Figure 1. Nepal: Recent Fiscal Developments

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1 Jul/Aug Aug/Sept Sept/Oct Oct/Nov Nov/Dec Dec/Jan Jan/Feb Feb/Mar Mar/Apr Apr/May May/Jun Jun/Jul Figure 1. : Recent Fiscal Developments Strong revenue growth combined with subdued capital spending kept the budget in surplus the past years. Fiscal Performance Revenue Capital expenditure Current expenditure Overall balance As a result, s public debt has been trending down. In July 1, government deposits stood at NRs 1 billion. Public Debt Central bank overdraft ((-) indicates deposit) Domestic debt External debt Net public debt - 9/ /11 11/1 1/1 Note: Overall balance: incurrence of net liabilities (incl. government deposits at NRB). 1/1 1/ /1 - - / / / /7 7/ /9 Sources: i authorities; and IMF staff estimates 9/ /11 11/1 1/1 1/1 1/ /1 - Government revenues declined by 9 percent (year-onyear) during the past month. Government spending registered a 7 percent year-onyear increase during the past months. Government Revenue May-9 May- Total revenue (y/y change in mma) Total revenue (annual average change) May- Government Spending Current and capital spending (annual average change) 1 Current and capital spending (y/y change in mma) May-9 May- May FCGO data indicates that capital spending in the first months of the fiscal year was NR 9. billion, up 19 percent from last year. But the execution rate remains low. Budget Execution Rate (in percent) 9 7 1/1 - Recurrent 1/1 - Capital 1/ - Recurrent 1/ - Capital 1/1 - Capital 1/1 - Recurrent /1 - Recurrent /1 - Capital 1/17 - Recurrent 1/17 - Capital 9 7 Net of the change in domestic borrowing, the government accumulated NR 7 bn (.1 percent of GDP) at the NRB during the first 9 months of the fiscal year. Cash Accumulation in the Treasury (In billions of i Rupees, change since start of the FY) /1 1/1 1/1 1/ /1 1/17 Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Note: Increase in government deposits at the NRB plus decline in domestic debt.

2 Figure. : Recent External Sector Developments Recorded remittances amounted to US$9 million in April. During the past months they were up by 9 percent from a year ago. Remittances 7 Monthly flow (in millions of U.S. dollars, RHS) Y/Y change in mma (in percent) Y/Y change in HP filtered series (in percent) - Apr- Apr-1 Apr- Apr-1 Apr- Apr- Apr-1 Apr- Imports are up 1 percent from a year ago. Exports are up percent. Private sector credit growth eased to percent in April (y/y), from a 7-year high in February. Apr- 7 - The outflow of migrant workers has been falling. Data is available only up to January 17. Foreign Employment Jan- Jan-11 Monthly Flow (thousands of persons, RHS) Y/Y change in mma (in percent) Y/Y change in HP filtered series (in percent) Jan-1 Jan-1 Balance of payments data suggests that oil import volumes so far this fiscal year are up percent from 1/, before the earthquakes and trade disruption. Jan-1 Jan- Jan-1 Jan Trade and Private Sector Credit (Growth, in percent) 1 Exports (y/y change in mma) 1 Imports (y/y change in mma) Private Sector Credit (y/y) Apr- Apr-1 Apr Oil Import Volume (Millions of barrels) Aug 1/1 1/1 1/ /1 1/17 Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul The growth of imports is raising the trade deficit but remittances continue to support the current account. Current Account Balance (In millions of US dollars) Trade Deficit (mma) 7 Remittances (mma) Current Account Balance (mma) - Central bank reserves (including gold and SDR holdings) reached a new high of US$.9 billion in mid-april. Central Bank Gross Official Reserves 1 Reserves in billions of U.S. dollars Reserves in months of prospective imports 1

