Nepalese Economic Overview

Tuesday - 10th February, 2015 | ResCon

Nepal, with a total area of 147,181 km2 and population of around 27million (according to Central Bureau of Statistics, Nepal), sits between China and India. It is a landlocked nation that heavily depends on import and remittance to keep the country running. The latest report shows that GDP of Nepal stands at Rs 2124.70 while the GDP is expected to grow by 3.00% as per the Government of Nepal (GoN). The current inflation rate in Nepal is around 7.20%.
Here is a quick view at the macroscopic indicators of Nepal.
Indicators 2015-08-21 | Fri
GDP (at current price) in Bn. Rs 2,124.70
GDP Growth Rate 3.00%
Inflation Rate 7.20%
Per Capita Income Rs 69,919.00
Total Population 26,494,504
Population Below Poverty Line (<$1) 25.16%
Literacy Rate 65.90%
Balance of Payment (in Bn.) Rs 144.85
Import (in Bn.) Rs 774.68
Export (in Bn.) Rs 85.32
Remittance (in Bn.) Rs 617.28
Government Revenue (in Bn.) Rs 405.85
Government Expenditure (in Bn.) Rs 499.96

Source: Nepal Rastra Bank & CBS

The GoN has set aside a budget of Rs 819.46 for the FY 2071/72. This year, the government is focusing mainly on agriculture, tourism and energy sectors. For further breakdown on the budget, please go through the following table.
Parameters 2015-07-17 | Fri
Budget Size Rs 819.46
Budget Nature Deficit
Applications of Fund  
Recurrent Expenditure Rs 484.26
Capital Expenditure Rs 208.87
Repayment of Loan Rs 126.33
Sources of Fund  
Internal Fund Rs 613.58
Foreign Grant Rs 110.92
Foreign Loan Rs 94.96

Source: Ministry of Finance

Ministry of Finance publishes budget for the new fiscal every year around middle of July. This is due to the fact that in Nepal FY starts in Shrawan and ends Ashad (i.e., mid-July). Along with the budget comes the fiscal policy for that year. Once the fiscal policy is out, Nepal Rastra Bank (NRB) publishes monetary policy for that fiscal year.

Structure of Nepalese Financial Market

NRB is the central bank of Nepal which is the sole body that regulates commercial banks, development banks and finance companies. In addition to taking up the role of regulatory body, it also publishes monetary policy and various economic reports at regular frequency. As per NRB’s website, “it was established in 1956 under the Nepal Rastra Bank Act, 1955 to discharge the central banking responsibilities including guiding the development of the embryonic domestic financial sector. Since inception, there has been a significant growth in both the number and the activities of the domestic financial institutions.”

Structure of Nepalese Capital Market

The securities market in Nepal started in 1985 and it was only in 1994 that the first and only stock exchange of Nepal – Nepal Stock Exchange (NEPSE) - was established. NEPSE was established under the Securities Exchange Act, 1983 and it officially started trading since 1/13/1994. It started the automated screen based trading since 8/24/2007. Of late, it is working toward fully automating the trading system which will allow buyers and sellers from all over Nepal to start trading online. For this purpose, it has already opened Central Depository and Settlement services (CDS) in 2010. The CDS will allow buyers and sellers to buy and sell securities in dematerialized form.

The bourse is regulated by Securities Board of Nepal (SEBON) which was established on 1/7/1993. It has been closely monitoring and regulating the stock market under the Securities Act, 2006. All the listed companies at the NEPSE must submit their audited financial reports to SEBON every quarter and at the end of fiscal year.

The following table shows various entities in Nepalese capital market along with their regulators.

# Entity Total No. Listed Companies Regulator
 1  Commercial Bank  59  59  Nepal Rastra Bank
 2  Development Bank  208  204  Nepal Rastra Bank
 3  Finance Company  132  127  Nepal Rastra Bank
 4  Hotel  6  6  Not Applicable
 5  Hydropower  13  13  Not Applicable
 6  Insurance Company  42  42  Insurance Board
 7  Manufacturing & Processing  31  26  Not Applicable
 8  Mutual Fund  15  15  Nepal Rastra Bank
 9  Others  6  5  Nepal Telecommunication Authority (for TeleCos)
 10  Trading  10  8  Not Applicable