KATHMANDU: Economic Digest offers a concise yet comprehensive overview of significant business happenings in Nepal, presented in easily digestible summaries.
Nepal’s economic and financial landscape is experiencing a dynamic shift marked by mixed signals. The NEPSE index declined slightly this week, reflecting cautious investor sentiment, even as the overall market capitalization surged by over 37% year-on-year, signaling long-term confidence.
While bank deposits have risen—largely due to remittance inflows—credit growth lags far behind targets, pointing to subdued economic activity and low private sector demand.
Rising gold prices and a weakening rupee underscore global market volatility and its local implications, particularly for imports. Meanwhile, the Economic Reform Commission has presented sweeping proposals—from repealing outdated laws and restructuring state enterprises to enhancing productive lending and reforming the hydropower and insurance sectors—aiming to modernize Nepal’s economy and improve investment appeal.
On the governance front, PM Oli addressed ongoing teacher protests and reaffirmed legislative intent, while regulatory warnings to social media platforms highlight the state’s push toward digital accountability.
Overall, Nepal is at a crossroads, balancing short-term economic pressures with long-term structural reforms.
NEPSE index drops 32.69 points over the week
The NEPSE index slipped by 32.69 points this week, closing at 2,670.70—a 1.21% drop. Total trading volume reached 36.6 million shares, with a turnover of Rs. 20.79 billion.
Only 52 companies posted gains, while 192 saw declines. Several sector indices, including manufacturing, tourism, development banks, insurance, and hydropower, also declined. Nepal Micro Insurance was the top performer with a 30.55% rise, while Upper Hewakhola Hydropower fell the most at 11.69%. NRN Infrastructure & Development led in transaction value with Rs. 1.8 billion, and Nagadi Group Power traded the highest number of shares—over 26 million.
Gold surges by Rs. 4,900 per tola
Gold prices rose by Rs. 4,900 per tola, reaching Rs. 185,000 today, while silver rose by Rs. 5 to Rs. 1,905 per tola, according to the Federation of Nepal Gold and Silver Dealers’ Association. The hike reflects growing demand and market shifts.
Bank deposits up, but credit growth lags behind target
Despite rising bank deposits—largely fueled by remittances—credit expansion has remained subdued. Nepal Rastra Bank reports that banks extended Rs. 304.82 billion in loans by mid-March 2024, marking a 6% rise from the previous year.
This, however, falls short of the fiscal year’s 12.5% target of Rs. 650 billion. Weak economic activity and low credit demand are seen as key factors. Although some areas, like import-related loans, show growth, the overall lending slowdown is affecting the broader economy.
Panel urges repeal of 15 obsolete laws hindering business
The High-Level Economic Reform Commission, led by Rameshore Khanal, has recommended the repeal of 15 outdated laws that constrain economic freedom and drive up business costs.
These include the Black Marketing Act, Foreign Investment Ban Act, and Revenue Leakage Control Act. The commission also proposes new laws for pharmaceuticals and medical products to replace the 2035 Drug Act, aiming to foster a modern and investor-friendly legal framework.
NEPSE market capitalization soars 37.1 percent
Nepal’s stock market capitalization climbed by 37.1% over the past year, reaching Rs. 4.54 trillion by mid-March, according to Nepal Rastra Bank.
This is up from Rs. 3.31 trillion a year earlier. The trading sector saw the most dramatic growth at 1277.1%, followed by hydropower (44.4%), development banks (43.8%), and finance companies (38.5%). Insurance and commercial banks also recorded gains of 24.5% and 23.1%, respectively.
Commercial banks held the largest market share at 23.6%, followed by hydropower (15.7%) and insurance (14.6%). The figures reflect growing investor confidence and diversification within Nepal’s stock market.
PM Oli urges teachers to end protests
Prime Minister KP Sharma Oli has urged protesting teachers to halt their agitation, assuring them that the government will soon introduce the School Education Act.
Speaking at a public event in Butwal, Oli acknowledged the teachers’ concerns but argued that street protests aren’t the solution. He emphasized that the new law will address longstanding issues in school education.
PM Oli also denied rumors of conflict with the recently resigned Tribhuvan University Vice-Chancellor, stating that the resignation was handled through due process.
