percent change
Agriculture 183,015 184,795 195,280 1.0 5.7
Agriculture and Forestry 180,260 181,958 192,241 0.9 5.7
Fishery 2,755 2,838 3,039 3.0 7.1
Non-agriculture 316,499 329,493 347,799 4.1 5.6
Industry 83,499 86,792 88,360 3.9 1.8
Mining and Quarrying 2,348 2,383 2,451 1.5 2.8
Manufacturing 38,898 39,891 39,963 2.6 0.2
Electricity, Gas and Water 11,562 13,065 13,514 13.0 3.4
Construction 30,690 31,453 32,432 2.5 3.1
Service 233,000 242,701 259,439 4.2 6.9
Wholesale and Retail Trade 68,099 65,066 69,247 -4.5 6.4
Hotels and Restaurant 7,976 8,258 8,881 3.5 7.5
Transport, Storage and Communications 42,001 43,868 46,764 4.4 6.6
Financial Intermediation 19,843 22,103 25,155 11.4 13.8
Real Estate, Renting and Business 36,900 41,240 43,064 11.8 4.4
Public Administration and Defence 9,139 9,262 9,785 1.3 5.6
Education 28,640 30,426 31,831 6.2 4.6
Health and Social Work 6,470 6,904 7,414 6.7 7.4
Other Community, Social and Personal Service 13,933 15,574 17,298 11.8 11.1
GDP at basic price before duduction of FISIM 499,514 514,288 543,079 3.0 5.6
GDP at Basic Price 480409 492812 520212 2.6 5.6
GDP at Producers' Prices 514460 530890 555850 3.2 4.7
Share in GDP (%)
Agriculture 36.6 35.9 36.0 -1.9 0.1
Non-agriculture 63.4 64.1 64.0 1.1 0.0
Industry 16.7 16.9 16.3 1.0 -3.6
Service 46.6 47.2 47.8 1.2 1.2
GDP Deflator 1.2618 1.3552 1.4586 7.4 7.6
Per capita GDP (in Rs.) 20,042 20,289 20,816 1.2 2.6
R=Revised estimate, P=Preliminary estimate
Source: Central Bureau of Statistics
Table 2
GROSS DOMESTIC PRODUCT
(at Current Prices)

Sector 2005/06 2006/07R 2007/08P 2006/07 2007/08


Rupees in million Percent change
Agriculture 211,704 226,822 258,282 7.1 13.9
Agriculture and Forestry 208,591 223,535 254,453 7.2 13.8
Fishery 3,113 3,287 3,829 5.6 16.5
Non-agriculture 418,596 470,167 533,848 12.3 13.5
Industry 105,098 115,529 126,356 9.9 9.4
Mining and Quarrying 3,134 3,417 3,857 9.0 12.9
Manufacturing 47,840 52,172 55,900 9.1 7.1
Electricity, Gas and Water 13,172 14,841 15,556 12.7 4.8
Construction 40,952 45,099 51,044 10.1 13.2
Service 313,498 354,638 407,492 13.1 14.9
Wholesale and Retail Trade 90,214 93,749 107,731 3.9 14.9
Hotels and Restaurant 9,368 10,018 11,378 6.9 13.6
Transport, Storage and Communications 61,250 69,364 73,697 13.2 6.2
Financial Intermediation 21,979 28,539 37,666 29.8 32.0
Real Estate, Renting and Business 60,042 70,791 78,524 17.9 10.9
Public Administration and Defence 10,967 12,227 15,069 11.5 23.2
Education 34,996 40,517 47,455 15.8 17.1
Health and Social Work 7,842 8,956 10,786 14.2 20.4
Other Community, Social and Personal Service 16,840 20,476 25,186 21.6 23.0
GDP at basic price before duduction of FISIM 630,301 696,989 792,130 10.6 13.7
GDP at Basic Price 611089 675484 768832 10.5 13.8
GDP at Producers' Prices 654055 727089 820814 11.2 12.9
Share in GDP (%)
Agriculture 33.6 32.5 32.6 -3.1 0.2
Non-agriculture 66.4 67.5 67.4 1.6 -0.1
Industry 16.7 16.6 16.0 -0.6 -3.8
Service 49.7 50.9 51.4 2.3 1.1
Per Capita GDP (in Rs.) 25289 27497 30361 8.7 10.4
Per Capita GDP (in USD) 350 390 470 11.6 20.4
R=Revised estimate, P=Preliminary estimate.
Source: Central Bureau of Statistics.
Table 3
AGGREGATE DEMAND AND SUPPLY
(At Current Prices)

Description 2005/06 2006/07R 2007/08P 2006/07 2007/08 2006/07 2007/08


Rs. in million Percent change Percent of GDP
Nominal GDP at Producers' Prices 654,055 727,089 820,814 11.2 12.9 100.0 100.0
Domestic Demand 770,930 860,017 989,268 11.6 15.0 118.3 120.5
Total Consumption 595,327 656,276 726,685 10.2 10.7 90.3 88.5
Government 56,794 66,847 81,482 17.7 21.9 9.2 9.9
Private 527,814 576,914 631,231 9.3 9.4 79.3 76.9
Non-Profit Institutions 10,719 12,515 13,972 16.8 11.6 1.7 1.7
Gross Capital Formation 175,603 203,741 262,582 16.0 28.9 28.0 32.0
Gross Fixed Capital Formation 135,532 148,421 172,746 9.5 16.4 20.4 21.0
Government 17,509 20,843 25,521 19.0 22.4 2.9 3.1
Private 118,023 127,578 147,225 8.1 15.4 17.5 17.9
Change in Stock 40,071 55,320 89,836 38.1 62.4 7.6 10.9
Net External Demand (116,876) (132,928) (168,454) 13.7 26.7 -18.3 -20.5
Export of goods & non factor services 87,952 94,979 98,836 8.0 4.1 13.1 12.0
Import of goods & non factor services 204,828 227,907 267,290 11.3 17.3 31.3 32.6
R=Revised estimate, P=Preliminary estimate.
Source: Central Bureau of Statistics.
Table 4
GROSS NATIONAL DISPOSABLE INCOME AND SAVING
(At Current Prices)

2005/06 2006/07R 2007/08P 2006/07 2007/08 2006/07 2007/08


Rs. In million Percent change Percent of GDP
GDP at producers price 654,055 727,089 820,814 11.2 12.9 100.0 100.0
Net Factor Income 4,956 7,432 10,187 50.0 37.1 1.0 1.2
Gross National Income 659,010 734,521 831,001 11.5 13.1 101.0 101.2
Net Transfer 126146 128992 158381 2.3 22.8 17.7 19.3
Gross National Disposable Income 785,156 863,513 989,382 10.0 14.6 118.8 120.5
Gross Domestic Savings 58,727 70,813 94,129 20.6 32.9 9.7 11.5
Gross National Savings 189,828 207,236 262,697 9.2 26.8 28.5 32.0
Gross Capital Formation 175,603 203,741 262,582 16.0 28.9 28.0 32.0
Lending/Borrowing (Resource Gap) (+/-) 14,225 3,495 115 -75.4 -96.7 0.5 0.0
R = Revised estimate, P = Preliminary estimate.
Source: Central Bureau of Statistics.
Table 5
AGRICULTURAL PRODUCTION INDEX

Agricultural Commodities Weight 2005/06 2006/07 2007/08 2006/07 2007/08


Index Percent change
Cereals and Other Crops 49.41 111.08 108.13 115.99 -2.7 7.3
Paddy 20.75 99.83 87.30 101.96 -12.6 16.8
Maize 6.88 116.87 122.63 126.58 4.9 3.2
Wheat 7.14 120.40 130.86 135.77 8.7 3.8
Millet 1.37 102.86 100.69 102.92 -2.1 2.2
Barley/naked barley 0.22 91.14 92.80 92.11 1.8 -0.7
Potato 4.67 150.32 147.92 156.41 -1.6 5.7
Sugarcane 1.24 111.34 117.54 112.37 5.6 -4.4
Jute 0.17 104.32 93.74 96.27 -10.1 2.7
Tobacco 0.06 68.41 66.65 65.79 -2.6 -1.3
Soyabeans 0.19 111.84 119.98 117.97 7.3 -1.7
Pulses 4.42 109.34 112.18 110.29 2.6 -1.7
Others 2.29 98.68 95.97 93.59 -2.7 -2.5
Vegetables, Horticultural and Nursery Products
9.71 132.48 140.89 154.41 6.3 9.6
Total vegetables 9.70 132.49 140.89 154.44 6.3 9.6
Others 0.01 120.26 118.01 115.81 -1.9 -1.9
Fruit, Nuts Beverage and Spice Crops 7.04 130.78 138.42 145.89 5.8 5.4
Orange 0.97 127.20 146.10 157.63 14.9 7.9
Mango 1.56 107.72 113.51 110.79 5.4 -2.4
Banana 0.40 102.92 108.86 117.45 5.8 7.9
Apple 0.42 107.36 108.62 117.19 1.2 7.9
Spice Crops 1.79 186.11 193.35 211.85 3.9 9.6
Tea 0.05 208.90 225.97 243.45 8.2 7.7
Coffee 0.004 337.08 402.25 561.80 19.3 39.7
Others 1.85 107.26 112.36 114.56 4.8 2.0
Farming of Domestic Animals 23.25 114.55 118.13 121.18 3.1 2.6
Buffaloes' Meat 4.42 113.77 117.77 121.50 3.5 3.2
Mutton 3.24 112.14 117.37 120.42 4.7 2.6
Milk 12.36 116.58 119.96 123.18 2.9 2.7
Others 3.23 110.27 112.40 113.83 1.9 1.3
Other Animals Farming ; Production of
Animals Products 2.43 111.03 119.69 123.39 7.8 3.1
Pigs' Meat 0.50 103.50 105.24 107.78 1.7 2.4
Poultry Meat 0.67 116.90 120.77 124.47 3.3 3.1
Eggs 0.81 118.43 121.19 124.43 2.3 2.67
Hides and skins 0.35 99.82 144.01 151.57 44.3 5.2
Others 0.10 89.31 89.48 89.48 0.2 0.0
Forestry, Logging and Related Services
Activities 8.07 102.47 104.24 104.45 1.7 0.2
Timber 1.09 102.77 105.52 107.80 2.7 2.2
Firewood 4.94 100.86 100.64 99.43 -0.2 -1.2
Medicinal/herbal products 0.02 112.23 114.26 112.53 1.8 -1.5
Others 2.03 106.14 112.22 114.77 5.7 2.3
Overall Index 100.00 114.64 115.72 122.26 0.9 5.7
Source: Central Bureau of Statistics.
Table 6
PRODUCTION OF MAJOR AGRICULTURAL COMMODITIES

Agricultural Commodities 2005/06 2006/07 2007/08 2006/07 2007/08


In thousand MT Percent Change
Cereals and Other Crops
Paddy 4209.3 3,680.8 4,299.2 -12.6 16.8
Maize 1734.4 1819.9 1,878.6 4.9 3.2
Wheat 1394.1 1515.1 1,572.1 8.7 3.8
Millet (Kodo) 290.9 284.8 291.1 -2.1 2.2
Barley 27.8 28.3 28.1 1.8 -0.7
Potato 1974.8 1943.2 2,054.8 -1.6 5.7
Sugarcane 2462.6 2599.8 2,485.4 5.6 -4.4
Jute 20.3 18.3 18.8 -10.1 2.7
Tobacco 2.7 2.6 2.6 -2.6 -1.3
Oil Seeds 139.3 135.7 134.3 -2.6 -1.0
Pulses 256.9 263.6 259.1 2.6 -1.7
Vegetables, Fruits and Spice Crops
Vegetables 2183.0 2320.5 2,543.3 6.3 9.6
Fruits 534.9 562.0 606.3 5.1 7.9
Tea 13.9 15.0 16.2 8.2 7.7
Livestock
Milk 1312.1 1350.2 1,386.6 2.9 2.7
Meat 219.2 227.1 233.9 3.6 3.0
Eggs (in million no) 597.9 611.7 628.2 2.3 2.7
Fishery 45.8 46.8 51.1 2.3 9.2
Source : Ministry of Agriculture and Cooperatives.
Table 7
AREA UNDER MAJOR AGRICULTURAL COMMODITIES

Agricultural Commodities 2005/06 2006/07 2007/08 2006/07 2007/08


In thousand hectare Percent Change
Cereals and Other Crops 4090.1 4040.0 4152.2 -1.2 2.8
Paddy 1549.4 1439.5 1549.3 -7.1 7.6
Maize 850.9 870.4 870.2 2.3 0.0
Wheat 672.0 702.7 706.5 4.6 0.5
Millet 261.7 265.2 265.5 1.3 0.1
Barley 26.2 26.6 26.1 1.3 -1.8
Potato 150.9 153.5 156.7 1.8 2.1
Sugarcane 62.1 64.0 63.0 3.2 -1.7
Jute 12.4 11.7 11.6 -6.1 -0.8
Tobacco 2.7 2.7 2.7 -0.5 -1.5
Oil Seeds 188.1 184.2 180.3 -2.0 -2.1
Pulses 313.6 319.6 320.4 1.9 0.3

Vegetables, Fruits and Spice Crops 262.8 271.7 295.0 3.4 8.6
Vegetables 189.8 198.3 220.1 4.5 11.0
Fruits 56.4 56.9 57.4 0.8 0.9
Tea 16.5 16.5 17.5 0.0 6.1
Source : Ministry of Agriculture and Cooperatives.
Table 8
PRODUCTION YIELD OF MAJOR AGRICULTURAL COMMODITIES

Agricultural Commodities 2005/06 2006/07 2007/08 2006/07 2007/08


Per hectare production in MT Percent change
Cereals and Other Crops
Paddy 2.72 2.56 2.78 -5.9 8.5
Maize 2.04 2.09 2.16 2.6 3.3
Wheat 2.07 2.16 2.23 3.9 3.2
Millet 1.11 1.07 1.10 -3.4 2.1
Barley 1.06 1.06 1.08 0.5 1.1
Potato 13.09 12.66 13.11 -3.3 3.6
Sugarcane 39.68 40.61 39.48 2.3 -2.8
Jute 1.63 1.57 1.62 -4.2 3.5
Tobacco 0.99 0.97 0.97 -2.1 0.2
Oil Seeds 0.74 0.74 0.74 -0.6 1.1
Pulses 0.82 0.82 0.81 0.7 -2.0
Vegetables, Fruits and Spice Crops
Vegetables 8.31 8.54 8.62 2.8 1.0
Fruits 2.82 2.83 2.76 0.6 -2.8
Tea 0.25 0.26 0.28 7.3 6.8
Source : Ministry of Agriculture and Cooperatives.
Table 9
IRRIGATION AND SUPPLY OF AGRICULTURAL INPUTS

Unit 2005/06 2006/07 2007/08 2006/07 2007/08


Percent Change
Total Irrigated Land* Thousand Hect. 1166 1195 1202 2.4 0.6
Chemical Fertilizers MT 91360 90850 53640 -0.6 -41.0
D.A.P. ,, 29131 19074 10066 -34.5 -47.2
Urea ,, 19099 30842 6126 61.5 -80.1
MOP ,, 686 2 0 -99.7 -100.0
A/S ,, 8119 4170 5222 -48.6 25.2
APS ,, 17324 30212 27220 74.4 -9.9
NP ,, 1040 333 508 -68.0 52.6
SSP ,, 3393 1005 1226 -70.4 22.0
Complex ,, 12568 5212 3272 -58.5 -37.2
Improved Seeds MT 3,551.1 3,157.7 3,802.3 -11.1 20.4
Paddy ,, 643.7 661.2 896.6 2.7 35.6
Maize ,, 10.7 5.8 0.6 -45.7 -89.7
Wheat ,, 2,859.2 2,450.7 2,882.9 -14.3 17.6
Others ,, 37.4 40.0 22.2 6.8 -44.6
* Includes areas covered by both Department of Irrigation and ADB/N.
Source: Ministry of Agriculture & Co-operatives and Department of Irrigation.
Table 10
ANNUAL MANUFACTURING PRODUCTION INDEX
(2003/04=100)

Description Weight * 2005/06 2006/07 2007/08** 2006/07 2007/08


Index % Change
Overall Index of Manufacturing Production 100.00 104.7 107.4 106.4 2.6 -0.9
Vegetable,Oils & Fats 15.78 108.7 108.4 93.1 -0.3 -14.1
Vegetable ghee 10.08 111.9 104.7 81.0 -6.5 -22.6
Mustard oil 1.95 93.0 104.0 100.7 11.7 -3.1
Soyabean oil 3.74 108.6 121.1 122.1 11.5 0.8
Dairy products 2.77 105.0 107.4 108.5 2.3 1.0
Processed Milk 2.77 105.0 107.4 108.5 2.3 1.0
Grain mill products, prepared animal feeds 8.16 106.5 115.0 119.0 8.0 3.5
Rice 4.33 104.8 111.8 116.7 6.6 4.5
Wheat flour 2.19 108.4 111.5 114.9 2.8 3.0
Animal feed 1.63 108.8 129.0 131.3 18.6 1.8
Other food products 7.93 110.2 118.2 125.0 7.2 5.8
Biscuit 1.04 112.3 116.5 123.9 3.8 6.3
Sugar 2.92 106.2 118.3 123.9 11.3 4.8
Noodles 2.72 112.4 117.7 122.8 4.7 4.3
Processed tea 1.25 113.0 120.3 133.5 6.4 11.0
Beverages 6.59 106.9 118.6 123.7 11.0 4.2
Liquor rectified 2.39 105.2 117.2 120.6 11.4 2.9
Beer 2.92 108.2 122.0 127.4 12.8 4.4
Soft drink 1.28 107.2 113.4 120.8 5.8 6.5
Tobacco products 6.53 99.7 102.7 105.5 3.1 2.7
Cigarette 6.53 99.7 102.7 105.5 3.1 2.7
Textiles 5.2 111.8 121.1 121.4 8.3 0.3
Yarn 3.18 118.1 130.9 131.4 10.8 0.4
Cotton clothes 1.27 103.4 107.6 106.1 4.1 -1.4
Synthetic clothes 0.75 99.6 102.3 105.1 2.8 2.7
Other Textiles 6.59 108.7 101.9 99.7 -6.3 -2.1
Woolen carpet 4.32 106.9 96.6 90.2 -9.6 -6.6
Jute goods 2.27 112.2 111.9 117.8 -0.3 5.3
Knitted and crocheted fabrics 1.18 97.1 88.2 90.4 -9.2 2.5
Pashmina 1.18 97.1 88.2 90.4 -9.2 2.5
Wearing apparel 7.14 68.1 59.4 50.5 -12.8 -15.0
Garment 7.14 68.1 59.4 50.5 -12.8 -15.0
Tanning and dressing of leather 0.92 111.0 121.0 122.1 9.0 0.9
Processed leather 0.92 111.0 121.0 122.1 9.0 0.9
Saw milling and planning of wood 0.95 99.0 101.9 104.2 2.9 2.3
Wood sawn 0.95 99.0 101.9 104.2 2.9 2.3
Paper & paper products 1.42 105.9 110.6 112.2 4.5 1.5
Paper excluding newsprint 1.42 105.9 110.6 112.2 4.5 1.5
Publishing Printing and reproducing of recorded Media 1.58 105.7 106.1 109.4 0.3 3.1
Newspaper 1.58 105.7 106.1 109.4 0.3 3.1
Other chemical products 10.34 111.7 122.5 126.5 9.7 3.2
Medicine 7.01 108.9 120.3 125.2 10.5 4.1
Soap 3.33 117.5 127.2 129.3 8.2 1.6
Plastic product 4.75 103.3 96.2 87.7 -6.9 -8.7
Plastic product 4.75 103.3 96.2 87.7 -6.9 -8.7
Non-metallic mineral products 5.34 107.7 104.1 103.5 -3.3 -0.5
Bricks 2.42 107.5 95.6 101.7 -11.1 6.4
Cement 2.92 107.9 111.1 105.1 3.0 -5.4
Other fabricated metal product 3.7 109.8 118.5 137.3 7.9 15.9
Iron rod & billets 3.7 109.8 118.5 137.3 7.9 15.9
Casting of metal 1.45 101.6 99.5 95.0 -2.0 -4.6
Domestic metal product 1.45 101.6 99.5 95.0 -2.0 -4.6
Electric machinary apparatus, wire and cable 1.68 108.6 108.5 108.5 0.0 0.0
Electrical wire & cable 1.68 108.6 108.5 108.5 0.0 0.0
*Weights are based on Census of Manufacturing Establishments (CME) 2001/2002.
**Revised.
Source: Central Bureau of Statistics.
Table 11
TOURISM INDICATORS

