Total lending growth continues to outstrip rise in deposits in the banking system, leading to increased dependency on external resources for management of liquidity.

According to Nepal Rastra Bank´s latest monthly report on the current economic status of the country, the total deposit mobilized by the banking system during the first ten months of the current fiscal year increased by Rs 30.6 billion, whereas the volume of lending during the same period rose by Rs 63.5 billion. Of the rise, Rs 51.65 billion was recorded only in the fixed account, thanks to recent rise in deposit rates in one-year fixed deposits.

Of the lending amount that totaled Rs 582 billion by the end of the first 10 months, lending to private sector was recorded at Rs 506 billion, which was 17 percent more than what was recorded in the same period last year.

The deficit in the balance of payment has scaled down slightly from a record over Rs 22 billion to Rs 17.3 billion due mainly to a surplus in financial account of Rs 14.39 billion against a deficit of Rs 5.96 billion recorded a month earlier.

Likewise, the workers´ remittances increased only by 10.2 percent to Rs 186.44 billion compared to its significant growth of 55.5 percent last year. In the foreign trade front, total imports grew at slower rate of 35 percent in the tenth month of 2009/10 compared to a growth of 41.3 percent in the ninth month. The merchandise imports grew to Rs 309.88 billion during the period, according to the report.

The decline in imports growth was attributed to sharp drop in the imports of gold. However, statistics show that the import of vehicles and spare parts, M.S. billet and petroleum products, among others continued to grow during the period. Despite these positive results, the NRB report paints a gloomy picture on the export front. “Nepal´s merchandise exports declined by 11.2 percent to Rs 50.20 billion in the first ten months of 2009/10,” the report said. In the first nine months, exports had dropped by around 9 percent. As a result, total trade deficit during the first ten months of 2009/10 expanded by 51 percent to Rs. 259.68 billion.

The rate of inflation moderated to 10 percent by the end of the tenth month compared to 12.9 percent increase in the same period last year. The price index of food and beverages group increased by 12.3 percent, whereas the index of non-food and services group rose only by 7.2 percent.

The overall salary and wage rate index rose by 13 percent in the review period compared to a rise of 21.1 percent a year ago. The gross foreign exchange reserves declined by 14.9 percent to Rs. 238.34 billion in mid-May 2010 from a level of Rs. 279.99 billion as at mid-July 2009.

Based on the trend of import in the ten months of the current fiscal year, the current level of reserves is sufficient for financing merchandise imports of 7.9 months and merchandise and service imports of 6.6 months.

courtesy:myrepublica, June 23 2010