Commercial banks’ non-banking assets increase by Rs. 766 million in a month
Commercial banks added Rs. 766 million in non-banking assets in just one month (Falgun), marking a 1.07% increase and pushing their total non-banking holdings to Rs. 36 billion.
This is a significant jump from Rs. 8 billion in 2021. While commercial banks struggle with asset management, development banks saw improvement—reducing their non-banking assets by 2.11% from Rs. 3.58 billion in Magh to Rs. 3.50 billion in Falgun.
Committee recommends raising elderly allowance age to 70
To curb social security spending, the Economic Reform Commission has proposed raising the elderly allowance eligibility age from 68 to 70. It also suggests pausing new benefits for five years and adjusting existing ones with inflation every two years.
The report calls for integrating social security records with national IDs and excluding recipients of foreign pensions. The aim is to cap spending at under 4% of GDP and 15% of the federal budget.
Minister Dahal promotes eco-friendly transport
Transport Minister Devendra Dahal, speaking at the Third International Transport Conference, highlighted Nepal’s efforts to develop environmentally sustainable infrastructure.
He emphasized safe, inclusive, and resilient transport systems, citing projects like the Kathmandu-Terai-Madhes Fast Track and the Nagdhunga Tunnel. The conference focuses on sustainable mobility and concludes on April 13.
Nepali Rupee drops against US dollar
The Nepali rupee weakened further against the US dollar, with the rate rising to Rs. 139.01 by Friday, up from Rs. 136.68 in early April.
Though the US dollar has softened against other global currencies, its strength against the Indian rupee—Nepal’s reference—has affected the Nepali currency. Experts warn this could push up import costs, especially for fuel and industrial goods, worsening the trade deficit. On the upside, remittance and tourism earnings could benefit.
Panel recommends shutting down Revenue Investigation Department
The Economic Reform Commission has called for the dissolution of the Revenue Investigation Department, arguing that it duplicates functions better handled by other agencies.
The panel suggests reinforcing the Revenue Tribunal and transferring responsibilities to bodies like the Department of Money Laundering Investigation. Accusations of business harassment and internal corruption have plagued the department for years.
Insurance Authority vows to boost sector performance
Sharad Ojha, Chair of the Nepal Insurance Authority, said the industry is poised to improve service quality and integrity. Speaking at a New Year event, Ojha emphasized the need for more focus on term insurance, risk assessment, employee training, and transparency. He encouraged expanding insurance to new sectors like housing.
Social media platforms given April deadline to register or face ban
Nepal’s Communication Minister Prithivi Subba Gurung has warned platforms like Facebook, X (Twitter), and YouTube to register with the government by mid-April or risk being banned. Speaking at a journalists’ event, he said new bills on media and cybersecurity are underway. The goal is to regulate digital content and curb scams without targeting online media.
Commission calls for business-friendly reforms
The Economic Reform Commission has urged the government to foster a more investment-friendly climate.
Chair Rameshore Khanal noted sluggish credit growth, weak real estate activity, and delayed payments in the construction sector as key issues. The report recommends immediate policy adjustments to boost demand and support economic growth.
Panel proposes public enterprise overhaul, mergers, and privatization
A comprehensive public enterprise reform has been recommended, including the merger and partial privatization of Udayapur and Hetauda cement factories.
Five non-operational state-owned entities should be shut down, and Nepal Airlines restructured with a foreign partner. The panel advocates depoliticized governance and converting public enterprises into public limited companies.
39 suggestions to boost hydropower sector
To advance Nepal’s hydropower industry, the commission has proposed 39 reforms. These include simplifying land and environmental clearances, updating policies, encouraging domestic equipment production, and increasing power consumption through electric appliances. The report also calls for unified water management and investment-friendly power tariffs.
Banking sector reforms urged to promote productive lending
The panel has proposed transforming banks into specialized institutions to boost credit in productive sectors. It recommends using credit scoring, launching infrastructure bonds, stabilizing interest rates, and enhancing financial literacy. Better laws on loan recovery and a dedicated asset management company are also suggested.
Commission advises ahutting down five state-owned enterprises
The reform panel has recommended closing down five underperforming state enterprises: Janakpur Cigarette Factory, Butwal Spinning Mills, Nepal Engineering Consultancy, National Construction Company Nepal, and Nepal Oriented Magnesite Pvt. Ltd. It advises the government to liquidate and repurpose their assets for more productive uses.
Comment