2005 2006 2007 2006 2007


Percent change
Tourist Arrivals (in no. of persons) 375,398 383,926 526,705 2.3 37.2
India 96,434 93,722 96,010 -2.8 2.4
Third Country 278,964 290,204 430,695 4.0 48.4
By Air 277,346 283,819 360,713 2.3 27.1
By Land 98,052 100,107 165,992 2.1 65.8
Tourism Earnings (Rs. in million)* 9,555.8 10,125.3 18,653.1 6.0 84.2
Average Duration of Stay (in days) 9.1 10.2 12.0 12.1 17.3
Per Capita Expenditure (in rupees) 25,455.1 26,373.1 35,414.7 3.6 34.3
Number of Hotel Beds 39,384 24,260 24,681 -38.4 1.7
* Data correspond to Nepali fiscal year.
Source : Ministry of Tourism and Civil Aviation and Nepal Rastra Bank.
Table 12
GENERATION, IMPORTS AND EXPORTS OF ELECTRICITY (GWH)

Percent Change
Year Generation Imports Exports Generation Imports Exports
2005/06 2514.7 266.2 96.6 4.7 10.3 -12.7

2006/07 2723.0 328.8 76.9 8.3 23.5 -20.4

2007/08 2768.3 412.4 31.5 1.7 25.4 -59.0


Source: Nepal Electricity Authority, Annual Report 2007-08
Table 13
NATIONAL URBAN CONSUMER PRICE INDEX
( 1995/96 = 100)
( Point to Point Annual Changes)

FY 2007/08
FOOD & BEVERAGES NON-FOOD & SERVICES OVERALL INDEX
MONTHS INDEX %CHANGES INDEX % CHANGES INDEX % CHANGES
JUL/AUG 191.9 9.7 197.9 2.8 194.7 6.3

AUG/SEP 197.4 10.9 198.1 2.8 197.8 7.0

SEP/OCT 199.2 9.5 198.2 2.9 198.7 6.3

OCT/NOV 196.4 8.4 201.4 4.1 198.7 6.3

NOV/DEC 191.4 7.1 201.5 4.1 196.1 5.7

DEC/JAN 187.7 7.3 201.7 4.1 194.3 5.8

JAN/FEB 189.3 7.9 204.3 4.8 196.3 6.4

FEB/MAR 193.1 9.4 204.5 4.9 198.4 7.2

MAR/APR 200.4 12.6 204.6 4.9 202.4 8.9

APR/MAY 203.6 13.0 205.7 5.3 204.6 9.2

MAY/JUN 204.3 13.0 212.9 9.0 208.3 11.0

JUN/JUL 208.6 12.9 217.5 11.3 212.7 12.1

ANNUAL 196.9 10.1 204.0 5.1 200.2 7.7


Table 14
NATIONAL URBAN CONSUMER PRICE INDEX
Base:1995/96=100

Weight 2059/60 2060/61 2061/62 2062/63 2063/64 2064/65


% 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 column 2 column 3 column 4 column 5 column 6
Groups & Sub-groups of the commodities 1 2 3 4 5 6 over 1 over 2 over 3 over 4 over 5
ALL ITEMS 100.00 148.9 154.8 161.8 174.7 185.9 200.2 4.0 4.5 8.0 6.4 7.7
Food and Beverages 53.20 144.0 148.8 154.7 166.8 178.8 196.9 3.3 4.0 7.8 7.2 10.1
Grains and Cereals Products 18.00 138.2 139.8 145.1 164.6 175.1 200.7 1.2 3.8 13.4 6.4 14.6
Rice and Rice Products (14.16) 136.6 138.0 142.4 163.6 168.1 197.2 1.0 3.2 14.9 2.8 17.3
Pulses 2.73 125.3 126.1 131.6 150.4 175.9 200.8 0.6 4.4 14.3 17.0 14.2
Vegetables, Fruits and Nuts 7.89 135.7 140.3 146.9 153.8 170.8 181.7 3.4 4.7 4.7 11.1 6.4
Spices 1.85 142.3 148.0 146.5 149.1 182.6 189.2 4.0 -1.0 1.8 22.5 3.6
Meat, Fish and Eggs 5.21 148.2 158.3 168.5 174.8 186.3 200.7 6.8 6.4 3.7 6.6 7.7
Milk and Milk Products 4.05 147.8 150.4 151.1 158.1 169.9 182.8 1.8 0.5 4.6 7.5 7.6
Oil and Ghee 3.07 136.9 153.7 150.8 147.4 157.3 190.1 12.3 -1.9 -2.3 6.7 20.9
Sugar and Related Products 1.21 124.4 123.9 154.6 163.7 152.0 136.7 -0.4 24.8 5.9 -7.1 -10.1
Beverages 2.28 161.6 162.1 165.0 180.7 188.1 192.5 0.3 1.8 9.5 4.1 2.3
Restaurant Meals 6.91 174.1 183.2 192.6 204.0 210.7 225.7 5.2 5.1 5.9 3.3 7.1
Non-food and Services 46.80 154.6 161.8 170.1 183.9 194.1 204.0 4.7 5.1 8.1 5.5 5.1
Cloth, Clothing & Sewing Services 8.92 135.7 138.1 141.5 145.4 148.6 152.2 1.8 2.5 2.8 2.2 2.4
Cloths (2.28) 124.6 126.3 130.7 133.7 135.6 136.0 1.4 3.5 2.3 1.4 0.3
Clothings (5.75) 136.6 138.1 140.5 144.6 147.9 151.8 1.1 1.7 2.9 2.3 2.6
Footwear 2.20 132.7 133.3 133.9 137.8 143.5 151.9 0.5 0.5 2.9 4.1 5.9
Housing 14.87 153.0 163.1 178.1 200.9 215.4 230.4 6.6 9.2 12.8 7.2 7.0
Fuel, Light and Water (5.92) 182.6 200.8 230.3 277.6 301.5 326.9 10.0 14.7 20.5 8.6 8.4
Transport and Communication 4.03 172.2 185.2 198.2 232.8 254.8 260.6 7.5 7.0 17.5 9.5 2.3
Medical and Personal Care 8.03 163.2 169.3 172.1 176.5 181.0 190.0 3.7 1.7 2.6 2.5 5.0
Education, Reading and Recreation 7.09 174.1 182.1 190.1 200.0 211.8 222.0 4.6 4.4 5.2 5.9 4.8
Tobacco and Related Products 1.66 150.5 153.2 156.2 163.1 173.1 185.9 1.8 2.0 4.4 6.1 7.4
Table 15
CONSUMER PRICE INDEX: KATHMANDY VALLEY
Base:1995/96=100

2060/61 2061/62 2062/63 2063/64 2064/65 Percentage Change


Groups & Sub-groups of the commodities
2003/04 2004/05 2005/06 2006/07 2007/08 2004/05 2005/06 2006/07 2007/08
ALL ITEMS 150.1 157.6 167.8 178.0 190.9 5.0 6.5 6.1 7.2
Food and Beverages 145.6 151.8 159.5 169.4 185.9 4.3 5.1 6.2 9.7
Grains and Cereals Products 146.9 151.7 162.9 172.1 192.4 3.3 7.4 5.6 11.8
Rice and Rice Products 150.6 155.1 167.4 172.4 196.2 3.0 7.9 3.0 13.8
Pulses 114.2 119.6 145.6 171.9 186.1 4.7 21.7 18.1 8.3
Vegetables, Fruits and Nuts 133.7 135.7 140.2 151.8 167.8 1.5 3.3 8.3 10.5
Spices 141.8 143.6 140.4 167.4 176.0 1.3 -2.2 19.2 5.1
Meat, Fish and Eggs 153.4 169.1 174.2 187.4 202.8 10.2 3.0 7.6 8.2
Milk and Milk Products 134.5 137.2 145.0 155.1 173.3 2.0 5.7 7.0 11.7
Oil and Ghee 149.8 146.6 143.0 153.8 188.5 -2.1 -2.5 7.6 22.6
Sugar and Related Products 127.9 164.3 170.9 159.8 145.5 28.5 4.0 -6.5 -8.9
Beverages 136.6 142.0 147.3 150.2 155.5 4.0 3.7 2.0 3.5
Restaurant Meals 171.2 179.7 187.1 191.5 205.1 5.0 4.1 2.4 7.1
Other Goods and Services 155.0 163.8 176.7 187.2 196.1 5.7 7.9 5.9 4.8
Cloth, Clothing & Sewing Services 139.0 145.5 148.3 152.1 155.4 4.7 1.9 2.6 2.2
Cloths 130.8 140.5 146.1 146.5 146.2 7.4 4.0 0.3 -0.2
Clothings 135.5 140.4 142.3 146.5 150.1 3.6 1.4 3.0 2.5
Footwear 133.9 135.1 136.6 143.8 151.6 0.9 1.1 5.3 5.4
Housing 158.4 172.6 192.0 204.7 217.5 9.0 11.2 6.6 6.3
Fuel, Light and Water 208.9 241.8 291.1 313.7 340.5 15.7 20.4 7.8 8.5
Transport and Communication 172.7 190.4 227.6 244.1 254.3 10.2 19.5 7.2 4.2
Medical and Personal Care 172.4 174.1 175.3 179.1 185.8 1.0 0.7 2.2 3.7
Education, Reading and Recreation 150.0 157.4 172.7 189.8 197.9 4.9 9.7 9.9 4.3
Tobacco and Related Products 136.5 138.6 144.4 157.2 173.3 1.5 4.2 8.9 10.2
Domestic Index 148.1 154.4 163.3 172.6 184.7 4.3 5.8 5.7 7.0
Imported Goods 158.9 171.3 187.5 201.6 217.4 7.8 9.5 7.5 7.8
Tradable Index 146.5 154.1 163.7 174.3 189.4 5.2 6.2 6.5 8.7
Non-tradable Index 158.1 165.4 177.0 186.3 194.1 4.6 7.0 5.3 4.2
Government Control Index 160.5 177.6 205.2 221.9 237.6 10.7 15.5 8.1 7.1
Non-control Index 148.0 153.5 160.1 169.0 181.2 3.7 4.3 5.6 7.2
Table 16
CONSUMER PRICE INDEX: HILLS
Base:1995/96=100

2060/61 2061/62 2062/63 2063/64 2064/65 Percentage Change


Groups & Sub-groups of the commodities
2003/04 2004/05 2005/06 2006/07 2007/08 2004/05 2005/06 2006/07 2007/08
ALL ITEMS 156.6 163.5 177.5 188.2 202.2 4.4 8.6 6.0 7.5
Food and Beverages 153.0 158.8 171.5 183.4 201.7 3.8 8.0 6.9 10.0
Grains and Cereals Products 134.1 139.6 158.6 168.4 194.4 4.1 13.6 6.2 15.4
Rice and Rice Products 130.3 133.7 154.9 161.9 190.9 2.6 15.9 4.5 17.9
Wheat and Wheat Flour 147.6 164.3 186.7 226.5 236.7 11.3 13.6 21.3 4.5
Other Grains and Cereal products 147.5 159.0 165.7 178.4 195.6 7.8 4.2 7.7 9.6
Pulses 127.7 133.4 158.9 190.3 213.1 4.5 19.1 19.8 12.0
Vegetables, Fruits and Nuts 146.7 152.8 160.0 174.1 183.2 4.2 4.7 8.8 5.2
All Vegetables 144.5 147.9 156.0 171.7 182.0 2.4 5.5 10.1 6.0
Vegetables without Leafy Green 136.8 139.7 147.9 165.7 175.6 2.1 5.9 12.0 6.0
Leafy Green Vegetables 184.3 190.2 197.5 202.7 214.2 3.2 3.8 2.6 5.7
Fruits and Nuts 154.2 169.8 174.2 182.4 187.5 10.1 2.6 4.7 2.8
Fruits 154.2 168.8 172.6 182.0 188.8 9.5 2.3 5.4 3.7
Nuts 153.9 202.6 224.9 193.4 144.9 31.6 11.0 -14.0 -25.1
Spices 153.2 155.4 160.0 187.2 197.8 1.4 3.0 17.0 5.7
Meat, Fish and Eggs 161.9 169.6 176.0 186.8 203.1 4.8 3.8 6.1 8.7
Milk and Milk Products 163.3 164.2 171.5 189.7 203.1 0.6 4.4 10.6 7.1
Oil and Ghee 150.0 152.5 150.2 157.1 188.9 1.7 -1.5 4.6 20.2
Sugar and Related Products 124.0 157.0 166.5 154.2 138.9 26.6 6.1 -7.4 -9.9
Beverages 185.1 187.2 213.2 216.8 225.4 1.1 13.9 1.7 4.0
Non Alcoholic Beverages 115.0 123.6 129.8 130.5 134.3 7.5 5.0 0.5 2.9
Alcoholic Beverages 209.9 209.7 242.9 247.4 257.8 -0.1 15.8 1.9 4.2
Restaurant Meals 206.2 213.9 225.2 235.0 250.0 3.7 5.3 4.4 6.4
Other Goods and Services 160.8 168.8 184.2 193.7 202.9 5.0 9.1 5.2 4.7
Cloth, Clothing & Sewing Services 126.8 129.9 136.4 139.4 142.6 2.4 5.0 2.2 2.3
Cloths 107.0 110.2 109.4 109.1 109.6 3.0 -0.7 -0.3 0.5
Clothings 128.3 130.4 140.7 145.6 147.9 1.6 7.9 3.5 1.6
Sewing Services 174.4 182.9 186.9 188.3 205.0 4.9 2.2 0.7 8.9
Footwear 129.7 133.4 142.9 147.0 151.0 2.9 7.1 2.9 2.7
Housing 162.4 176.9 199.2 214.5 227.7 8.9 12.6 7.7 6.2
House Furnishing and Household Goods 131.6 136.7 143.3 154.6 160.7 3.9 4.8 7.9 3.9
House Rent 153.0 159.2 166.6 175.7 184.3 4.1 4.6 5.5 4.9
Cleaning Supplies 133.7 135.7 139.2 149.6 168.6 1.5 2.6 7.5 12.7
Fuel, Light and Water 195.6 223.8 268.8 291.2 310.5 14.4 20.1 8.3 6.6
Transport and Communication 206.4 221.6 266.2 298.4 299.4 7.4 20.1 12.1 0.3
Transport 219.8 237.6 289.3 326.9 328.1 8.1 21.8 13.0 0.4
Public Transport 222.9 241.6 296.6 337.0 336.8 8.4 22.8 13.6 -0.1
Private Transport 182.6 188.6 201.9 206.2 224.2 3.3 7.1 2.1 8.7
Communication 127.1 127.9 130.2 130.2 130.2 0.6 1.8 0.0 0.0
Medical and Personal Care 163.8 165.9 175.0 179.9 189.9 1.3 5.5 2.8 5.6
Medical Care 166.0 167.2 177.9 183.8 196.0 0.7 6.4 3.3 6.6
Personal Care 155.2 161.0 163.6 164.7 166.0 3.7 1.6 0.7 0.8
Education, Reading and Recreation 185.6 192.2 203.1 205.9 217.9 3.6 5.7 1.4 5.8
Education 220.2 229.3 244.2 248.4 266.9 4.1 6.5 1.7 7.4
Reading and Recreation 121.6 123.5 127.6 127.1 127.4 1.6 3.3 -0.4 0.2
Religious Activities 157.1 163.6 167.3 171.8 176.4 4.1 2.3 2.7 2.7
Tobacco and Related Products 155.0 162.0 171.5 181.7 195.7 4.5 5.9 5.9 7.7
Table 17
CONSUMER PRICE INDEX: TERAI
Base:1995/96=100

2060/61 2061/62 2062/63 2063/64 2064/65 Percentage Change


Groups & Sub-groups of the commodities
2003/04 2004/05 2005/06 2006/07 2007/08 2004/05 2005/06 2006/07 2007/08
ALL ITEMS 156.9 163.8 177.9 189.9 205.2 4.4 8.6 6.7 8.1
Food and Beverages 149.2 155.0 169.5 182.8 201.9 3.9 9.4 7.8 10.5
Grains and Cereals Products 137.7 143.1 168.0 179.4 208.0 3.9 17.4 6.8 15.9
Rice and Rice Products 133.1 137.9 164.5 167.7 200.1 3.6 19.3 1.9 19.3
Pulses 132.7 138.3 150.1 173.0 205.3 4.2 8.5 15.3 18.7
Vegetables, Fruits and Nuts 141.9 151.6 159.8 181.2 189.7 6.8 5.4 13.4 4.7
Spices 149.7 145.0 150.5 190.3 194.2 -3.1 3.8 26.4 2.0
Meat, Fish and Eggs 159.9 167.7 174.7 185.5 198.5 4.9 4.2 6.2 7.0
Milk and Milk Products 155.3 154.7 161.1 171.6 181.1 -0.4 4.1 6.5 5.5
Oil and Ghee 157.3 152.7 149.0 159.4 191.5 -2.9 -2.4 7.0 20.1
Sugar and Related Products 121.4 147.8 158.2 146.4 130.5 21.7 7.0 -7.5 -10.9
Beverages 169.2 170.8 189.0 200.7 202.9 0.9 10.7 6.2 1.1
Restaurant Meals 181.9 192.5 206.5 213.4 229.3 5.8 7.3 3.3 7.5
Other Goods and Services 166.4 174.5 188.1 198.6 209.3 4.9 7.8 5.6 5.4
Cloth, Clothing & Sewing Services 141.7 143.3 147.0 149.9 153.9 1.1 2.6 2.0 2.7
Cloths 130.8 132.4 135.0 138.8 139.6 1.2 2.0 2.8 0.6
Clothings 143.4 144.3 147.5 149.5 154.2 0.6 2.2 1.4 3.1
Footwear 134.2 133.3 136.7 141.9 152.5 -0.7 2.6 3.8 7.5
Housing 166.1 182.0 206.9 222.3 239.2 9.6 13.7 7.4 7.6
Fuel, Light and Water 197.7 225.7 272.6 297.9 324.6 14.2 20.8 9.3 9.0
Transport and Communication 185.0 194.3 223.6 245.2 249.9 5.0 15.1 9.7 1.9
Medical and Personal Care 169.5 173.1 177.8 182.5 192.5 2.1 2.7 2.6 5.5
Education, Reading and Recreation 200.5 209.3 215.5 227.5 238.4 4.4 3.0 5.6 4.8
Tobacco and Related Products 162.7 164.8 171.4 179.5 189.9 1.3 4.0 4.7 5.8
Table 18
NATIONAL WHOLESALE PRICE INDEX
(By Groups and Sub-groups of Commodities)
(1999/2000 = 100)

