The NEPSE Journal
Market commentary, data deep-dives, and trading notes from the NEPSE Trading desk.
Government revenue in Nepal fell by -10.8% in mid-August 2082/83, reversing last year’s growth. The decline reflects weak consumption and heavy reliance on imports for tax collection. This poses risks to fiscal stability and development spending, highlighting the urgent need for tax base diversification and structural reform.
Nepal’s market capitalization-to-GDP ratio crossed 80% in FY 2082/83, signaling renewed investor confidence and stronger capital market activity. While this is a positive sign for financial development, the ratio remains concentrated in a few sectors and may reflect valuation gains more than real economic expansion. Sustained health will depend on diversifying listed companies and ensuring market stability.
Nepal’s base rate has fallen from 10% in FY 2022/23 to 5.78% by mid-August 2082/83, reflecting ample liquidity and cooling inflation. While this boosts credit affordability and competition among banks, it squeezes profit margins and limits spreads. Sustained low base rates could stimulate investment but also push banks to adapt their business models to safeguard profitability.
Nepal’s lending rates have dropped to 7.76% in mid-August 2082/83, creating opportunities for cheaper loans across industries, households, and SMEs. This environment can boost investment in hydropower, infrastructure, and productive sectors, but the benefits will depend on whether credit is channeled into growth-generating activities rather than speculation
Commercial banks’ deposit rates in Nepal have dropped to 4.02% by mid-August 2082/83, down from 7.8% just two years earlier. This benefits borrowers through lower lending rates but reduces household returns on savings. While improved liquidity explains the decline, the trend poses risks if it discourages savings and shifts funds into informal or speculative sectors.
Nepal’s T-bill rates have dropped to around 2.65%–2.98% in mid-August 2082/83, reflecting strong liquidity, low inflation, and external stability. While this benefits borrowers and signals cheaper financing, investors face shrinking returns on safe assets and may need to seek alternatives. Sustained low rates depend on inflation, liquidity, and fiscal borrowing trends.
Private sector lending in Nepal grew only 7.7% in mid-August 2082/83, modest compared to past years of rapid expansion. Weak investment demand, cautious households, and banks’ risk-averse lending strategies explain the slowdown. Unless credit is channeled into productive sectors, Nepal risks stagnating in low investment and low growth despite ample liquidity.
Domestic credit growth in Nepal has slowed to 5.4% in mid-August 2082/83, down from 27% in FY 2020/21. While banks have liquidity from remittances, weak credit demand reflects low investor confidence and limited new investments. This poses risks to long-term growth, job creation, and capital formation unless policies succeed in channeling credit toward productive sectors.
Nepal’s narrow money (M1) rebounded by 22% in FY 2024/25 and grew another 17.3% in mid-August 2082/83, signaling improved confidence in the banking system and stronger liquidity. This recovery reflects remittance inflows, stable inflation, and secure deposit conditions, but unless banks expand credit to productive sectors, the boost may not fully translate into sustained economic growth.
Nepal’s broad money supply expanded by 12.5% in FY 2024/25, reflecting strong remittance inflows and easing liquidity pressures. This has stabilized interest rates and strengthened financial sector liquidity. However, with weak credit growth, much of the money supply is not flowing into productive investments, raising concerns about long-term sustainability and the need for policies to direct liquidity toward growth-driving sectors.