This greatly relieved the policymakers, but consumers found no respite as inflation remained high at 9.6 percent in mid-December 2010, despite sharp cut in money supply by the central bank.[break]
The prices of food items during the period went up by more than 15 percent, reads the macro-economic report for the first five months of 2010/11 that Nepal Rastra Bank (NRB) released on Friday.
Of food items too, the price of vegetables shot up by 33.7 percent, sugar and sweets by 56.6 percent and spices by 28.3 percent. While the price of fruits increased by 22.9 percent, price of cereals and milk rose by 15.6 percent and 15.2 percent respectively.
Worse still, banks witnessed drop in deposit mobilization and liquidity crunch tightened, affecting flow of credit to the private sector -- the engine of economic growth.
“In the five months of 2010/11, lending of commercial banks to private sector grew by mere Rs 23.98 billion,” reads the report. During the same period last year, commercial banks´ lending to private sector had grown by well over Rs 52 billion.
During the period, remittance flow increased by well over Rs 10 billion to Rs 96.59 billion, compared to the same period last year. Grants increased by 24 percent to Rs 10.67 billion and pension receipts also rose by 11.5 percent to Rs. 13.61 billion, helping the central bank contain the current account deficit at Rs 4.61 billion from Rs 20.63 billion of the same period last year.
Similarly, trade deficit dropped by a percent (more than Rs 1 billion) to Rs 127 billion during the period, as exports grew by 8.5 percent and imports grew at a much slower rate of 0.6 percent.
According to the report, the country´s total exports for the period valued at Rs 27.25 billion, Rs 2 billion more than what was recorded in the same period last year. Exports to India jumped by 11.7 percent, mainly due to rise in demand of thread, jute goods, wire, cardamom, plastic utensil and M S pipe.
Exports to overseas market expanded only nominally. But Nepal´s major export items like woolen carpet, tanned skin, pashmina, readymade leather and tea goods recorded a strong growth rate.
With exports totaling to Rs 2.28 billion, pulses were the country´s largest export for the first five months, ahead of woolen carpet (at Rs 2.02 billion) and readymade garment (at Rs 1.62 billion).
Rise in import of petroleum products, M S billet, chemical fertilizers, cold rolled sheet in coil, hot rolled sheet in coil and other machinery and parts increased imports from India by over 27 percent. Imports from other countries, however, declined by 30 percent, thanks to drop in import of gold, betel nuts and steel rod and sheet, among others.
“The gross foreign exchange reserves in US dollar terms increased marginally by 1.6 percent to $3.67 billion in mid-December 2010 from $3.61 billion at mid-July 2010,” reads the report.
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