Percentage Change
Groups and Sub-groups Weight % 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08
2/1 3/2 4/3 5/4 6/5
1 2 3 4 5 6
Overall Index 100.0 110.4 114.9 123.3 134.3 146.4 159.7 4.1 7.3 8.9 9.0 9.1
Agricultural Commodities 49.6 109.6 111.9 118.5 130.2 145.3 159.1 2.1 5.9 9.9 11.6 9.5
Foodgrains 16.6 95.3 93.7 102.4 119.0 131.9 148.9 -1.7 9.3 16.2 10.9 12.9
Cash Crops 6.1 131.7 120.5 147.3 159.4 183.0 191.8 -8.5 22.2 8.2 14.8 4.8
Pulses 3.8 114.5 115.3 118.7 136.4 164.2 186.1 0.7 2.9 14.9 20.4 13.3
Fruits and Vegetables 11.2 112.3 121.3 114.7 120.7 131.7 146.7 8.0 -5.4 5.2 9.1 11.4
Spices 1.9 97.8 106.1 102.0 108.5 132.5 129.2 8.5 -3.9 6.4 22.1 -2.5
Livestock Production 10.0 117.2 126.2 134.8 143.8 155.0 165.9 7.7 6.8 6.7 7.8 7.0
Domestic Manufactured Commodities 20.4 108.4 114.5 121.6 126.0 136.7 148.7 5.6 6.2 3.6 8.5 8.8
Food Related Products 6.1 107.2 109.0 112.0 116.4 125.9 138.0 1.7 2.8 3.9 8.2 9.6
Beverages and Tobacco 5.7 112.1 116.3 122.2 128.2 135.2 143.3 3.7 5.1 4.9 5.4 6.0
Construction Materials 4.5 109.5 126.4 145.9 149.1 172.3 196.1 15.4 15.4 2.2 15.6 13.8
Others 4.1 104.0 107.3 108.5 111.9 115.9 120.2 3.2 1.1 3.1 3.6 3.7
Imported Commodities 30.0 113.1 120.1 132.3 146.5 154.7 168.0 6.2 10.2 10.7 5.6 8.6
Petrolium Products and Coal 5.4 141.0 158.3 196.2 244.5 267.3 298.9 12.3 23.9 24.6 9.3 11.8
Chemical Fertilizers and Chemical Goods 2.5 122.9 127.6 143.1 162.1 169.5 194.6 3.8 12.1 13.2 4.6 14.8
Transport Vehicles and Machinery Goods 7.0 102.9 108.3 117.3 125.3 128.2 138.1 5.2 8.3 6.8 2.3 7.7
Electric and electronic Goods 1.9 97.6 96.1 96.7 96.2 95.6 95.2 -1.5 0.6 -0.6 -0.6 -0.4
Drugs and Medicine 2.7 103.2 107.0 108.3 111.7 113.5 116.2 3.7 1.2 3.2 1.6 2.4
Textile related Products 3.1 105.8 110.8 113.2 111.4 110.7 108.1 4.7 2.2 -1.6 -0.6 -2.3
Others 7.4 109.9 115.9 122.2 130.4 141.5 154.6 5.5 5.4 6.7 8.5 9.3
Table 19
NATIONAL URBAN CONSUMER PRICE INDEX
( 1995/96 = 100)
( Point to Point Annual Changes)

2005/06 2006/07 2007/08P

Months Index %Changes Index %Changes Index % Changes

170.7 7.3 183.1 7.3 194.7 6.3


Jul/Aug
173.3 8.2 184.8 6.6 197.8 7.0
Aug/Sep
173.8 7.8 186.9 7.5 198.7 6.3
Sep/Oct
174.5 8.5 186.9 7.1 198.7 6.3
Oct/Nov
173.0 8.8 185.6 7.3 196.1 5.7
Nov/Dec
170.6 7.0 183.6 7.6 194.3 5.8
Dec/Jan
170.8 5.8 184.5 8.0 196.3 6.4
Jan/Feb
174.3 7.7 185.1 6.2 198.4 7.2
Feb/Mar
176.0 7.9 185.9 5.6 202.4 8.9
Mar/Apr
179.0 9.1 187.3 4.6 204.6 9.2
Apr/May
179.6 9.1 187.6 4.5 208.3 11.0
May/Jun
180.6 8.3 189.8 5.1 212.7 12.1
Jun/Jul
Annual 174.7 8.0 185.9 6.4 200.2 7.7
Table 20
NATIONAL SALARY AND WAGE RATE INDEX
(2004/05=100)

Weight 2005/06 2006/07 2007/08 Percentage Change


S.No. Groups/Sub-groups
% Annual Annual Annual
5 over 4 6 over 5
1 2 3 4 5 6
Overall Index 100.00 103.9 114.1 125.2 9.8 9.7
1 Salary Index 26.97 100.3 106.6 118.2 6.3 10.9

Officers 9.80 100.2 105.8 121.0 5.6 14.4


Non Officers 17.17 100.3 107.1 116.6 6.8 8.9
1.1 Civil Service 2.82 100.0 110.0 135.8 10.0 23.5
Officers 0.31 100.0 110.0 137.3 10.0 24.8
Non Officers 2.51 100.0 110.0 135.6 10.0 23.3
1.2 Public Corporations 1.14 102.9 111.0 121.2 7.8 9.2
Officers 0.19 104.3 113.8 132.1 9.1 16.1
Non Officers 0.95 102.7 110.5 119.0 7.6 7.7
1.3 Bank & Financial Institutions 0.55 107.3 113.1 170.5 5.4 50.8
Officers 0.10 109.4 117.3 167.7 7.2 43.0
Non Officers 0.45 106.9 112.1 171.2 4.9 52.7
1.4 Army &Police Forces 4.01 100.0 111.4 121.8 11.4 9.3
Officers 0.17 100.0 109.9 127.5 9.9 16.0
Non Officers 3.84 100.0 111.5 121.5 11.5 9.0
1.5 Education 10.55 100.0 107.0 122.8 7.0 14.8
Officers 6.80 100.0 106.5 125.7 6.5 18.0
Non Officers 3.75 100.0 108.0 117.6 8.0 8.9
1.6 Private Organisations 7.90 100.0 101.3 99.8 1.3 -1.5
Officers 2.24 100.0 101.5 100.5 1.5 -1.0
Non Officers 5.66 100.0 101.3 99.5 1.3 -1.8
2 Wage Rate Index 73.03 105.3 116.8 127.8 10.9 9.4
2.1 Agricultural Labourer 39.49 106.6 117.6 126.7 10.3 7.7
Male 20.49 105.8 116.3 125.1 10.0 7.6
Female 19.00 107.6 119.0 128.6 10.6 8.1
2.2 Industrial Labourer 25.25 104.6 118.1 131.8 13.0 11.6
Highly Skilled 6.31 103.0 112.4 122.4 9.1 8.9
Skilled 6.31 104.4 116.6 129.3 11.6 10.9
Semi Skilled 6.31 105.3 119.9 133.5 13.9 11.3
Unskilled 6.32 105.5 123.7 142.2 17.2 15.0
2.3 Construction Labourer 8.29 101.3 109.1 120.2 7.7 10.2
Mason 2.76 102.3 109.6 119.3 7.1 8.9
Skilled 1.38 102.3 109.3 118.2 6.8 8.1
Unskilled 1.38 102.2 109.8 120.4 7.4 9.7
Carpenter 2.76 101.1 107.0 114.9 5.8 7.4
Skilled 1.38 101.2 107.8 114.7 6.5 6.4
Unskilled 1.38 101.1 106.2 115.1 5.1 8.4
Worker 2.77 100.4 110.7 126.5 10.2 14.3
Male 1.38 100.2 110.3 124.2 10.1 12.6
Female 1.39 100.7 111.2 128.8 10.4 15.8
Table 21
NATIONAL WHOLESALE PRICE INDEX
(1999/00 = 100)
2007/08
( Point to Point Annual Changes)

Overall Agricultural Domestic Manufactured Imported


Months Index % Change Index % Change Index % Change Index % Change
Jul/Aug 160.0 12.4 168.2 20.0 142.8 7.7 158.0 3.4
Aug/Sep 163.5 11.1 174.4 16.6 143.4 7.8 159.3 4.5
Sep/Oct 164.3 10.3 175.2 14.1 143.5 8.0 160.2 5.1
Oct/Nov 161.3 7.2 167.3 8.5 142.5 5.2 164.2 6.3
Nov/Dec 155.2 6.1 153.3 5.3 144.6 6.3 165.5 7.1
Dec/Jan 150.8 5.5 144.1 4.0 144.7 5.9 165.9 7.2
Jan/Feb 151.3 4.3 144.5 1.7 146.2 6.6 166.1 6.9
Feb/Mar 156.4 6.6 152.1 4.9 150.1 9.0 167.7 7.8
Mar/Apr 156.6 9.4 151.8 10.4 151.1 8.5 168.2 8.3
Apr/May 160.1 10.1 156.3 10.3 155.8 11.7 169.2 8.9
May/Jun 164.9 12.9 157.4 10.8 159.4 13.9 181.0 15.7
Jun/Jul 171.8 13.2 165.0 7.6 160.8 14.4 190.3 21.2
Annual 159.7 9.1 159.1 9.5 148.7 8.8 168.0 8.6
Table 22
TOWN-WISE AVERAGE WAGE RATE (in Rs.)
FY 2006/07 FY 2007/08 Percentage Change
S.No. Groups/Sub-groups Unit KTM BRT BRJ BHR KTM BRT BRJ BHR KTM BRT BRJ BHR
1 Agricultural Labourer
Male Daily 223.33 105.00 116.67 80.83 223.33 115.56 116.67 95.83 0.00 10.05 0.00 18.56
Female Daily 128.33 81.11 116.67 80.83 130.28 91.94 116.67 95.83 1.52 13.36 0.00 18.56
2 Construction Labourer
Mason
Skilled Daily 333.33 270.00 175.00 250.00 383.33 274.58 175.00 250.00 15.00 1.70 0.00 0.00
Unskilled Daily 247.92 190.00 135.83 175.00 316.67 193.06 143.33 175.00 27.73 1.61 5.52 0.00
Carpenter
Skilled Daily 329.17 270.00 200.00 250.00 366.67 274.58 200.00 250.00 11.39 1.70 0.00 0.00
Unskilled Daily 245.00 190.00 150.00 175.00 305.00 193.06 150.00 175.00 24.49 1.61 0.00 0.00
Labour
Male Daily 165.00 143.33 111.67 119.17 200.00 146.39 116.67 120.00 21.21 2.13 4.48 0.70
Female Daily 140.83 118.33 111.67 118.61 170.14 133.61 116.67 120.00 20.81 12.91 4.48 1.17

KTM = Kathmandu BRT = Biratnagar BRJ = Birgunj BHR = Bhairahawa


Table 23
GOVERNMENT BUDGETARY OPERATION

2004/05 2005/06 2006/07 2007/08


Budget Revised
Estimate Estimate
Revenue and Grants 83266.2 84596.0 102486.9 129772.7 127600.6
Revenue 68875.1 70768.5 86686.0 102311.8 104865.3
Tax Revenue 54104.8 57427.0 71126.7 80962.2 85025.3
1
Non-Tax Revenue 14770.3 13341.5 15559.3 21349.6 19840.0
Foreign Grants 14391.2 13827.5 15800.8 27460.9 22735.3

Expenditure and Investment 87779.4 95110.6 115826.2 152078.6 144244.8


Expenditure 89027.1 95127.0 116832.3 151966.4 140022.8
Recurrent 61686.4 67017.6 77122.4 98172.5 91409.7
Capital 27340.7 28109.4 39709.9 53794.0 48613.0
Loans and Investment, Net -1247.7 -16.4 -1006.1 112.2 4222.1
Loans and Investment 0.0 1497.2 20.0 1467.6 6903.3
Principal Recovery 1247.7 1513.6 1026.1 1355.5 2681.2

Surplus(+) Deficit(-) -4513.2 -10514.6 -13339.4 -22305.9 -16644.2

Source of Financing Deficits 4513.2 10514.8 13339.4 22305.9 16644.2

Internal Loans, Net 1358.0 4556.9 8678.8 13218.3 11982.5


Loans Received 8938.1 11834.2 17892.3 20500.0 20500.0
Principal Repayment 7580.1 7277.3 9213.5 7281.7 8517.5
External Loans, Net 3312.9 1226.8 2514.7 9087.6 3456.1
Loans Received 9266.1 8214.3 10053.5 17367.4 11325.5
Principal Repayments 5953.2 6987.5 7538.8 8279.8 7869.4
Cash Balance (- Increase) -157.7 4731.1 2145.9 0.0 1205.7

1 Revenue receipts from principal repayment is not included.


Source: Budget Speeches, Economy Survey and Red Book, Ministry of Finance, GON.
Table 24
REVENUE *
Rs. in million

7 2004/05 2005/06 2006/07 2007/08 (BE) 2007/08 (RE)

Tax Revenue 54104.8 57427.0 71126.7 80962.2 85025.3


Tax on External Trade 15701.6 15343.7 16707.6 19489.3 21034.6
1
Import Duty 14888.3 14597.7 15928.7 18693.3 20504.1
Export Duty 697.9 625.3 698.6 726.0 417.3
Others 115.3 120.7 80.3 70.0 113.3
Commodity and Services Tax 25331.3 28121.8 35438.8 40175.1 40984.2
VAT 18885.4 21613.0 26095.6 29651.9 29742.6
Excise Duties 6445.9 6508.8 9343.2 10523.2 11241.6
Income and Property Transfer Tax 13071.9 13961.5 18980.3 21297.8 23006.5
Corporate Income Tax 7345.0 7576.5 11605.6 11360.6 13249.3
Government Corporation 1332.4 195.8 1019.7 776.5 204.5
Non-Government Corporation 6012.6 7380.8 10585.9 10584.1 13044.8
Remuneration Tax 1675.9 1771.1 2007.9 2527.7 2430.2
Investment and Other Tax 1445.4 1585.9 2118.3 2980.9 3346.7
House and Land Registration Tax 1799.2 2180.3 2253.5 3346.1 2919.8
House Land and Other Property Tax 0.0 0.0 0.0 0.0 0.0
Vehicle Tax 806.5 847.6 995.0 1082.5 1060.5
Non-Tax Revenue 14770.3 13341.5 15559.3 21349.6 19840.0
Forest 553.7 409.9 510.3 465.7 519.5
Interest 1466.6 1734.6 1059.6 1485.2 756.9
Dividend 4589.9 3394.8 4937.7 5557.8 5025.9
Departmental Receipts2 712.8 740.8 787.3 806.8 717.3
Civil Administration3 3943.2 4705.5 5424.5 5376.7 6086.4
Miscellaneous4 3504.0 2356.0 2839.9 7657.4 6734.0
Total Revenue 68875.1 70768.5 86686.0 102311.8 104865.3

* Amount of principal recovery is not included.


1 Includes Imports Duties, Indian Excise Refund and Agriculture Improvement Duties.
2 Includes drinking water, irrigation, electricity, postal services, food and agriculture, education,
transport and others.
3 Includes duties and fees and penalty, fines and forfeitures.
4 Includes royalty and sales of government property and donation and miscellaneous income.
BE: Budget Estimates, RE: Revised Estimates
Source: Budget Speeches, Economic Survey, Ministry of Finance, GON.
Table 25
RECURRENT EXPENDITURES*

Rs. in million
2004/05 2005/06 2006/07 2007/08BE
General Administration and Constitutional
Bodies 4359.4 4891.2 6397.7 6903.9
Constitutional Bodies 813.9 1001.9 876.1 3130.2
General Administration 3545.5 3889.3 5521.6 3773.7
Defence and Internal Security 15429.4 17415.7 18777.7 19413.7
Defence 8580.3 9706.0 10128.9 10183.4
Police & Jail 6849.1 7709.7 8648.8 9230.3
Social Services 23208.8 25382.6 29497.6 39797.6
Education 15960.2 17729.8 19976.0 25456.2
Health 4273.0 4851.3 6218.5 9252.0
Drinking Water 396.1 407.9 463.0 553.9
Local Development 1509.1 1542.5 1904.8 2096.1
Other Social Services 1070.4 851.1 935.3 2439.5
Economic Services 7167.8 7529.8 8384.9 10214.6
Agriculture 2117.2 2437.5 2766.2 3515.9
Irrigation 410.9 403.7 451.3 584.4
Land Reform & Cadastral Survey 354.9 370.3 394.3 800.8
Forest 1582.1 1675.2 1712.7 1987.3
Industry & Mining 491.8 412.6 499.4 555.6
Communication 1060.2 1123.3 1189.3 1329.5
Transport 316.9 333.7 333.8 483.7
Electricity 85.2 105.3 102.8 124.4
Other Economic Services 748.6 668.2 935.1 833.0
Miscellaneous 11521.0 11798.3 14064.5 21842.7
Interest Payments 6218.0 6158.7 6164.0 7383.2
Unclassified Expenditures 5303.0 5639.6 7900.5 14459.5
Total Recurent Expenditures 61686.4 67017.6 77122.4 98172.5

* Loans and investment as well as principal repayment on external and internal loans is not included.
Source: Budget Speeches, Economic Survey, Ministry of Finance, GON.
Table 26
CAPITAL EXPENDITURE

Rs. in million
2004/05 2005/06 2006/07 2007/08 (BE)
Economic Administration and Planning 389.4 866.7 3864.1 1151.0
Planning and Statistics 24.2 20.3 26.2 26.1
Constitutional Organs 38.0 100.9 45.3 403.0
General Administration 327.2 745.5 3792.6 721.9
Defence and Internal Security 3180.7 2285.0 2154.8 1320.2
Defence 2412.6 1606.2 1000.8 716.1
Police & Jail 768.1 678.8 1154.0 604.1
Social Services 7940.7 10151.8 15529.3 23668.2
Education 1260.4 1609.6 1604.9 2615.8
Health 409.3 948.2 1185.5 2926.6
Drinking Water 1440.0 1949.8 3182.7 4774.0
Local Development 4468.6 4682.4 7671.6 9034.5
Other Social Services 362.4 961.8 1884.6 4317.4
Economic Services 15394.9 14797.1 17938.6 27551.8
Agriculture 217.5 265.4 1374.2 2308.7
Irrigation 1921.5 2462.7 3012.6 3407.0
Land Reform & Cadastral Survey 88.6 98.9 66.1 160.5
Forest 410.7 148.0 152.5 311.4
Industry & Mining 23.5 31.0 91.2 606.2
Communication 536.8 283.6 251.0 813.8
Transport 4149.6 4178.1 6382.1 8989.5
Electricity 7219.1 6256.4 5450.0 7525.1
Other Economic Services 827.6 1073.0 1158.9 3429.4
Unclassified Expenditures 435.0 8.8 223.1 102.7
Capital Expenditure 27340.7 28109.4 39709.9 53794.0

Source: Budget Speeches, Economic Survey, Ministry of Finance, GON.