3 Apr- Apr-1 Apr- Apr-1 Apr- Figure. : Recent Monetary Developments Reserve money rose by 1 percent (y/y) from last April even as the contribution from NRB NFA growth waned. Central Bank Balance Sheet (In percent, contribution to reserve money growth) Net claims on government Other net domestic assets 7 Net foreign assets Reserve money growth (y/y) Credit to the private sector is the key driver of the 1 percent (y/y) increase in broad money (M) in April. Broad Money Growth (In percent, contribution to broad money growth) Net claims on government Other net domestic assets Net foreign assets Private sector credit M growth Inflation rose to. percent (y/y) in April, from a multiyear low in March. Food price inflation remained low, at.7 percent (y/y). Consumer Price Inflation (Percent change, year-on-year) Non-food items (contribution to headline CPI) Food items (contribution to headline CPI) Non-food CPI (y/y) Headline CPI (y/y) s inflation is currently around the level in. Consumer Prices in and (Percent change, year on year) : Headline CPI (y/y) : Headline CPI (y/y) Apr- Apr-1 Apr- Apr- Apr-1 Apr- Apr- Apr-1 Apr- May-9 May- May- Sources: i authorities, Haver analytics; and IMF staff estimates. The REER is 1 percent above the -1 average. Exchange Rates (+) Appreciation (-) Depreciation REER index (=) NEER index (=) USD per NRs (RHS) Stock prices are about percent higher than a year ago. Stock Market Performance in and (Mid-July 7=) NEPSE Index NEPSE index, commercial banks Bombay Stock Exchange (SENSEX index) Sources: i authorities; and IMF staff estimates

4 Figure. : Economic Growth, Human Development, Remittances, and Exports The growth of real GDP (at market prices) is estimated to have slowed to. percent in /1 due to the earthquakes and trade disruption. 7 China Vietnam LIC median 1 Real GDP Growth (Percent change) Real GDP, Other Real GDP, Agriculture Real GDP (at market prices) 7 1 s growth has lagged peers and per capita GDP remains lower than in other Asian countries. 1,,,,,, Per Capita GDP (PPP) (In current international dollars) 1 /11 11/1 1/1 1/1 Source: Central Bureau of Statistics. 1/ /1 Mongolia Vietnam Source: World Bank, WDI Database. Lao P.D.R. Cambodia Poverty declined to percent of the population in /11. It is higher in rural and mountainous areas. 7 Poverty rate, 199/9-/11 (In percent of the population) National Urban Rural Mountainous 199/9 / /11 Source: Central Bureau of Statistics. The decline in poverty is reflected in an improvement in s UNDP Human Development Index Human Development Index (HDI) (Index number) Mongolia Lao P.D.R. HDI, 1 Cambodia Source: UNDP, Human Development Report. Average HDI (19-1) Myanmar Compared to other countries, has high remittances. Inflows of Remittances, Selected Countries, But s exports have been growing slower than GDP. 9 7 Exports of Goods and Services average -9 average 1 Sources: World Bank, Remittances Data; IMF, World Economic Outlook. Note: Observation for is for /1. Sources: World Economic Outlook; and IMF staff estimates.

5 Table 1. : Monthly Data for Key Macroeconomic Indicators. /1 1/17 Year-on-year change, in percent Feb Mar Apr May FY to date Feb Mar Apr May FY to date Feb Mar 17 Apr May FY to date (1/17) Inflation (end of period, in percent) Imports (in US$ m) 9 77,11 7 9, Non-oil imports (in US$ m) 7, 1,97-7 Oil imports (in US$ m) Exports (in US$ m) Remittances (in US$ m) 7, 1 9, Flow of migrant workers (thousands) Government revenue (in NR bn) Government expenditure (in NR bn) Current expenditure (in NR bn) Capital expenditure (in NR bn) /1 1/17 Year-on-year change, in percent Stocks Flow Stocks Flow 17 Flow Feb Mar Apr May FY to date Feb Mar Apr May FY to date Feb Mar Apr May Fiscal year Central bank reserves (in US$ m),,77,9 1,,1,9,99 Credit to the private sector (in NR bn) 1,7 1, 1, ,9 1,9 1,9