Prices of cereal grains and their products, which command a weight of 14.81 percent in the inflation basket, came down by 0.2 percent in mid-October compared to a month ago, while prices of legume varieties and fruits fell by 1.1 percent and 4.9 percent, respectively, Nepal Rastra Bank´s latest macroeconomic report shows. Communications cost too dropped by 0.2 percent during the period.[break]
These reductions backed by prices of sugar, sweets, alcoholic beverage and tobacco products that did not change over the month helped inflation to moderate in mid-October. Also, costs of housing, transport and education remained unchanged over the month which did not exert upward pressure on the consumer price index.
The central bank report shows consumer prices rose 11.1 percent in the hilly region, the most in all three regions of the country, followed by 10.8 percent in the Tarai and 9.7 percent in Kathmandu Valley.
BoP Situation
The overall balance of payment (BoP) surplus fell to Rs 347.3 million in the first three months of the current fiscal year, as against a surplus of Rs 33.66 billion recorded in the same period last fiscal year.
The contraction in surplus came as current account posted a deficit of Rs 2.94 billion in the three-month period this fiscal year as against a current account deficit of Rs 13.82 billion in the same period last fiscal year. "The current account deficit was reported due to a substantial rise in imports of merchandise and service”," NRB report says.
The fall in BoP surplus was triggered by net service income deficit of Rs 2.47 billion in the three-month period as against a surplus of Rs 3.29 billion recorded in the same period last year. However, 25.5 percent growth in net transfers to Rs 110.42 billion in the period partially offset pressure created by current account and net service income deficits.
Under net transfers, remittances sent by Nepalis working abroad rose 28.8 percent to Rs 97.72 billion. Nepal also received foreign direct investment of Rs 2.05 billion in the three-month period.
Forex reserve
Despite hike in remittances, gross foreign exchange reserves shrunk 2.2 percent to Rs 429.95 billion in mid-October from Rs 439.46 billion in mid-July 2012. However, in terms of US dollar, the forex reserves expanded by 2.5 percent to US$ 5.08 billion in mid-October.
On the basis of import trend seen in the first three months of the current fiscal year, the existing reserve is sufficient for financing merchandise imports of 9.7 months and merchandise and service imports of 8.2 months, according to the central bank.
Related story
Nepal’s BoP surplus nosedived from over Rs 282 billion to Rs 1....