Table 27
FOREIGN AID AND DEBT SERVICING

Rs. in million
2004/05 2005/06 2006/07 2007/08
Budget Revised
Estimates Estimates
Foreign Grants 14391.2 13827.5 15800.8 27460.9 22735.3
Bilateral 9104.3 7617.8 8399.0 12954.7 10726.5
Multilateral 5286.9 6209.7 7401.8 14506.2 12008.8
Foreign Loans, net 3312.9 1226.8 2514.7 9087.6 3456.1
Foreign Loans 9266.1 8214.3 10053.5 17367.4 11325.5
Bilateral 126.5 40.6 1048.9 1617.0 1054.4
Multilateral 9139.7 8173.7 9004.6 15750.4 10271.1
Principal Repayments 5953.2 6987.5 7538.8 8279.8 7869.4
Total Foreign Aid, net 17704.1 15054.3 18315.6 36548.5 26191.4
Interest Payment 2146.7 2163.9 2055.7 2717.3 2145.3

Source: Budget Speeches and Economic Survey, Ministry of Finance, GON.


Table 28
OUTSTANDING INTERNAL AND EXTERNAL DEBT OF GON

Rs. in Million
2004 2005 2006 2007 2008
Internal Debts* 81411.4 82842.0 89954.9 99303.9 111239.1
Central Bank 14353.3 12723.4 11049.2 15629.7 18849.8
Commercial Banks 43796.3 48550.7 58461.4 65836.4 72140.6
Financial Institutions1 9677.8 10287.5 9301.1 10178.8 11573.5
Others 13583.9 11280.3 11143.2 7658.9 8675.2
External Debts 232779.3 219641.9 233968.6 216628.9 242060.6
Direct 232777.5 219641.4 233968.6 216628.9 242060.6
Indirect 1.8 0.5 0.0 0.0 0.0
Total Debt 314190.7 302483.9 323923.5 315932.8 353299.7
* Includes Treasury Bills, Development Bonds, National Saving Certificates, Special Bonds and
Citizen Saving Certificates.
1 Includes Agricultural Development Bank (until 2005), Provident Funds, Citizen Investment Trust,
Insurance Companies, Rural Development Banks, Development Banks and Financial Corporation.
Source: Nepal Rastra Bank and Economic Survey, Ministry of Finance, GON.
Table 29
OWNERSHIP PATTERN OF GOVERNMENT BONDS*

Rs in million
2006 2007 2008
Amount Percent Amount Percent Amount Percent
Nepal Rastra Bank 1839.9 6.8 1860.8 7.5 1270.8 4.8
Commercial Banks 7215.6 26.7 7224.9 29.1 7174.3 27.4
Financial Institutions1 4672.5 17.3 4649.0 18.7 6699.1 25.6
Provident Fund Corporation 4228.6 15.7 5529.9 22.2 4965.4 18.9
Government Business Enterprises 230.0 0.9 0.0 0.0 0.0 0.0
Private Business Enterprises 418.5 1.6 342.5 1.4 0.0 0.0
Individuals 5013.9 18.6 2278.2 9.2 3906.8 14.9
Non-profit Organisation 3365.7 12.5 2973.3 12.0 2189.8 8.4
Total Debt 26984.7 100.0 24858.6 100.0 26206.1 100.0
* Includes Development Bonds, National Saving Certificates and Special Bonds.
1 Includes Financial corporations, Insurance Companies, Nepal Development Bank, Gramin Bikas Bank,
Citizen Investment Trust and Nepal Telecommunication Corporation.
Source : Nepal Rastra Bank.
Table 30
OWNERSHIP PATTERN OF TREASURY BILLS
Rs. in million
Outstanding as at mid-July

2006 2007 2008

Amount Percent Amount Percent Amount Percent

Nepal Rastra Bank 9209.3 14.6 13768.8 18.5 17579.0 20.7

Commercial Banks 51245.8 81.4 58611.5 78.7 64966.3 76.4

Financial Institutions 400.0 0.6 0.0 0.0 0.0 0.0

Others 2115.2 3.4 2065.0 2.8 2487.7 2.9

Total Debt 62970.3 100.0 74445.3 100.0 85033.0 100.0

Source : Nepal Rastra Bank.


Table 31
FOREIGN ASSISTANCE

Rs in million
% change
2005/06 2006/07 2007/08* 2006/07 2007/08

A. Foreign Grants 13807.9 15800.8 22735.3 14.4 43.9

Bilateral 8087.4 8399.0 10726.5 3.9 27.7

Multilateral 5720.5 7401.8 12008.8 29.4 62.2

B. Foreign Loans 9416.6 10053.5 11325.5 6.8 12.7

Bilateral 65.2 1048.9 1054.4 1509.4 0.5

Multilateral 9351.4 9004.6 10271.1 -3.7 14.1

Total (A+B) 23224.5 25854.4 34060.8 11.3 31.7

* Revised Estimate.
Source: Budget Speeches, Ministry of Finance, GON.
Table 32
DIRECTION OF FOREIGN TRADE*
Rs. in million
Percent Change
2005/06 2006/07 2007/08 2006/07 2007/08

Total Exports 60234.1 59383.1 59266.5 -1.4 -0.2


To India 40714.7 41728.8 38555.7 2.5 -7.6
To Other Countries 19519.4 17654.3 20710.8 -9.6 17.3

Total Imports 173780.3 194694.6 221937.7 12.0 14.0


From India 107143.1 115872.3 142376.5 8.1 22.9
From Other Countries 66637.2 78822.3 79561.2 18.3 0.9

Total Trade Balance -113546.2 -135311.5 -162671.2 19.2 20.2


With India -66428.4 -74143.5 -103820.8 11.6 40.0
With Other Countries -47117.8 -61168.0 -58850.4 29.8 -3.8

Total Foreign Trade 234014.4 254077.7 281204.2 8.6 10.7


With India 147857.8 157601.1 180932.2 6.6 14.8
With Other Countries 86156.6 96476.6 100272.0 12.0 3.9
* On customs data basis
Table 33
FOREIGN TRADE*
(Monthly)
Rs. in million
2005/06 2006/07 2007/08
Months Export Import Balance Export Import Balance Export Import Balance
Jul/Aug 5061.4 13664.8 -8603.4 4781.5 14971.6 -10190.1 5295.1 16470.7 -11175.6
Aug/Sep 5235.1 14159.8 -8924.7 5428.3 16162.5 -10734.2 4349.1 16666.8 -12317.7
Sep/Oct 5257.2 13863.9 -8606.7 4809.1 15446.2 -10637.1 5569.8 18656.8 -13087.0
Oct/Nov 5004.5 14334.0 -9329.5 5184.5 16457.4 -11272.9 3743.1 14131.8 -10388.7
Nov/Dec 5971.6 16087.9 -10116.3 5696.2 17415.5 -11719.3 5113.8 19666.1 -14552.3
Dec/Jan 5703.4 14703.3 -8999.9 4623.8 14517.0 -9893.2 4584.2 20915.7 -16331.5
Jan/Feb 4552.7 14324.6 -9771.9 4190.0 9775.1 -5585.1 4897.7 17659.7 -12762.0
Feb/Mar 6010.2 14874.4 -8864.2 4228.9 12329.7 -8100.8 4261.1 15391.7 -11130.6
Mar/Apr 3759.5 11008.4 -7248.9 5161.0 21542.5 -16381.5 4555.1 20975.1 -16420.0
Apr/May 3231.2 12139.3 -8908.1 4356.2 17422.0 -13065.8 4931.3 21736.9 -16805.6
May/Jun 5240.4 16546.1 -11305.7 5712.9 19502.2 -13789.3 5738.1 18406.0 -12667.9
Jun/Jul 5206.9 18073.8 -12866.9 5210.7 19152.9 -13942.2 6228.1 21260.4 -15032.3
Annual 60234.1 173780.3 -113546.2 59383.1 194694.6 -135311.5 59266.5 221937.7 -162671.2
* On customs data basis

4. BOP tables 5/13/2009


Table 34
COMMODITYWISE CLASSIFICATION OF FOREIGN TRADE*

Rs. in million
Standard International Trade Exports Imports
Classification Description 2005/06 2006/07 2007/08 2005/06 2006/07 2007/08
0 Food and live animals 7192.0 7055.8 13164.9 13298.7 12895.9 15838.3
1 Tobacco and beverages 25.0 23.3 24.3 1161.8 957.9 1238.3
2 Crude materials, inedibles except fuels 1223.4 1368.0 1350.7 10562.3 8829.3 8365.1
3 Mineral fuels and lubricants 3.2 0.0 0.0 36447.0 36362.0 43968.5
4 Animal and vegetable oils and fats 4284.6 4454.9 2062.0 10196.6 12137.6 9399.1
5 Chemicals and drugs 3686.9 4091.6 2823.5 24750.2 26995.9 26863.3
6 Manufactured goods classified chiefly
by materials 28533.0 30412.2 29643.3 40600.5 48145.3 57448.4
7 Machinary and transport equipments 1201.9 1240.9 912.9 26194.6 36357.4 48006.4
8 Miscellaneous manufactured articles 14081.6 10736.5 9281.7 10417.8 11755.0 10726.2
9 Commodity and transactions not classified
according to kind 2.5 0.0 3.2 150.8 258.3 84.2
Total 60234.1 59383.2 59266.5 173780.3 194694.6 221937.8
* On customs data basis

4. BOP tables 5/13/2009


Table 35
COMMODITYWISE CLASSIFICATION OF FOREIGN TRADE WITH INDIA*

Rs. in million
Standard International Trade Exports Imports
Classification Description 2005/06 2006/07 2007/08 2005/06 2006/07 2007/08
0 Food and live animals 6306.7 5944.3 7617.4 10108.8 8220.4 9757.0
1 Tobacco and beverages 14.3 12.1 10.7 724.5 712.6 877.1
2 Crude materials, inedibles except fuels 1163.3 1291.6 1181.4 5437.6 4764.6 4700.4
3 Mineral fuels and lubricants 0.5 0.0 0.0 35665.3 35612.6 43146.4
4 Animal and vegetable oils and fats 4145.7 4337.2 2023.6 152.6 65.6 229.7
5 Chemicals and drugs 3564.7 3977.4 2696.3 13520.8 14647.7 15356.4
6 Manufactured goods classified chiefly
by materials 21928.3 23763.4 22942.2 25487.4 29627.5 40950.9
7 Machinary and transport equipments 111.0 185.7 300.4 11974.0 18513.3 23064.8
8 Miscellaneous manufactured articles 3477.7 2217.2 1783.7 4072.1 3708.0 4219.7
9 Commodity and transactions not classified
according to kind 2.5 0.0 0.0 0.0 0.0 74.1
Total 40714.7 41728.9 38555.7 107143.1 115872.3 142376.5
* On customs data basis
Table 36
COMMODITYWISE CLASSIFICATION OF FOREIGN TRADE WITH OTHER COUNTIRES*

Rs. in million
Standard International Trade Exports Imports
Classification Description 2005/06 2006/07 2007/08 2005/06 2006/07 2007/08
0 Food and live animals 885.3 1111.5 5547.5 3189.9 4675.5 6081.3
1 Tobacco and beverages 10.7 11.2 13.6 437.3 245.3 361.2
2 Crude materials, inedibles except fuels 60.1 76.4 169.3 5124.7 4064.7 3664.7
3 Mineral fuels and lubricants 2.7 0.0 0.0 781.7 749.4 822.1
4 Animal and vegetable oils and fats 138.9 117.7 38.4 10044.0 12072.0 9169.4
5 Chemicals and drugs 122.2 114.2 127.2 11229.4 12348.2 11506.9
6 Manufactured goods classified chiefly
by materials 6604.7 6648.8 6701.1 15113.1 18517.8 16497.5
7 Machinary and transport equipments 1090.9 1055.2 612.5 14220.6 17844.1 24941.6
8 Miscellaneous manufactured articles 10603.9 8519.3 7498.0 6345.7 8047.0 6506.5
9 Commodity and transactions not classified
according to kind 0.0 0.0 3.2 150.8 258.3 10.1
Total 19519.4 17654.3 20710.8 66637.2 78822.3 79561.3
* On customs data basis.
Table 37
EXPORTS OF MAJOR COMMODITIES TO INDIA*
Rs. in million
2005/06 2006/07 2007/08
Total 30707.5 33976.9 32316.2
1 Aluminium Section 893.7 831.5 894.5
2 Brans 105.9 121.3 264.5
3 Cardamom 608.1 848.1 1034.8
4 Catechue 382.4 542.8 543.7
5 Cattlefeed 454.6 80.9 176.9
6 Chemicals 1057.5 950.2 275.7
7 Copper Wire Rod 305.8 206.0 617.4
8 G.I. pipe 519.3 127.8 242.7
9 Ghee (Vegetable) 3861.7 4136.5 2132.3
10 Ghee(Clarified) 103.0 110.9 101.7
11 Ginger 275.2 541.3 543.2
12 Herbs 133.5 105.6 148.6
13 Juice 1139.6 1591.3 1836.4
14 Jute Goods 2636.8 2756.8 2582.5
15 M.S. Pipe 105.7 761.9 979.5
16 Medicine (Ayurvedic) 301.1 156.3 132.1
17 Noodles 414.7 237.4 532.9
18 Oil Cakes 291.6 318.1 405.0
19 Paper 95.5 131.6 120.2
20 Particle Board 227.5 206.8 157.6
21 Pashmina 210.7 48.3 44.0
25 Plastic Utensils 808.3 415.1 302.6
26 Polyster Yarn 3476.3 2241.0 2618.0
27 Pulses 643.2 306.9 314.8
28 Readymade garment 1137.3 765.0 478.1
29 Ricebran Oil 112.6 178.3 196.5
30 Rosin 346.5 577.4 355.6
31 Shoes and Sandles 237.8 244.4 348.6
32 Skin 334.8 363.1 346.0
33 Soap 363.6 502.7 424.2
34 Stone and Sand 321.3 425.6 395.4
35 Tarpentine 105.1 179.2 81.4
36 Textiles* 2154.6 3056.9 2114.8
37 Thread 1898.3 4055.9 4134.8
38 Tooth Paste 730.8 663.4 475.6
39 Wire 1504.1 1610.7 1546.7
40 Zinc sheet 2409.0 3579.9 4416.9
* Based on customs data
Table 38
IMPORTS OF MAJOR COMMODITIES FROM INDIA*
Rs. in million
2005/06 2006/07 2007/08
Total 80589.4 87365.8 109187.3
1 Agri. Equip.& Parts 671.6 1073.1 1483.8
2 Aluminium Ingot, Billet & Rod 259.9 424.6 654.7
3 Baby Food & Milk Products 571.9 357.8 445.3
4 Books and Magazines 319.3 318.8 439.7
5 Cement 1933.6 2519.9 2337.0
6 Chemical Fertilizer 1052.3 624.0 315.7
7 Chemicals 3281.4 2590.9 2719.8
8 Coal 1193.5 950.7 910.1
9 Coldrolled Sheet in Coil 797.7 2079.6 4005.8
10 Cosmetics 881.5 523.3 568.8
11 Cuminseeds and Peppers 317.2 161.4 230.3
12 Electrical Equipment 1561.3 2365.2 3587.3
13 Enamel & Other Paints 216.2 294.1 349.5
14 Fruits 759.9 714.7 675.0
15 Glass Sheet and G.Wares 454.9 481.9 1075.8
16 Hotrolled Sheet in Coil 1144.8 2052.7 3575.9
17 Insecticides 283.6 452.9 510.4
18 Live Animals 512.1 376.0 393.0
19 M.S. Billet 3883.4 4384.2 8145.4
20 M.S. Wire Rod 1065.2 1418.7 2595.3
21 Medicine 4389.0 4442.5 5434.1
22 Other Machinery & Parts 3509.4 3556.3 4682.0
23 Other Stationary Goods 381.5 248.0 262.1
24 Paper 603.2 806.9 729.3
25 Petroleum Products 33657.2 33567.6 40815.7
26 Pipe and Pipe Fittings 261.3 246.3 1033.5
27 Plastic Utensils 268.2 86.0 157.0
28 Radio, TV, Deck & Parts 504.2 479.2 469.4
29 Readymade Garments 1083.4 737.4 869.5
30 Rice 2309.8 1614.2 835.5
31 Salt 238.1 302.3 187.1
32 Sanitaryware 222.6 215.5 195.7
33 Sugar 226 17.4 12.1
34 Textiles 2051.7 1753.8 18.9
35 Thread 2166.9 3158.8 3056.3
36 Tobacco 599.6 646.3 732.2
37 Tyre Tubes,Flapes 303.9 345.4 454.7
38 Vegetables 1139.6 1035.8 1457.3
39 Vehicles & Spare Parts 5213.7 9798.7 11874.6
40 Wire Products 298.8 142.8 891.8
* Based on customs data
Table 39
EXPORTS OF MAJOR COMMODITIES TO
OTHER COUNTRIES*

Rs. in million
2005/06P 2006/07 2007/08

Total 15241.0 13563.8 13144.0


1 Handicraft ( Metal and Wooden ) 430.9 250.2 194.0
2 Herbs 19.0 43.5 97.9
3 Nepalese Paper & Paper Products 257.0 190.6 347.1
4 Nigerseed 7.0 8.8 1.2
5 Pashmina 1577.8 931.0 643.4
6 Pulses 191.7 488.5 1458.4
7 Readymade Garments 6204.1 5212.9 4755.8
8 Readymade Leather Goods 14.4 111.1 22.9
9 Silverware and Jewelleries 282.4 325.4 269.4
10 Tanned Skin 310.4 279.1 248.7
11 Tea 107.6 122.5 57.0
12 Woolen Carpet 5838.7 5600.2 5048.2
* Based on customs data
Table 40
IMPORTS OF MAJOR COMMODITIES FROM OTHER COUNTRIES*

Rs. in million
2005/06 2006/07P 2007/08
Total 49639.9 54339.2 59076.9
1 Aircraft Spareparts 1071.3 1462.8 1049.9
2 Betelnut 806.7 1418.3 1857.0
3 Chemical Fertilizer 389.1 617.3 19.6
4 Computer Parts 1353.8 2701.0 2269.7
5 Copper Wire Rod,Scrapes & Sheets 2089.1 1878.8 1941.1
6 Cosmetic Goods 343.0 368.2 456.6
7 Crude Palm Oil 4051.1 7121.5 5746.8
8 Crude Soyabean Oil 1572.9 1924.2 1600.0
9 Edible Oil 456.2 635.2 407.1
10 Electrical Goods 2872.7 2965.8 3945.2
11 Gold 2.9 3519.9 3750.5
12 M.S. Billet 916.7 1123.6 904.3
13 M.S.Wire Rod 545.8 289.4 169.5
14 Medical Equip.& Tools 709.5 847.5 1374.8
15 Medicine 1108.1 1536.9 1263.0
16 Office Equip.& Stationary 221.3 104.5 106.2
17 Other Machinary & Parts 2830.7 2007.4 3902.0
18 Other Stationaries 355.1 328.7 337.3
19 P.V.C.Compound 279.2 141.4 868.1
20 Palm Oil 2788.4 324.7 279.6
21 Parafin Wax 147.0 146.2 125.8
22 Petroleum Products * 548.8 572.2 523.0
23 Pipe & Pipe Fittings 231.0 273.8 280.2
24 Polythene Granules 3696.7 2959.7 3718.9
25 Raw Wool 1511.1 1630.8 1394.8
26 Readymade Garments 2332.1 1828.3 1778.4
27 Shoes and Sandals 728.3 826.1 691.3
28 Small Cardamom 209.5 268.8 255.1
29 Steel Rod & Sheet 158 51.9 2.4
30 Storage Battery 137.1 121.2 86.7
31 Synthetic Carpet 141.6 144.5 117.8
32 Telecommunication Equip. Parts 1720.5 954.1 4979.4
33 Tello 316 292.5 375.8
34 Textile Dyes 2095.9 2344.6 1376.1
35 Textiles 2854.3 2455.7 1966.6
36 Threads 1610.8 1256.8 1395.8
37 Transport Equip.& Parts 2155.7 2705 4391.8
38 Tyre,Tube & Flaps 158.9 70.7 51.6
39 Video Television & Parts 963.9 954.1 1819
40 Writing & Printing Paper 832 792.6 1039.7
41 Zinc Ingot 2327.1 2372.5 458.4
* Based on customs data
Table 41
ITEMS IMPORTED FROM INDIA ON PAYMENT OF
CONVERTIBLE FOREIGN EXCHANGE
As at Mid-July 2008
Harmonized Harmonized
S. No. Name of Items
Section Code No.
1 13.01 13.01.02.00 Extracts
2 21.06 21.06.90.40 Soft Drink Concentrate
3 27.10 27.10.19.11 Furnace Oil
4 27.13 27.13.20.00 Bitumen
All industrial chemicals mentioned in this section (except
5 28.00 28.00.00.00 chemicals used for the production of medicine for human
being)
6 28.03 28.03.00.00 Carbon Black
7 29.01 29.01.10.00 L.L.P. (Light Liquid Paraffin )
8 29.02 29.02.20.00 Benzene / Toluene
9 29.05 29.05.11.00 Methanol
10 29.05 29.05.16.00 2-Ethyl Hexanol
11 29.05 29.05.31.00 Ethylene Glycol
12 29.05 29.05.44.00 Sorbitol
13 29.15 29.15.00.00 Methylene Salicylate
14 29.15 29.15.21.00 Acetic Acid
15 29.15 29.15.32.00 Vinyl Acetate Monomer
16 29.16 29.16.12.00 Buty Acraylate Monomer / 2 Etyl Hexyls Acrylate
17 29.17 29.17.34.00 Dibutyl Phthalate
18 29.17 29.17.35.00 Phthalic Anhydride
19 29.17 29.17.36.00 Terephthalic Acid
20 29.22 29.22.00.00 Oxygen Function Amino-Compounds
21 29.24 29.24.00.00 Carboxamide-Function Compounds
22 29.33 29.33.00.00 Heterocyclic compound
23 29.34 29.34.00.00 Nucleic Acids
24 29.41 29.41.00.00 Antibiotics
25 32.15 32.15.00.00 Printing Ink
Flavour (raw material used in toothpaste), Odoriferous
26 33.02 33.02.90.00
Substances / Perfume
27 34.02 34.02.90.10 LABSA (raw material used in detergent)
28 38.17 38.17.10.00 Mixed Alkyl benzenes
29 38.23 38.23.11.00 Stearic Acid
30 38.23 38.23.19.00 Palm Steearin DFA / Palm Karnel DFA
31 39.01 39.01.10.00, 39.01.20.00 Polyethylene
32 39.02 39.02.10.00 Polypropylene
33 39.03 39.03.19.00 Polysterence
34 39.05 39.05.30.00 Polyvinyl Alcohol
35 39.07 39.07.60.00 Plastic Pet Chips / Pet Resin
36 39.11 39.11.90.00 PVC Resin
37 39.20 39.20.00.00 Polethylene
38 39.20 39.20.20.00 Polypropylene Films/Noodle Strapper
39 39.20 39.20.59.00 Printed Laminated Web
40 39.20 39.20.59.00 Seasoning Wrapper
41 40.01 40.01.00.00 Natural Rubber
42 40.02 40.02.00.00 Synthetic Rubber
43 48.01 48.01.00.00 News Print Paper
44 48.02 48.02.00.00 Papers
Harmonized Harmonized
S. No. Name of Items
Section Code No.
45 48.06 48.06.00.00 Papers
46 48.10 48.10.00.00 Paper
47 50.04 50.04.00.00 Silk Yarn
48 50.05 50.05.00.00 Silk Yarn
49 51.06 51.06.00.00 Woolen yarn (yarn of carded wool, except hosiery)
50 51.07 51.07.00.00 Woolen yarn (yarn of Combed wool, except hosiery)
51 51.08 51.08.00.00 Woolen yarn (yarn of fine animal hair, except hosiery)
52 52.01 52.01.00.00 Cotton
52.05.11.00 to 52.05.14.00
53 52.05 and 52.06 and Cotton yarn
52.06.11.00 to 52.06.14.00
Partially oriented Polyster yarn (except partially-oriented
54 54.02 54.02.42.00 Polyester Yarn as per section 54.02.42.00 and Synthetic
Filament Yarn as per section 54.02.49)
55 54.02 54.02.49.00 Synthetic Filament Yarn
54.03.00.00, 55.9.00.00 and
56 54.03, 55.9, 55.10 Artificial yarn (except hosiery)
55.10.00.00
55.01, 55.02, 55.03, 55.01.00.00, 55.02.00.00,
57 55.04, 55.03.00.00, 55.04.00.00, Artificial fiber (human made)
55.06 and 55.07 55.06.00.00 and 55.07.00.00
58 55.03 55.03.20.00 Polyster fiber
59 55.04 55.04.10.00 Viscose Rayon (fiber)
60 59.02 59.02.00.00 Tyre cord fabric
61 70.10 70.10.90.00 Carboys, Bottles, Plasks, Jar, Pots.
62 72.03 72.03.90.00 Sponge Iron
63 72.04 72.04.49.00 M. S. Scrap
64 72.06 72.06.00.00 Iron Ingots
65 72.07 72.07.00.00 Mild steel billet
36.00.00.00, 37.00.00.00,
36.00, 37.00, 38.00,
38.00.00.00, 39.00.00.00,
66 39.00, Hot rolled sheet in coil and not in coil
51.00.00.00, 72.08.52.00,
51.00 and 72.08
72.08.51.00 and 72.08.52.00
16.00.00.00, 17.00.00.00 and
67 16.00, 17.00 and 72.09 Cold roll sheet in coil
72.09.18.00
68 72.10 72.10.12.00 Tin plate
69 72.11 72.11.14.00 Hot rolled sheet in coil
70 72.11 72.11.19.00 Hot rolled sheet in coil
71 72.13 72.13.91.10 M.S. wire rod in coil
72.17.20.00, 72.17.30.00 and
72 72.17 Bead Wire (copper coated)
72.17.90.00
73 72.18 72.18.99.00 Steel byume
74 72.19 72.19.00.00 Steel plate
75 72.26 72.26.11.00 Silicon Steel
Aluminum Copper/Brass Scraps Re-Melted Ingots (as per
76 74.04 74.04.00.00 the notice of Ministry of Environment, Science and
Technology)
77 74.07 74.07.10.00 Copper Rods
78 74.08 74.08.11.0 Copper Wire
79 76.01 76.01.00.00 Aluminium ingot billet
80 76.02 76.02.00.00 Aluminium Waste
81 76.04 and 76.05 76.04.00.00 and 76.05.00.00 Aluminium rod in coil
82 76.12 76.12.10.00 Tubes
83 79.01 79.01.11.00 Zinc
Harmonized Harmonized
S. No. Name of Items
Section Code No.
84 79.01 79.01.20.00 Zinc Alloy
85 83.09 83.09.10.00 Metal Crown Corks
86 84.00 84.00.00.00 All machinary equipment (except parts)
87 85.01 and 85.02 85.01.00.00 and 85.02.00.00 Electric motor, generating set
88 85.04 85.04.90.00 Amorphous Metalcores
89 85.07 85.07.90.00 PP Battery Container & Battery Separator
90 85.29 85.29.90.00 TV PictureTube
91 85.40 85.40.11.00 Spare Parts for TV Receiver
Fabrics imported as raw materials by readymade garment
Others, section not
92 exporting industries (under the provision of spending
specified
foreign exchange up to 50 percent of their export earnings)
93 17.02 17.02.30 Dextrose Anhydrous I.P.
94 25.23 25.23.10.00 Clinker
95 27.10 27.10.19.16 M.T.O. (Mineral Turpentile Oil)
96 27.10 27.10.19.90 Petrosole
97 29.16 29.16 Unsaturated Acycline Monocarboxylic Acid
Sulphonamides: Sulphamethoxazole, Sulphafurazole,
98
29.35 29.35.00 Sulphadiazine, Sulphadimidine, Sulphacetamide
99 29.35 29.35.11 Sulphamethoxazole
100 29.35 29.35.12 Sulphafurazole
101 29.35 29.35.13 Sulphadiazine
102 29.35 29.35.14 Sulphadimidine
Sulphacetamide Sulphamethoxy, Pyridarine,
103 Sulphamethiazole,
29.35 29.35.15 Sulphamoxole, Sulphamide
104 29.35 29.35.21 Sulphamethoxy, Pyridarine
105 29.35 29.35.22 Sulphamethiazole
106 29.35 29.35.23 Sulphamoxole
107 29.35 29.35.24 Sulphamide
108 29.42 29.42 Other Organic Compounds
109 32.12 32.12.90.00 Ziline, Light Solvent Neptha
110 33.02 33.02.10 Essence Flavor
111 35.03 35.03 Geltain Capsules
112 39.05 39.05.42.00 Penta Aerithritole
113 39.20 39.2 Film of Polyester, Polythelyne, BOPP, Pvc, OPP, CPP
114 39.21 39.21.19 Printed Wrapper
115 39.23 39.23.90 Plastic Lolypop Stick
116 48.23 48.23.90 (76.07.20) Chewing gum Wrapper
117 70.10 70.10.20 Stoppers, Lids and Other Closures
118 72.01 72.01.10.00 Pig Iron
119 72.11 72.11.23 CRCA Strips (76.20 MM)
120 76.07 76.07 Aluminum foils
121 79.01 79.01.12.00 Zinc
122 85.04 85.04.22.00 3000 KVA Transformer
123 78.01 78.01.10.00 Pure /Refined Lead
124 78.01 78.01.91.00 Antimony Lead Alloy
Table 42
SUMMARY OF BALANCE OF PAYMENTS
Rs. in million Percentage Change
Particulars 2005/06 2006/07 2007/08 2006/07 2007/08
A. Current Account 14224.5 -902.2 23679.6 -106.3 -2724.7
Goods: Exports f.o.b. 61482.4 61488.4 61971.1 0.0 0.8
Oil 0.0 0.0 0.0 - -
Other 61482.4 61488.4 61971.1 0.0 0.8
Goods: Imports f.o.b. -171540.8 -190437.1 -217962.8 11.0 14.5
Oil -33657.2 -33567.6 -40815.7 -0.3 21.6
Other -137883.6 -156869.5 -177147.1 13.8 12.9
Balance on Goods -110058.4 -128948.7 -155991.7 17.2 21.0
Services: Net -6818.3 -8377.3 -11092.0 22.9 32.4
Services: credit 26469.7 32078.9 42236.1 21.2 31.7
Travel 9555.8 10125.3 18653.1 6.0 84.2
Government n.I.e. 7441.5 12336.4 13301.8 65.8 7.8
Other 9472.4 9617.2 10281.2 1.5 6.9
Services: debit -33288.0 -40456.2 -53328.1 21.5 31.8
Transportation -12592.3 -14557.4 -22675.9 15.6 55.8
Travel -11960.8 -15785.0 -20862.0 32.0 32.2
Other -8734.9 -10113.8 -9790.2 15.8 -3.2
Balance on Goods and Services -116876.7 -137326.0 -167083.7 17.5 21.7
Income: Net 4955.5 7431.8 7946.8 50.0 6.9
Income: credit 11432.3 14500.8 13447.7 26.8 -7.3
Income: debit -6476.8 -7069.0 -5500.9 9.1 -22.2
Balance on Goods,Services and Income -111921.2 -129894.2 -159136.9 16.1 22.5
Transfers: Net 126145.7 128992.0 182816.5 2.3 41.7
Current transfers: credit 130861.7 133196.8 185462.9 1.8 39.2
Grants 18851.1 18218.2 20993.2 -3.4 15.2
Workers' remittances 97688.5 100144.8 142682.7 2.5 42.5
Pensions 12007.6 12937.0 18789.9 7.7 45.2
Other 2314.5 1896.8 2997.1 -18.0 58.0
Current transfers: debit -4716.0 -4204.8 -2646.4 -10.8 -37.1
B. Capital Account (Capital Transfer) 3107.0 4449.9 7912.5 43.2 77.8
Total, Groups A plus B 17331.5 3547.7 31592.1 -79.5 790.5
C. Financial Account (Excluding Group E) -1324.5 -2362.1 11032.6 78.3 -567.1
Direct investment in Nepal -469.7 362.3 293.9 - -
Portfolio Investment 0.0 0.0 0.0 - -
Other investment: assets -14008.8 -10690.0 -11396.1 - -
Trade credits -1629.5 -5127.6 853.2 214.7 -116.6
Other -12379.3 -5562.4 -12249.3 -55.1 120.2
Other investment: liabilities 13154.0 7965.6 22134.8 -39.4 177.9
Trade credits 9232.5 1727.8 12483.6 -81.3 622.5
Loans 526.9 1455.6 3391.5 176.3 133.0
General Government 703.7 2150.7 3455.9 205.6 60.7
Drawings 7691.0 9689.7 11325.5 26.0 16.9
Repayments -6987.3 -7539.0 -7869.6 7.9 4.4
Other sectors -176.8 -695.1 -64.4 293.2 -90.7
Currency and deposits 3394.6 4782.2 6259.7 40.9 30.9
Nepal Rastra Bank -116.5 2.4 -5.6 -102.1 -333.3
Deposit money banks 3511.1 4779.8 6265.3 36.1 31.1
Other liabalities 0.0 0.0 0.0 - -
Total, Group A through C 16007.0 1185.6 42624.7 - -
D. Miscellaneous Items, Net 12985.4 9500.9 -6690.3 -26.8 -170.4
Total, Group A through D 28992.4 10686.5 35934.4 -63.1 236.3
E. Reserves and Related Items -28992.4 -10686.5 -35934.4 -63.1 236.3
Reserve assets -28992.3 -13410.2 -37002.0 -53.7 175.9
Nepal Rastra Bank -21297.1 -10963.2 -29636.8 -48.5 170.3
Deposit money banks -7695.2 -2447.0 -7365.2 -68.2 201.0
Use of Fund Credit and Loans -0.1 2723.7 1067.6 - -60.8
Changes in reserve net ( - increase ) -25597.8 -5904.3 -29674.7 -76.9 402.6
Table 43
RECEIPTS AND EXPENDITURE OF CONVERTIBLE
FOREIGN CURRENCY

Rs. in million
2005/06 2006/07 2007/08
Income 157297.3 179967.3 236927.2
Services 109764.3 127693.0 167634.3
Remittances 92748.7 107417.4 139421.4
Gorkha Remittances 5231.2 5856.3 7071.4
Tourist Expenditure 11710.9 12645.8 20339.9
Interest Receipts 4814.9 6872.6 7032.0
Others 489.8 757.2 841.0
Merchandise Exports 21738.5 22366.8 28663.2
Diplomatic Mission 5281.5 7794.0 10726.3
Foreign Aid 17117.7 16622.2 23642.5
Loan 7351.8 8289.6 6695.8
Miscellaneous 3395.3 5491.3 6260.9

Expenditures 135184.9 165471.4 233402.7


Services 16544.5 19492.1 18241.3
Interest Payments 1879.8 1960.9 2071.0
Others 14664.7 17531.2 16170.3
Amortization 5244.5 6520.5 7046.2
Merchandise Imports 67684.3 74881.8 93727.2
Diplomatic Mission 649.8 403.4 600.8
Miscellaneous 45061.9 64173.6 113787.2

Surplus (+) Deficit(-) 22112.3 14495.9 3524.5

* Data based on foreign exchange record of Nepal Rastra Bank.


Note: Figures of some heads and sub-heads may not tally with the published figures
in previous year due to some changes made in composition of respective
heads and sub-heads

4. BOP tables 5/13/2009


Table 44
FOREIGN ASSETS AND LIABILITIES OF THE BANKING SYSTEM

Rs. in million
Mid-July
2006 2007 2008
A. Monetary Authorities
A.1. Foreign Assets 133036.3 130213.9 170314.2
Gold 405.0 0.0 0.0
IMF Gold Tranche 0.0 0.0 0.0
SDRs 663.7 587.5 630.6
Foreign Exchange 131967.6 129626.4 169683.6
Convertible 124147.2 123755.3 142848.8
In-convertible 7820.4 5871.1 26834.8
A.2. Foreign Liabilities 1566.6 3928.3 5657.6
A.3. Net Foreign Assets (A1-A2) 131469.7 126285.6 164656.6
B. Commercial Banks
B.1. Foreign Exchange 33065.4 35499.6 42939.9
Convertible 31790.7 31681.0 38827.1
In-convertible 1274.7 3818.6 4112.8
B.2. Total Liabilities 25095.9 29875.7 36141.1
B.3. Net Foreign Assets 7969.5 5623.9 6798.8
C. Banking System (Total)
C.1. Foreign Assets 166101.7 165713.5 213254.1
Gold, IMF Gold Tranche, SDRs 1068.7 587.5 630.6
Foreign Exchange 165033.0 165126.0 212623.5
Convertible 155937.9 155436.3 181675.9
In-convertible 9095.1 9689.7 30947.6
C.2. Foreign Liabilities 26662.5 33804.0 41798.7
C.3. Net Foreign Assets 139439.2 131909.5 171455.4

Source: Research Department, NRB.


Table 45
GROSS OFFICIAL FOREIGN ASSETS*

Rs in million
Mid-month 2005/06 2006/07 2007/08
August 105729.1 137521.3 127091.3
September 104725.4 132982.5 126322.3
October 104920.1 131783.2 122244.5
November 110477.2 130443.8 125912.1
December 111411.3 137622.7 127999.3
January 112848.9 138067.1 129139.0
February 113640.6 137553.6 130372.4
March 114444.1 142696.7 144900.7
April 116116.1 137918.1 145564.3
May 122580.5 130326.5 156689.7
June 129056.9 126858.6 162443.2
July 133036.3 130213.9 170314.2

* Include gold bullion and coins,IMF Reserve Tranche, SDRs and foreign
exchange of Monetary Authority.
Source: Nepal Rastra Bank.
Table 46
INTERVENTION IN FOREIGN EXCHANGE MARKET
(Amount in Million Dollar)
US $ Million
Purchased Sold
Date Rate Amount Rate Amount
July 18, 2007 65.11 3.4 August 20, 2007 66.73 6.0
July 25, 2007 64.96 2.0 January 23, 2008 63.83 8.6
August 1, 2007 65.16 8.2 July 2, 2008 69.49 3.1
August 6, 2007 65.16 11.0
August 8, 2007 65.16 7.4
August 15, 2007 65.16 2.6
August 22, 2007 65.96 6.9
August 27, 2007 65.96 6.7
August 30, 2007 65.96 3.1
September 5, 2007 65.96 11.4
September 6, 2007 65.96 9.5
September 10, 2007 65.66 11.8
September 12, 2007 65.46 17.6
September 17, 2007 65.26 5.9
September 24, 2007 64.36 12.9
September 27, 2007 63.96 8.4
October 1, 2007 63.96 7.6
October 4, 2007 63.96 7.2
October 9, 2007 63.76 27.7
October 10, 2007 63.57 3.1
October 15, 2007 63.46 23.7
October 17, 2007 63.47 25.3
October 30, 2007 63.57 43.1
November 5, 2007 63.32 12.6
November 7, 2007 63.32 21.0
November 13, 2007 63.32 14.7
November 14, 2007 63.32 12.7
November 19, 2007 63.32 25.1
November 21, 2007 63.32 20.3
November 28, 2007 64.02 10.5
December 3, 2007 64.02 32.0
December 5, 2007 63.62 16.7
December 10, 2007 63.62 18.0
December 12, 2007 63.52 20.8
December 17, 2007 63.52 12.4
December 26, 2007 63.61 16.3
December 31, 2007 63.52 13.8
Purchased Sold
Date Rate Amount Rate Amount
January 3, 2008 63.52 7.0
January 7, 2008 63.42 10.3
January 9, 2008 63.17 17.6
January 14, 2008 63.17 15.9
January 17, 2008 63.17 31.1
January 22, 2008 63.17 4.4
January 28, 2008 63.42 26.0
January 31, 2008 63.37 12.3
February 4, 2008 63.37 13.8
February 6, 2008 63.37 12.3
February 12, 2008 63.52 11.2
February 13, 2008 63.62 35.9
February 20, 2008 63.62 21.2
February 21, 2008 64.12 8.5
February 25, 2008 64.17 25.2
February 27, 2008 64.17 27.9
March 3, 2008 63.92 3.9
March 5, 2008 64.57 10.7
March 10, 2008 64.83 11.4
March 12, 2008 65.02 55.0
March 17, 2008 64.97 34.6
March 19, 2008 65.22 19.6
March 25, 2008 64.82 24.2
March 26, 2008 64.36 7.7
March 31, 2008 64.37 28.3
April 3, 2008 64.12 24.7
April 4, 2008 64.12 14.6
April 8, 2008 64.12 16.6
April 16, 2008 64.12 37.9
April 18, 2008 64.12 31.7
April 24, 2008 63.92 4.8
April 28, 2008 64.30 21.8
April 30, 2008 64.37 10.6
May 5, 2008 65.12 22.8
May 7, 2008 65.17 16.6
May 12, 2008 66.42 18.1
May 14, 2008 67.52 35.4
May 21, 2008 68.32 14.9
May 22, 2008 68.47 28.3
May 27, 2008 68.72 9.1
June 3, 2008 67.67 31.7
June 4, 2008 68.17 22.6
Purchased Sold
Date Rate Amount Rate Amount
June 9, 2008 68.57 15.9
June 11, 2008 68.72 25.6
June 16, 2008 68.72 28.2
June 18, 2008 68.72 17.9
June 23, 2008 68.72 8.4
June 25, 2008 68.80 22.2
June 30, 2008 68.57 28.2
July 7, 2008 69.20 23.5
July 9, 2008 69.42 27.5
July 14, 2008 68.60 25.6
July 15, 2008 68.62 15.0
1589.2 17.7
Table 47
FOREIGN LOAN AGREEMENTS
IN 2007/08
(Date and Purpose/Projectwise)

Rs. in Million
Date of Agreement Donor
S.No. Signed Agency/Govt. Amount Name of the Project

1 September 3, 2007 Saudi Fund for Development 985.5 Bagmati Irrigation Project
2 September 14, 2007 India 6500.0 Line of Credit
3 November 26, 2007 OPEC Fund 636.5 Road Connectivity Sector I Project
4 April 21, 2008 OPEC Fund 638.5 Rural Reconstruction and Rehabilitation Project

Total Amount 8760.5

Source: Ministry of Finance, GON.


Table 48
FOREIGN GRANT AGREEMENTS
In 2007/08
(Date and Purpose / Projectwise)

S. N. Date of agreement Donar Agency Amount Name of Project / Purpose


signed / Government
1 July 24, 2007 China 428.5 Economic and Technical Cooperation
2 July 27, 2007 Netherlands 177.6 Assistance to the Nepalese Private Sector throgh Program for Cooperation with Emerging Markets
3 August 2, 2007 World Bank 26.3 IDF Grant for Legal and Judicial Reforms to Strengthen Creditor Rights Project
4 August 9, 2007 ILO 194.7 Employment Promotion and peace Building Based on Local Economic Development Project
5 September 5, 2007 Japan 27.2 Kathmandu-Bhaktapur Roads
6 September 5, 2007 Germany 1175.0 Middle Marsyangdi Hydroelectric Project
7 September 19, 2007 Korea 227.5 Government Integrated Data and Training Center (GIDTC)
8 October 4, 2007 World Bank 318.0 Nepal Biogas Support Program
9 December 5, 2007 Norway 240.7 Peace Trust Fund
10 December 12, 2007 Germany 1550.0 Middle Marsyangdi Hydroelectric Project
11 December 20, 2007 China 428.5 Economic and Technical Cooperation
12 January 9, 2008 Switzerland 200.0 Sustainable Management of Agricultural Soils in the Mid-Hills of Nepal Phase III
13 January 14, 2008 ADB 6290.0 Rural Reconstruction and Rehabilitation Sector Development Program (RRRSDP)
14 January 28, 2008 Japan 234.4 Food Aid ( KR)
15 January 31, 2008 World Bank 6300.0 Poverty Alleviation Fund
16 January 31, 2008 World Bank 2690.0 Road Sector Development Project
17 January 31, 2008 World Bank 3150.0 Irrigation and Water Resources Management Project
18 January 31, 2008 World Bank 3780.0 Education for All
19 Februray 25, 2008 UNDP 6030.9 Country Program Action Plan (CPAP)
20 Februray 25, 2008 UNICEF 4358.0 Country Program Action Plan (CPAP)
21 Februray 25, 2008 UNFPA 1789.0 Country Program Action Plan (CPAP)
22 March 3, 2008 UK 931.4 Peace Trust Fund
23 March 31, 2008 ADB 516.4 Education Sector Program (ESP II)
24 April 3, 2008 India 240.0 Rehabilitation of Devighat Hydropower Plant
25 April 3, 2008 India 88.0 Development of 1000 Shallow Tube Well Irrigation System in Dhanusa and Mahottari Districts
26 May 5, 2008 IFAD 270.0 Poverty Alleviation Fund
27 May 22, 2008 Finland 373.4 Strengthening of Environmental Administration and Management at the Local Level (SEAM-N) Phase II
28 May 22, 2008 Finland 1035.0 Rural Water Supply and Sanitation Project in Western Nepal (RWSSP-WN)
29 May 23, 2008 ADB 1720 Information and Communication Technology (ICT) Development Project
30 June 5, 2008 Australia 643.3 Education for All (EFA) Program
31 June 5, 2008 EC 2634 Education for All (EFA) Program
32 July 3, 2008 Switzerland 162.2 Vertical Shaft Brick Kiln Project Fourth Phase
33 July 3, 2008 Switzerland 70 Hill Maze Research Project Phase III
Total Amount 48300.1
Source : Ministry of Finance, GON.
Table 49
COMMITMENT OF FOREIGN AID
IN FY 2007/08
(Donorwise Classification)

Rs. in Million

S.No. Sector Grant Loan Total

A. Bilateral
1 Australia 643.3 0.0 643.3
2 China 857.0 0.0 857.0
3 Finland 1408.4 0.0 1408.4
4 Germany 2725.0 0.0 2725.0
5 India 328.0 6500.0 6828.0
6 Japan 261.6 0.0 261.6
7 Netherlands 177.6 0.0 177.6
8 Norway 240.7 0.0 240.7
9 Saudi Fund for Development 0.0 985.5 985.5
10 South Korea 227.5 0.0 227.5
11 Switzerland 432.2 0.0 432.2
12 UK 931.4 0.0 931.4

Sub Total (A) 8232.7 7485.5 15718.2

B. Mulilateral
1 ADB 8526.4 0.0 8526.4
2 European Community (EC) 2634.0 0.0 2634.0
3 IFAD 270.0 0.0 270.0
4 ILO 194.7 0.0 194.7
5 OPEC Fund 0.0 1275.0 1275.0
6 UNDP 6030.9 0.0 6030.9
7 UNFPA 1789.0 0.0 1789.0
8 UNICEF 4358.0 0.0 4358.0
9 World Bank 16264.3 0.0 16264.3

Sub Total (B) 40067.3 1275.0 41342.3


Grand Total (A+B) 48300.1 8760.5 57060.6
Source: Ministry of Finance, GON
Table 50
SDR HOLDING TRANSACTIONS WITH THE IMF
As at Mid-July, 2008

In SDRs
Date Description Debit Credit
August 15, 2007 Allocation charges - 87059.0
November 12, 2007 Quarterly Interest 58714.0 -
Allocation charges - 81221.0
December 25, 2007 Quarterly Interest 63671.0 -
January 3, 2008 PRGF Interest - 103906.0
February 10, 2008 Quarterly Interest 51155.0 -
Allocation charges - 71508.0
May 2, 2008 Assessment Charge - 576.0
May 6, 2008 Quarterly Interest 39470.0 -
Allocation charges - 56002.0
July 1, 2008 PRGF Interest - 126121.0
Total 213010.0 526393.0
Opening Balance 5882331.0 -
Closing Balance - 5568948.0

Source: Foreign Exchange Management Department, NRB.


Table 51
MONETARY SURVEY
Rs. in million
Changes During the Fiscal Year
Monetary aggregates 2002 2006 2007 2008 2006/07 2007/08
Oct Jul Jul Jul (e) Amount Percent Amount Percent
1/ 2/
1. Foreign Assets, Net 87163.1 139439.2 131909.5 171455.5 5904.2 4.2 29674.7 22.5
1.1. Foreign Assets 105173.7 166101.7 165713.5 213254.1 -388.2 -0.2 47540.6 28.7
1.2 Foreign Currency Deposits 17269.7 25088.1 28247.2 34229.1 3159.1 12.6 5981.8 21.2
1.3 Other Foreign Liabilities 740.9 1574.4 5556.8 7569.6 3982.5 253.0 2012.7 36.2
2. Net Domestic Assets 140502.3 207384.8 263608.7 323921.6 42789.9 1/ 20.6 70184.3 2/ 26.6
2.1. Domestic Credit 211205.1 322683.8 360558.1 437269.8 37874.3 11.7 76711.7 21.3
Domestic Credit* 322683.8 376581.9 453293.6 53898.1 16.7 76711.7 20.4
a. Net Claims on Govt. 58362.7 70970.6 78343.6 87079.6 7373.0 10.4 8736.0 11.2
i. Claims on Govt. 58362.7 70970.6 81466.1 91026.0 10495.6 14.8 9559.9 11.7
ii. Govt. Deposits 0.0 0.0 3122.5 3946.4 3122.5 823.9 26.4
b. Claims on Non-Financial Govt. En 3438.8 4560.9 5114.9 5646.5 554.0 12.1 531.6 10.4
c. Claims on Financial Institutions 11614.4 3581.9 3622.2 4709.5 40.3 1.1 1087.3 30.0
i. Government 11582.4 1808.3 1713.0 1670.5 -95.3 -5.3 -42.5 -2.5
ii. Non-government 32.0 1773.6 1909.2 3039.1 135.6 7.6 1129.8 59.2
d. Claims on Private Sector 137789.2 243570.4 273477.4 339834.2 29907.0 12.3 66356.8 24.3
Claims on Private Sector* 243570.4 289501.2 355858.0 45930.8 18.9 66356.8 22.9
2.2. Net Non-monetary Liabilities 70702.8 115298.9 96949.4 113348.2 -4915.6 1/ -4.3 6527.4 2/ 6.7
Net Non-monetary Liabilities* 115298.9 112973.2 129372.0 11108.2 1/ 9.6 6527.4 2/ 5.8
3. Broad Money (M2) 227665.4 346824.0 395518.2 495377.1 48694.1 14.0 99859.0 25.2
3.1. Money Supply (M1) 77082.4 113060.7 126887.9 154343.9 13827.2 12.2 27456.0 21.6
a. Currency 57168.2 77780.4 83553.3 100175.2 5772.8 7.4 16622.0 19.9
b. Demand Deposits 19914.2 35280.3 43334.4 54168.7 8054.0 22.8 10834.4 25.0
3.2. Time Deposits 150583.0 233763.3 268630.2 341033.2 34866.9 14.9 72403.0 27.0
4. Broad Money Liquidity (M3) 244935.1 371912.2 423765.4 529606.2 51853.2 13.9 105840.8 25.0
1/ Adjusting the exchange valuation loss of Rs. 13433.95 million.
2/ Adjusting the exchange valuation gain of Rs 9871.37 million.
e = estimates.
*Adjusting credit write-off of Rs 2869.3 million (Rs 821.7 million principal and Rs 2047.6 million interest) as at mid Oct-2006 by Nepal
Bank Ltd. and Rs 13.2 billion (Rs 4055.2 million principal and Rs 9099.3 million interest) by RBB as at mid Dec-2006.
Table 52
MONETARY AUTHORITIES ACCOUINT
Rs in million
Changes During the Fiscal Year
2002 2006 2007 2008 2006/07 2007/08
Oct Jul Jul Jul (e) Amount Percent Amount Percent
1. Foreign Assets 79467.9 133036.3 130213.9 170314.2 -2822.4 -2.1 40100.4 30.8
1.1 Gold 503.2 405.0 0.0 0.0 -405.0 -100.0 0.0 0.0
1.2 SDR Holdings 3.0 663.7 587.5 630.6 -76.2 -11.5 43.2 7.3
1.3 Reserve Position in the Fund 589.2 0.0 0.0 0.0 0.0 0.0 0.0
1.4 Foreign Exchange 78372.5 131967.6 129626.4 169683.6 -2341.2 -1.8 40057.2 30.9
2. Claims on Government 26832.0 12108.7 15616.1 18925.8 3507.5 29.0 3309.6 21.2
2.1 Treasury Bills 15573.5 9209.3 13755.6 17555.9 4546.2 49.4 3800.4 27.6
2.2 Development Bonds 2457.9 1518.6 1518.6 6.9 0.0 0.0 -1511.7 -99.5
2.3 Other Govt. Papers 2273.0 309.7 342.0 1362.9 32.3 10.4 1020.9 298.5
2.4 Loans and Advances 6527.6 1071.0 0.0 0.0 -1071.0 -100.0 0.0 0.0
3. Claims on Non-Financial Govt. Ent. 7.5 8.5 8.5 11.0 0.0 0.0 2.5 29.4
4. Claims on Financial Institutions 1661.2 1038.5 696.9 464.1 -341.5 -32.9 -232.8 -33.4
(of which development banks) 0.0 27.3 7.0 0.0 -20.3 -74.3 -7.0 -100.0
4.1 Government 1629.2 979.2 657.9 432.1 -321.3 -32.8 -225.8 -34.3
4.2 Non-government 32.0 59.3 39.0 32.0 -20.3 -34.2 -7.0 -17.9
5. Claims on Banks 1074.2 329.2 1870.8 660.7 1541.6 468.4 -1210.2 -64.7
5.1 Refinance 1074.2 329.2 80.8 60.7 -248.4 -75.5 -20.2 -24.9
5.2 Repo Lending/SLF 0.0 0.0 1790.0 600.0 1790.0 0.0 -1190.0 -66.5
6. Claims on Private Sector 3060.3 3208.5 8116.8 3053.2 4908.3 153.0 -5063.6 -62.4
7. Other Assets 14338.7 18244.8 16285.4 19020.8 -1959.4 -10.7 2735.5 16.8
Assets = Liabilities 126441.8 167974.4 172808.4 212449.8 4834.0 2.9 39641.4 22.9
8. Reserve Money 76704.8 110898.1 119269.3 144591.6 8371.2 7.5 25322.3 21.2
8.1 Currency Outside Banks 57168.2 77780.4 83553.3 100175.2 5772.8 7.4 16622.0 19.9
8.2 Currency Held by Commercial Bank 3888.5 6054.4 7359.8 12651.9 1305.3 21.6 5292.1 71.9
8.3 Deposits of Commercial Banks 13389.4 22907.3 22597.7 23857.3 -309.6 -1.4 1259.5 5.6
8.4 Other Deposits 2258.7 4155.9 5758.5 7907.3 1602.6 38.6 2148.7 37.3
9. Govt. Deposits 0.0 0.0 3122.5 3946.4 3122.5 823.9 26.4
10. Foreign Liabilities 533.0 1566.6 3928.3 5657.6 2361.7 150.7 1729.2 44.0
10.1 Foreign Deposits 78.6 9.9 12.3 6.7 2.4 24.3 -5.6 -45.2
10.2 IMF Trust Fund 0.0 0.0 0.0 0.0 0.0 0.0
10.3 Use of Fund Resources 0.0 0.0 0.0 0.0 0.0 0.0
10.4 SAF 0.0 0.0 0.0 0.0 0.0 0.0
10.5 ESAF 404.3 0.0 0.0 0.0 0.0 0.0
10.6 PRGF 1556.7 3916.0 5650.8 2359.3 151.6 1734.8 44.3
10.7 CSI 50.1 0.0 0.0 0.0 0.0 0.0
11. Capital and Reserve 31242.5 36261.4 25234.3 35730.6 -11027.1 -30.4 10496.3 41.6
12. Other Liabilities 17961.5 19248.3 21253.7 22523.6 2005.5 10.4 1269.8 6.0
p = provisional.
Table 53
CONDENSED ASSETS AND LIABILITIES OF COMMERCIAL BANKS

Rs. in Million
Changes During the Fiscal Year
2003 2006 2007 2008 2006/07 2007/08
Jul Jul Jul Jul (e) Amount Perdent Amount Percent
1. Total Deposits 185508.2 289975.9 334453.3 421523.7 44477.4 15.3 87070.4 26.0
1.1. Demand Deposits 22154.5 35716.1 42692.2 54124.4 6976.1 19.5 11432.1 26.8
a. Domestic Deposits 17655.5 31124.4 37575.8 46261.5 6451.4 20.7 8685.6 23.1
b. Foreign Deposits 4499.0 4591.7 5116.4 7862.9 524.7 11.4 2746.5 53.7
1.2. Saving Deposits 85301.0 151710.7 174633.9 211406.4 22923.1 15.1 36772.6 21.1
a. Domestic Deposits 81347.3 145776.8 168320.4 203771.0 22543.6 15.5 35450.6 21.1
b. Foreign Deposits 3953.7 5934.0 6313.5 7635.5 379.5 6.4 1322.0 20.9
1.3. Fixed Deposits 76093.4 100068.2 114032.5 152364.3 13964.3 14.0 38331.8 33.6
a. Domestic Deposits 67276.4 85505.7 97215.1 133633.6 11709.4 13.7 36418.5 37.5
b. Foreign Deposits 8817.0 14562.5 16817.3 18730.7 2254.9 15.5 1913.4 11.4
1.4. Margin Deposits 1959.3 2480.9 3094.7 3628.6 613.9 24.7 533.9 17.3
2. Borrowings from Rastra Bank 1074.2 329.2 1870.8 660.7 1541.6 468.4 -1210.2 -64.7
3. Foreign Liabilities 207.9 7.7 1628.5 1912.0 1620.8 21035.2 283.5 17.4
4. Other Liabilities 76977.3 105652.3 101782.9 124993.9 -3869.4 -3.7 23211.0 22.8
4.1 Paid-up Capital 0.0 17049.7 20017.1 31750.3 2967.3 17.4 11733.2 58.6
4.2 General Reserves 0.0 9746.2 4330.7 3529.9 -5415.6 -55.6 -800.7 -18.5
4.3 Other Liabilities 0.0 78856.3 77435.1 89713.7 -1421.2 -1.8 12278.6 15.9
Assets = Liabilities 263767.6 395965.1 439735.4 549090.2 43770.4 11.1 109354.8 24.9
6. Liquid Funds 43144.4 61817.3 64930.3 79010.5 3113.0 5.0 14080.2 21.7
6.1. Cash in Hand 3888.5 6054.4 7359.8 12651.9 1305.3 21.6 5292.1 71.9
6.2. Balance with Rastra Bank 13389.4 22907.3 22597.7 23857.3 -309.6 -1.4 1259.5 5.6
6.3. Foreign Currency in Hand 719.0 399.2 454.0 358.8 54.8 13.7 -95.2 -21.0
6.4. Balance Held Abroad 23143.1 31401.9 33933.0 41100.6 2531.1 8.1 7167.6 21.1
6.5. Cash in Transit 2004.4 1054.5 585.8 1042.0 -468.7 -44.4 456.1 77.9
7. Loans and Advances 181487.8 307583.9 340354.9 420242.6 32771.0 10.7 79887.7 23.5
Loans and Advances* 307583.9 356378.7 436266.4 48794.8 15.9 79887.7 22.4
7.1. Claims on Government 31530.7 58861.9 65850.0 72100.2 6988.1 11.9 6250.2 9.5
7.2. Claims on Non-Financial Govt. Ent 3431.3 4552.4 5106.4 5635.5 554.0 12.2 529.1 10.4
7.3. Claims on Financial Ent 9953.2 2543.5 2925.3 4245.4 381.8 15.0 1320.1 45.1
Government 829.1 1055.1 1238.4 225.9 27.3 183.3 17.4
Non-government 1714.4 1870.2 3007.1 155.9 9.1 1136.8 60.8
7.4. Claims on Private Sector 134728.9 240361.9 265360.6 336781.0 24998.8 10.4 71420.4 26.9
Claims on Private Sector* 240361.9 281384.4 352804.8 41022.6 17.1 71420.4 25.4
a. Principal 0.0 198215.2 231949.1 307272.1 33733.9 17.0 75323.0 32.5
Principal* 198215.2 236826.0 312149.0 38610.8 19.5 75323.0 31.8
b. Interest Accrued 0.0 42146.6 33411.5 29508.9 -8735.1 -20.7 -3902.6 -11.7
Interest Accured* 42146.6 44558.4 40655.8 2411.8 5.7 -3902.6 -8.8
7.5. Foreign Bills Purchased & Discounted 1843.7 1264.3 1112.6 1480.5 -151.7 -12.0 367.8 33.1
8. NRB Bonds 0.0 0.0 0.0 0.0 0.0 0.0
9. Other Assets 39135.4 26563.8 34450.3 49837.1 7886.5 29.7 15386.8 44.7
e = estimated
Table 54
BANKING SURVEY
Rs. in Million
Change
Particulars 2006 2007 2008 2006/07 2007/08
Jul July July cmount Percent Amount Percent
1. Foreign Assets, Net 138640.5 131911.5 170094.0 6705.0 4.8 28311.1 21.5
Net Foreign Assets(MS) 139439.1 131909.5 171455.5 5904.3 1/ 4.2 29674.6 2/ 22.5
Foreign Assets 166101.7 165713.5 213254.1 -388.2 -0.2 47540.6 28.7
Foreign Liabilities 26662.6 33804.0 41798.6 7141.4 26.8 7994.6 23.6
Net Foreign Assets(OBI) -798.6 2.0 -1361.5 800.6 -100.3 -1363.5 -
Foreign Assets 0.0 2.0 1.0 2.0 -1.0 -50.0
Foreign Liabilities 798.6 0.0 1362.5 -798.6 -100.0 1362.5
2. Net Domestic Assets 242424.5 308793.4 378808.0 52934.9 1/ 21.8 79886.1 2/ 25.9
A. Domestic Credit 362330.8 411534.1 520471.9 49203.3 13.6 108937.8 26.5
i. Claims on Government 72336.6 79617.3 88093.7 7280.7 10.1 8476.4 10.6
Claims on Govt(net)(MS) 70970.6 78343.7 87096.0 7373.1 10.4 8752.3 11.2
Claims on Govt(MS) 70970.6 81466.2 91025.9 10495.6 14.8 9559.7 11.7
Govt Deposits (MS) 0.0 3122.5 3929.9 3122.5 807.4 25.9
Claims on Govt (OBI) 1366.0 1273.6 997.7 -92.4 -6.8 -275.9 -21.7
ii. Claims on NBFI 1785.8 1925.7 3061.7 139.8 7.8 1136.1 59.0
Claims on NBFI(MS) 1785.8 1925.7 3061.7 139.8 7.8 1136.1 59.0
Claims on NBFI(OBI) 0.0 0.0 0.0 0.0 0.0
iii. Claims on Nonfinancial Govt. Enter. 4560.9 5114.9 5646.5 554.0 12.1 531.6 10.4
Claims on Non-Fin. Govt. Ent.(MS) 4560.9 5114.9 5646.5 554.0 12.1 531.6 10.4
Claims on Non-Fin. Govt. Ent.(OBI) 0.0 0.0 0.0 0.0 0.0
iv. Claims on Private Sector 283647.5 324876.3 423670.0 41228.8 14.5 98793.7 30.4
Claims on Private Sector(MS) 243570.4 273477.4 339834.2 29907.0 12.3 66356.8 24.3
Claims on Private Sector(MS)* 243570.4 289501.2 355858.0 45930.8 18.9 66356.8 22.9
Claims on Private Sector(OBI) 40077.1 51398.9 83835.8 11321.8 28.3 32436.9 63.1
B. Capital and Other Items(net) 119906.3 102740.8 141663.9 -3731.6 1/ -3.1 29051.8 2/ 28.3
Capital and Other Items(net)(MS) 115299.5 96949.4 113365.4 -18350.1 -15.9 16416.0 16.9
Less Claims on OBI (MS) -1796.2 -1696.5 -1647.9 99.6 -5.5 48.7 -2.9
Time and Saving Deposits of OBI at MS 4295.6 4836.7 28755.2 541.1 12.6 23918.5 494.5
Capital and Other Items(net)(OBI) 2107.4 2651.2 1191.2 543.8 25.8 -1460.0 -55.1
3. Liquid Liabilities (L1) 381064.9 440702.5 548901.5 59637.6 15.7 108199.0 24.6
A. Broad Money (M2) 346823.7 395517.8 495377.2 48694.1 14.0 99859.4 25.2
Money Supply (M1) 113060.3 126887.6 154344.0 13827.3 12.2 27456.4 21.6
- Currency 77780.4 83553.3 100175.2 5772.9 7.4 16621.9 19.9
- Demand Deposits 35279.9 43334.3 54168.8 8054.4 22.8 10834.5 25.0
Time Deposits (MS) 233763.4 268630.2 341033.2 34866.8 14.9 72403.0 27.0
B. Less Time and Saving Deposits of OBI (at MS) 4295.6 4836.7 28755.2 541.1 12.6 23918.5 494.5
C. Time and Saving Deposits (OBI) 38536.8 50021.4 82279.5 11484.6 29.8 32258.1 64.5
Note: In this table, MS refers to those items that are derived from the Monetary Survey; OBI to Other Banking Institutions
and NBFI to Non-bank Financial Institutions.
Since mid-July 2006, MS includes the consolidated balance sheet of ADB/N and OBI excludes it.
*Adjusting credit write-off of Rs 2869.3 million (Rs 821.7 million principal and Rs 2047.6 million interest) as at mid Oct-2006 by Nepal
Bank Ltd. and Rs 13.2 billion (Rs 4055.2 million principal and Rs 9099.3 million interest) by RBB as at mid Dec-2006.
1/ Adjusting the exchange valuation loss of Rs. 13433.95 million.
2/Adjusting the exchange valuation gain of Rs. 9871.37 million.
Table 55
INTEREST RATE STRUCTURE OF
COMMERCIAL BANKS*
(Percent per Annum)

2006 2007 2008


Jul Jul July
1. Deposit Rates
Savings Deposits 2.0-5.0 2.0-5.0 2.0-6.50
1 Year Fixed Deposits 2.25-5.0 2.25-5.0 2.5-6.0
2 Years and Above 2.5-6.4 2.5-5.5 2.75-6.75
2 Lending Rates
Industry 8.0-13.5 8.0-13.5 7.0-13.0
Agriculture 9.5-13 9.5-13 9.5-12
Export Bills 5.0-11.5 5.0-11.5 5.0-11.5
Commercial Loans 8.0-14 8.0-14.0 8.0-13.5
Overdrafts 6.5-14.5 6.0-14.5 6.50-13.5

* Unweighted.
Table 56
CREDIT-DEPOSIT AND LIQUIDITY-DEPOSITS RATIOS OF
COMMERCIAL BANKS
(Monthly)

Rs in million
Credit- Liquidity-
2007/08 Total Deposits Total Credit Liquid Fund Liquidity
Deposit Ratio Deposit
August 341626.9 277930.6 66637.7 130324.1 81.36 38.15
September 343500.9 285360.4 62001.1 126697.8 83.07 36.88
October 348315.0 292938.1 65946.6 125556.1 84.10 36.05
November 357903.2 301237.7 66305.2 128809.4 84.17 35.99
December 366938.8 309833.6 66962.0 130150.9 84.44 35.47
January 372411.1 319874.8 65432.6 128864.6 85.89 34.60
February 370798.9 326212.3 68219.3 131313.2 87.98 35.41
March 375589.4 326708.5 69607.9 129948.6 86.99 34.60
April 389851.8 336310.7 72906.8 137696.5 86.27 35.32
May 397967.9 343242.1 73221.6 135374.7 86.25 34.02
June 402170.7 345557.7 76428.3 140684.6 85.92 34.98
July 421523.7 348142.4 79010.5 151110.7 82.59 35.85
1. Excludes inter-bank deposits and government deposits, but includes foreign deposits.
2. Excludes investment in government securities and includes foreign bills purchased and discounted.
3. Includes cash in hand, balance with Nepal Rastra Bank, foreing currency in hand, balance held
abroad, cash in transit and government securities.
Table 57
STOCK MARKET INDICATORS
Details Mid-July % Change
2006 2007 2008 2007 2008
1. No. of listed companies 135 135 142 - 5
2. Paid-up capital of the listed companies (Rs.in million) 19958 21746 29465 9 35
3. Total market capitalization (Rs.in million) 96763 186300 366248 93 97
4. Annual turnover (Rs.in million) 3452 8360 22821 142 173
5. Market days 228 232 235 2 1
6. No.of companies traded 110 116 136 5 17
7. No. of transactions 97374 120510 150800 24 25
8. No. of listed shares (in '000) 226540 243504 321131 7 32
9. No.of shares traded (in '000) 12222 18147 28600 48 58
10. Ratio of paid-up capital to GDP (%) 3.1 3.0 3.6 - -
11 Ratio of turnover to market capitalization (%) 3.6 4.5 6.2 - -
12 Ratio of market capitalization to GDP (%) 15.0 25.9 44.6 - -
13 NEPSE index (closing)* 286.6 386.8 683.9 35 77
14 NEPSE sensitive index (closing)** - 175.8 253.7 - 44
*Base: February 12, 1994.
**Base: January 1, 2007.
Source: Nepal Stock Exchange Ltd.
Table 58
CONSOLIDATED SOURCES AND USES OF FUND OF OTHER FINANCIAL
INSTITUTIONS
Rs. in Million
Mid-July Amount Change Percentage Change
2005/06 2006/07 2007/08* 2005/06 2006/07 2005/06 2006/07
Sources of Funds
1. Capital Fund 10,235.2 10,913.7 15,654.3 678.5 4,740.6 6.6 43.4
3. Deposits 66,128.2 53,532.4 82,590.6 (12,595.8) 29,058.2 (19.0) 54.3
4. Borrowing 11,776.6 12,785.4 15,504.9 1,008.8 2,719.5 8.6 21.3
5. Other Liabilities 21978.3 11952.4 21668.8 (10,025.9) 9,716.4 (45.6) 81.3
6 P/L Account -88.97 812.31 1776.74 901.3 964.4 (1,013.0) 118.7
Sources = Uses 110,029.4 89,996.2 137,195.3 (20,033.2) 47,199.2 (18.2) 52.4
Uses of Funds 110,029.4 89,996.2 137,195.3 (20,033.2) 47,199.1 (18.2) 52.4
1. Cash & Bank Balance 12434.1 13507.2 29633.0 1,073.1 16,125.8 8.6 119.4
2. Investment 6,737.6 8,347.4 11,359.2 1,609.8 3,011.9 23.9 36.1
3. Loans and Advances 64,205.8 59,000.7 84,927.8 (5,205.1) 25,927.1 (8.1) 43.9
4. Other Assets 26020.43 7279.6 9885.14 (18,740.8) 2,605.5 (72.0) 35.8
5 P/L Account 631.36 1861.28 1390.15 1,229.9 (471.1) 194.8 (25.3)

* Consists of 58 Development Banks, 78 Finance Companies , 12 Micro-finance Institutions and


16 Cooperative Societies (with limited banking transactions).
Note: Figures in parenthesis indicate a decline.
Table 59
SOURCES AND USES OF FUND OF DEVELOPMENT BANKS
Rs. in Million
Mid-July Amount Change Percent Change
2005/06* 2006/07** 2007/08*** 2006/07 2007/08 2006/07 2007/08
Sources of Funds
1. Capital Funds 4,765.2 4,060.0 6,551.1 (705.1) 2,491.1 (14.8) 61.4
a. Paid-up Capital 3122.36 2860.62 5419.9 (261.7) 2,559.3 (8.4) 89.5
b. General Reserve 255.79 137.5 192.6 (118.3) 55.1 (46.2) 40.1
c. Retain Earning 28.1 -39.2 -188.3 (67.3) (149.1) (239.5) (380.4)
c. Other Reserve 1358.91 1101.1 1126.9 (257.8) 25.8 (19.0) 2.3
2. Deposits 35,832.7 15,370.0 25,749.9 (20,462.7) 10,379.9 (57.1) 67.5
a. Current - 157.8 514.2 157.8 356.4 - 225.9
b. Saving - 6,002.7 12370.8 6,002.7 6,368.1 - 106.1
c. Fixed - 7,132.5 8592.6 7,132.5 1,460.1 - 20.5
d. Call - 1,407.9 3456.9 1,407.9 2,049.0 - 145.5
e. Others - 669.1 815.4 669.1 146.3 - 21.9
3. Borrowings 5,226.2 2,231.9 2,532.7 (2,994.3) 300.8 (57.3) 13.5
a. NRB 1159.1 796.5 778.5 (362.6) (18.0) (31.3) -2.3
b. Commercial Banks 758.3 596.7 728.9 (161.6) 132.2 (21.3) 22.2
c. Others 3308.8 838.7 1025.27 (2,470.1) 186.6 (74.7) 22.2
4. Others Liabilities 15118.02 1666.1 5653.4 (13,451.9) 3,987.3 (89.0) 239.3
5 Profit & Loss A/C -843.61 -669.81 -618.31 173.8 51.5 (20.6) -7.7
Sources =Uses 60,098.5 22,658.2 39,868.8 (37,614.1) 17,210.6 (62.6) 76.0
1. Liquid Funds 5,232.5 3,731.4 9,967.8 (1,501.1) 6,236.4 (28.7) 167.1
a. Cash in Hand 689.4 237.2 603.0 (452.2) 365.8 (65.6) 154.2
b. Bal.with NRB 1398.7 522.3 2260.6 (876.4) 1,738.3 (62.7) 332.8
c. Bal.with Dom. Bank 3144.4 2971.9 7104.27 (172.5) 4,132.4 (5.5) 139.0
2. Investments 2,119.1 1,536.6 3,324.8 (582.5) 1,788.2 (27.5) 116.4
a. Share and Debenture 1604.69 1399.18 3146.58 (205.5) 1,747.4 (12.8) 124.9
b. Govt.Securities 514.37 137.4 178.2 (377.0) 40.8 (73.3) 29.7
3. Loans and Advances 31,142.2 15,373.8 23,670.5 (15,768.4) 8,296.7 (50.6) 54.0
4. Others 21272.89 1260.6 2171.77 (20,012.3) 911.2 (94.1) 72.3
5 Profit & Loss A/C 331.9 755.8 733.9 423.9 (21.9) 127.7 (2.9)

Note: Figures in parenthesis indicate a decline.


* Number of Development Banks: 28
** Number of Development Banks: 38
*** Number of Development Banks: 58
Source: Banks and Financial Institutions Regulation Department.
Table 60
SOURCES AND USES OF FUND OF FINANCE COMPANIES
Rs. in Million
Mid - July Amount Change Percentage Change
2005/06* 2006/07** 2007/08*** 2006/07 2007/08 2006/07 2007/08
Sources of Funds
1 Capital Funds 4,314.8 5,379.9 7,444.4 1,065.1 2,064.6 24.7 38.4
a. Paid-up Capital 3,356.7 4,439.9 6,910.7 1,083.2 2,470.9 32.3 55.7
b. General Reserve 586.5 711.5 787.7 125.0 76.2 21.3 10.7
c. Retain Earning 306.4 72.2 (455.3) (234.2) (527.5) (76.4) -
d. Other Reserve 65.2 156.4 201.3 91.1 45.0 139.7 28.8
2 Deposits 27,351.4 34,514.7 52,282.6 7,163.3 17,767.9 26.2 51.5
a. Current 16.8 0.1 103.6 (16.6) 103.5 (99.3) -
b. Saving 8,118.1 11,665.2 22,907.0 3,547.1 11,241.8 43.7 96.4
c. Fixed 19,007.6 22,240.8 28,269.7 3,233.2 6,028.9 17.0 27.1
d. Call 56.0 517.5 829.2 461.5 311.7 824.7 60.2
e. Others 153.0 91.2 173.1 (61.9) 82.0 (40.4) 89.9
3 Borrowings 1,154.8 3,469.6 4,365.0 2,314.8 895.4 200.4 25.8
a. Commercial Banks 995.0 2,707.9 3,577.3 1,712.9 869.4 172.2 32.1
b. Others 159.8 761.7 787.7 601.9 25.9 376.5 3.4
4 Others Liabilities 5,463.1 8,762.9 14,052.3 3,299.8 5,289.4 60.4 60.4
5 P/L Account 572.1 1,339.3 2,239.1 767.2 899.8 134.1 67.2
Sources =Uses 38,856.2 53,466.4 80,383.3 14,610.1 26,917.0 37.6 50.3
1 Liquid of Funds 5,386.7 7,513.4 17,741.7 2,126.7 10,228.3 39.5 136.1
a. Cash in Hand 198.7 256.1 588.4 57.4 332.3 28.9 129.7
b. Bal.with NRB 749.9 922.9 3,852.6 173.0 2,929.7 23.1 317.4
c. Bal.with Dom. Bank 4,438.0 6,334.4 13,300.8 1,896.4 6,966.4 42.7 110.0
2 Investments 2,784.5 4,635.7 4,307.4 1,851.2 (328.3) 66.5 -7.1
a. Govt.Securities 963.2 1,222.1 717.5 258.9 (504.6) 26.9 -41.3
b. Others 1,821.2 3,413.6 3,589.9 1,592.4 176.3 87.4 5.2
3 Loans and Advances 27,095.3 35,616.5 51,516.9 8,521.2 15,900.4 31.4 44.6
4 Others 3,511.3 4,844.7 6,317.7 1,333.4 1,473.0 38.0 30.4
5 Profit & Loss A/C 78.5 856.1 499.6 777.6 (356.5) 991.1 -41.6

Note: Figures in parenthesis indicate a decline


* Number of Finance Companies: 70
** Number of Finance Companies: 74
*** Number of Finance Companies: 78
Source: Banks & Financial Institutions Regulation Department.
Table 61
STATUS OF NON PERFORMING LOAN OF DEVELOPMENT BANKS AND
FINANCE COMPANIES
Rs. in Million
Mid July
Institution 2005/06 2006/07 2007/08 2007/08 2007/08
% of % of % of Amount Percentage
Total Total Total Total Total Total Total Total Total Change in Change in
NPL Loan Loan NPL Loan Loan NPL Loan Loan Total NPL Total NPL

Development Bank 410.3 7756.4 5.29% 652.4 13162.5 4.96% 809 21332.3 3.79% 156.6 24.00

Finance Companies 201.5 2393.4 8.42% 204.1 3242.5 6.29% 211.8 5149.4 4.11% 7.7 3.77

Source: Banks and Financial Institution Regulation Department.


Table 62
SOURCES AND USES OF FUND OF
RURAL DEVELOPMENT BANKS*

Rs. in Million
Mid - July Amount Change Percentage Change
2005/06 2006/07 2007/08 2006/07 2007/08 2006/07 2007/08
Sources of Funds
1. Capital Funds 316.3 338.4 307.7 22.1 (30.7) 7.0 -9.1
a. Paid-up Capital 298.5 298.5 308.5 - 10.0 - 3.4
b. General Reserve 16.7 21.8 25.5 5.1 3.7 30.5 17.0
c. Other Reserve 0.7 18.1 27.4 17.4 9.3 2,485.7 51.4
Retained Earning 0.4 - -53.7 (0.4) - (100.0) -
2. Deposits 499.8 517.9 591.6 18.1 73.7 3.6 14.2
a. Current
b. Saving 478.8 513.6 591.6 34.8 78.0 7.3 15.2
c. Fixed - 1.5 - 1.5 (1.5) - (100.0)
d. Call
e. Others 21.0 2.8 - (18.2) (2.8) (86.7) (100.0)
3. Borrowings 2303.7 2780.6 3071.6 476.9 291.0 20.7 10.5
a. Domestic Institution 939.6 807.9 (131.7) (807.9) (14.0) -100.0
b. NRB 28 97.6 36.4 69.6 (61.2) 248.6 -62.7
c. Others 1336.1 1875.1 3035.2 539.0 1,160.1 40.3 61.9
4. Others Liabilities 456.4 321.1 386.4 (135.3) 65.3 (29.6) 20.3
5 Profit & Loss A/C 43.1 7.5 - - - - -
Sources =Uses 3,619.3 3,965.5 4,357.3 346.2 391.8 9.6 9.9
5. Liquid of Funds 300.2 197.5 206.4 (102.7) 8.9 (34.2) 4.5
a. Cash in Hand 16.7 18.1 28.7 1.4 10.6 8.4 58.6
b. Bal.with NRB 10.9 14.4 12.4 3.5 (2.0) 32.1 -13.9
c. Bal.with Dom. Bank 272.6 165 165.3 (107.6) 0.3 (39.5) 0.2
6. Investments 1148.6 1541.8 1713.5 393.2 171.7 34.2 11.1
7. Loans and Advances 1616.5 1771 1968.7 154.5 197.7 9.6 11.2
8. Others 333 205.8 315.6 (127.2) 109.8 (38.2) 53.4
9 Profit & Loss A/C 221 249.4 153.1 28.4 (96.3) 12.9 -38.6

Note: Figures in parenthesis indicate a decline.


* Number of RDBs: 5
Source: Banks & Financial Institutions Regulation Department.
Table 63
SOURCES AND USES OF FUND
OF MICRO CREDIT DEVELOPMENT BANKS*
Rs. in Million
Mid - July Amount Change Percentage Change
2005/06 2006/07 2007/08 2006/07 2007/08 2006/07 2007/08
Sources of Funds
1. Capital Funds 514.1 780.1 950.2 266.0 170.1 51.7 21.8
a. Paid-up Capital 272.4 477.2 634.6 204.8 157.4 75.2 33.0
b. General Reserve 110.8 40.8 61.5 (70.0) 20.7 (63.2) 50.7
c. Other Reserve 90 210.9 194.6 120.9 (16.3) 134.3 (7.7)
d. Retained Earning 40.9 51.2 59.5 10.3 8.3 25.2 16.2
2. Deposits 432.7 585.2 948.4 152.5 363.2 35.2 62.1
a. Current - - - - - - -
b. Saving 432.7 585.2 948.4 152.5 363.2 35.2 62.1
c. Fixed - - - - - - -
d. Call - - - - - - -
e. Others - - - - - - -
3. Borrowings 3,021.2 4,163.6 5,329.0 1,142.4 1,165.4 37.8 28.0
a. NRB 9.7 48.6 57.5 38.9 8.9 401.0 18.3
b. Commercial Banks 1149.6 2557.4 3403.1 1,407.8 845.7 122.5 33.1
c. Others 1861.9 1557.6 1868.4 (304.3) 310.8 (16.3) 20.0
4. P/L Account 76.6 65.8 101.3 (10.8) 35.5 (14.1) 54.0
5. Others 533.5 721.2 896.5 187.7 175.3 35.2 24.3
Sources =Uses 4,578.1 6,315.9 8,225.4 1,737.8 1,909.5 38.0 30.2
1. Liquid Funds 1,021.6 1,575.3 956.7 553.7 (618.6) 54.2 (39.3)
a. Cash in Hand 3.0 4.2 8.7 1.2 4.5 40.0 107.1
b. Bal.with NRB 125.2 55.0 58.8 (70.2) 3.8 (56.1) 6.9
c. Bal.with Dom. Bank 893.4 1516.1 889.2 622.7 (626.9) 69.7 (41.3)
2. Investments 524.0 455.6 1,790.5 (68.4) 1,334.9 (13.1) 293.0
a. Share and Debenture - - 1,694.3 - 1,694.3 - -
b. Govt.Securities 162.5 57 51.2 (105.5) (5.8) (64.9) (10.2)
c. Others 361.5 398.6 45.0 37.1 (353.6) 10.3 (88.7)
3. Loans and Advances 2686.5 4009.6 5109.5 1,323.1 1,099.9 49.2 27.4
4. Others 346 275.4 365.1 (70.6) 89.7 (20.4) 32.6
5 P/L Account - - 3.6 - 3.6 - -

Note: Figures in parenthesis indicate a decline.


* Micro-finance institutions other than 5 RRDBs
Source: Banks and Financial Institutions Regulation Department.
Table 64
SOURCES AND USES OF FUND OF COOPERATIVE
SOCIETIES (WITH LIMITED BANKING TRANSACTION)
Rs. in Million
Mid - July Amount Change Percentage Change
2005/06* 2006/07** 2007/08*** 2006/07 2007/08 2006/07 2007/08
Sources of Funds
1. Capital Funds 324.8 355.3 400.9 30.5 45.6 9.4 12.8
a. Paid-up Capital 228.4 250.5 293.6 22.1 43.1 9.7 17.2
b. General Reserve 40.6 47.9 57.7 7.3 9.8 18.0 20.4
c. Other Reserve 55.8 56.9 49.6 1.1 (7.3) 2.0 -12.8
2. Deposits 2,011.6 2,544.6 3,018.1 533.0 473.5 26.5 18.6
a. Saving 1206.5 1633.9 2008.9 427.4 375.0 35.4 23.0
b. Fixed 569.5 685.2 717.9 115.7 32.7 20.3 4.8
c. Others 235.6 225.5 291.4 (10.1) 65.9 (4.3) 29.2
3. Borrowings 70.7 139.7 206.7 69.0 67.0 97.6 48.0
a. Commercial Banks 45.6 67.6 73.5 22.0 5.9 48.2 8.7
b. Other Financial Institution 25.1 72.1 133.2 47.0 61.1 187.3 84.8
4 Others Liabilities 407.3 481.1 680.2 73.8 199.1 18.1 41.4
5 P/L Account 62.8 69.5 54.63 6.7 (14.9) 10.7 -21.4
Sources =Uses 2,877.2 3,590.2 4,360.5 713.0 770.3 24.8 21.5
5. Liquid of Funds 493.2 489.6 760.3 (3.6) 270.7 (0.7) 55.3
a. Cash in Hand 43.6 41.2 49.1 (2.4) 7.8 (5.4) 19.1
b. Bal.with NRB 12.8 45.3 635.9 32.5 590.6 253.7 1303.8
c. Bal.with Dom. Bank 436.8 403.1 75.3 (33.7) (327.8) (7.7) -81.3
6. Investments 161.5 177.7 223.1 16.2 45.4 10.1 25.5
a. Govt.Securitis 82.7 3.9 3.9 (78.8) (0.0) (95.3) -0.5
b. Others 78.8 173.8 219.2 95.0 45.4 120.6 26.1
7. Loans and Advances 1,665.4 2,229.8 2,662.2 564.4 432.4 33.9 19.4
a. Commercial Loan 741.2 914.2 989.1 173.0 74.9 23.3 8.2
b. Production Loan 32.8 38.1 57.1 5.3 19.0 16.2 49.9
c. Loan on FDR and Securities 85.0 105.3 125.1 20.3 19.8 23.9 18.8
d. Others 806.4 1172.2 1490.8 365.8 318.6 45.4 27.2
8. Others 557.2 693.1 715 135.9 21.9 24.4 3.2

Note: Figures in parenthesis indicate a decline.


* No. of Cooperatives: 19
** No. of Cooperatives: 17
***No. of Cooperatives: 16
Source: Banks and Financial Institutions Regulation Department.
Table 65
STRUCTURE OF NEPALESE FINANCNIAL SYSTEM
Rs. in million
Mid-July 2007 Mid-July 2008
Ratio of total Ratio of total
Total
Percentage assets to Total assets/ Percentage assets to
assets/
share in total nominal GDP liabilities share in nominal GDP
liabilities
(in percentage) total (in percentage)
Financial institutions 703564.7 87.5 96.8 898735.3 88.1 109.5
Nepal Rastra Bank 174209.0 21.7 24.0 212449.8 20.8 25.9
Commercial banks 439735.0 54.7 60.5 549090.2 53.8 66.9
Finance companies 53466.4 6.7 7.4 80383.3 7.9 9.8
Development Banks 22658.2 2.8 3.1 39868.8 3.9 4.9
Cooperatives 3590.0 0.4 0.5 4360.5 0.4 0.5
Microcredit financial institutions 9906.1 1.2 1.4 12582.7 1.2 1.5
Microcredit non- financial 1842.2 0.2 0.3 2382.7 0.2 0.3
institutions
Contractual Savings institutions 100131.2 12.5 13.8 121685.8 11.9 14.8
Employees Provident Fund 59225.9 7.4 8.1 67940.3 6.7 8.3
Citizen Investment Trust 9541.2 1.2 1.3 13675.5 1.3 1.7
Insurance companies 31364.0 3.9 4.3 40070.0 3.9 4.9
Postal Saving Bank 700.0 0.1 0.1 827.0 0.1 0.1
Total 803695.9 100.0 110.5 1020421.1 100.0 124.3
Nominal GDP (Rs Million) 727088 820815
Market capitalization of Stock
Exchange (Rs Million) 186301.28 366247.56
Ratio of stock Market
capitalizitation
to GDP (in percentage) 25.8 44.6
Table 66
SOURCES AND USES OF FUND OF MICRO FINANCE NGOs
(Liscensed by NRB)

Rs. inThousand
Mid - July Amount Change Percentage Change
2005/06* 2006/07** 2007/08** 2006/07 2007/08 2006/07 2007/08
Sources of Funds
1. Funds 45561 136851 162031 91,290 25,180 200.4 18.4
2. Staff Welfare Fund 26,209 32,815 42,447 6,606 9,632 25.2 29.4
a. Staff Welfare Fund 1876 1855 3636 (21) 1,781 (1.1) 96.0
b. Staff Provident Fund 4251 6307 8144 2,056 1,837 48.4 29.1
c. Others 20082 24653 30667 4,571 6,014 22.8 24.4
3. Risk Bearing Fund 13068 16044 26768 2,976 10,724 22.8 66.8
4. P/L Account (Net) 59861 76140 96610 16,279 20,470 27.2 26.9
5. Borrowings 541,756 1,168,088 1,494,220 626,332 326,132 115.6 27.9
a. Domestic Institution 534045 1153474 1478422 619,429 324,948 116.0 28.2
b. Foreign Institution 7711 14614 15798 6,903 1,184 89.5 8.1
6. Others 207813 412317 560620 204,504 148,303 98.4 36.0
Sources =Uses 894,268 1,842,255 2,382,696 947,987 540,441 106.0 29.3
1. Liquid of Funds 131,980 467,234 428,839 335,254 (38,395) 254.0 (8.2)
a. Cash in Hand 10652 11320 12454 668 1,134 6.3 10.0
c. Bal.with Dom. Bank 121328 455914 416385 334,586 (39,529) 275.8 (8.7)
2. Investment 48563 10173 20115 (38,390) 9,942 (79.1) 97.7
3. Micro Credit 439819 775688 982478 335,869 206,790 76.4 26.7
4. Others 273906 589160 951264 315,254 362,104 115.1 61.5

Note: Figures in parenthesis indicate a decline.


* Number of NGOs: 44
** Number of NGOs: 47
*** Number of NGOs: 46
Source: Banks and Financial Institutions Regulation Department.
Table 67
AGGREGATE SOURCES AND USES OF FUND OF INSURANCE COMPANIES

Rs. in Million
Mid-July Amount Change % Change
Particulars
2006* 2007** 2008P*** 2006/07 2007/08 2006/07 2007/08
Sources
1. Capital Fund 1680 1680.00 3,680.0 0.00 2000.0 0.0 119.0
2. Reserve Funds 19192.9 24,122.0 29,330.0 4929.10 5208.0 25.7 21.6
3. Other Liabilities 4346.6 5,562.0 7,060.0 1215.40 1498.0 28.0 26.9
Sources =Uses 25219.5 31,364.0 40,070.0 6144.50 8706.0 24.4 27.8
Uses 0.0
1. Bank and Cash Balances 2,125.0 3,035.0 3,850.0 910.00 815.0 42.8 26.9
2. Investment 19,318.30 23,956.0 30,670.0 4637.70 6714.0 24.0 28.0
3. Fixed Assets 1,400.00 1,922.0 2,610.0 522.00 688.0 37.3 35.8
4. Other Assets 2,376.20 2,451.0 2,940.0 74.80 489.0 3.1 20.0
P=Provisional
*Number of Companies: 21
**Number of Companies: 21
*** Number of Companies: 25
Source: Insurance Board.
Table 68
SOURCES AND USES OF FUND OF
EMPLOYEES PROVIDENT FUND

Rs. in Million
Mid-July Amount Change % Change
Particulars
2005/06 2006/07 2007/08 P 2006/07 2007/08 P 2006/07 2007/08 P
Sources
1. Provident Fund 48144.9 54500.7 62485.0 6355.8 7984.3 13.2 14.6
2. Reserve Fund 2941.2 3193.8 3572.5 252.6 378.8 8.6 11.9
3. Other Liabilities 1244.4 1531.4 1882.8 287.0 351.3 23.1 22.9
Sources =Uses 52330.6 59225.9 67940.3 6895.3 8714.4 13.2 14.7
Uses
1. Employees' Borrowings 21418.1 25178.1 29387.4 3759.9 4209.3 17.6 16.7
2. Fixed Deposits 18520.0 20895.0 23894.0 2375.0 2999.0 12.8 14.4
3. GON Securities 4228.6 5509.5 4638.7 1280.9 -870.8 30.3 -15.8
4. Project Loans 3677.6 2784.1 3286.4 -893.5 502.3 -24.3 18.0
5. Share Investment 390.8 433.7 884.6 42.9 450.9 11.0 104.0
6. Other Assets 4095.5 4425.7 5849.2 330.2 1423.5 8.1 32.2
P=Provisional
Source: Employees' Provident Fund.
Table 69
SOURCES AND USES OF FUND OF
CITIZEN INVESTMENT TRUST

Rs. in Million
Mid - July Amount Change Percentage Change
2006 2007 2008P 2006/07 2007/08 2006/07 2007/08
Sources of Funds
1. Paid-up Capital 39.99 39.99 59.99 20.0 50.0
2. Reserve Fund 69.02 95.7 100.0 26.7 4.3 38.7 4.4
3. Fund Collection 6716.25 8573.6 12366.2 1,857.3 3,792.6 27.7 44.2
4. Other Liabilities 432.57 831.9 1149.3 399.4 317.4 92.3 38.2
Sources = Uses 7257.8 9541.2 13675.5 2,283.4 4,134.2 31.5 43.3
Uses of Fund
1. Cash and Bank Balance 866.08 1043.4 457.0 177.4 (586.4) 20.5 (56.2)
2. Investment 5136.0 6600.6 9586.0 1,464.6 2,985.4 28.5 45.2
3. Loans & Advances 743.34 1015.5 2592.5 272.2 1,577.0 36.6 155.3
4. Fixed Assets 54.08 54.3 55.0 0.3 0.7 0.5 1.2
5. Other Assets 458.34 827.4 985.0 369.0 157.6 80.5 19.1
P = Provisional.
Note: Figures in parenthesis indicate a decline.
Source: Citizen Investment Fund.