Improvement in Nepal Rastra Bank's Financial Position: Foreign Liabilities Decrease, Local Economy Active

Nepal Rastra Bank (NRB) has published a comparative financial report covering the period from August 16, 2024 (31st Bhadra 2081) to July 16, 2024 (31st Ashad 2081). This preliminary report highlights significant changes in both foreign and local currency assets and liabilities, indicating a strengthened overall financial health of the bank. The report signals positive progress in the bank’s monetary policy and financial management.

1. Liabilities and Equity Status:

(a) Foreign Currency Liabilities:

• July 2024: NPR 51.49 billion

• August 2024: NPR 47.41 billion
  A reduction of NPR 4.08 billion shows that NRB has successfully decreased its foreign liabilities. This decline is attributed to a drop in deposits from banks and financial institutions, as well as reduced liabilities related to the International Monetary Fund (IMF). This balance helps reduce foreign liabilities, stabilizing the foreign currency reserves.

(b) Local Currency Liabilities:

• July 2024: NPR 143 billion

• August 2024: NPR 148 billion
  A NPR 5 billion increase in local liabilities reflects growing liquidity demand within the banking system. This indicates increased economic activity and a rise in credit demand within the market.

(c) Equity:

• July 2024: NPR 577.08 billion

• August 2024: NPR 606.79 billion
  Equity increased by NPR 29.71 billion, attributed to capital expansion and accumulated profits. This indicates NRB’s financial strengthening, which positively impacts the bank’s long-term stability and financial health.

2. Asset Status:

(a) Foreign Currency Assets:

• July 2024: NPR 196 billion

• August 2024: NPR 204 billion
  An increase of NPR 8 billion in foreign currency assets is primarily due to investments in foreign deposits and gold certificates. This demonstrates NRB's success in strengthening foreign currency reserves, which helps maintain exchange rate stability and protects the country from external economic shocks.

(b) Local Currency Assets:

• July 2024: NPR 91.05 billion

• August 2024: NPR 94.67 billion
  Local currency assets increased by NPR 3.62 billion, supported by investments in government securities. This shows that NRB has taken strategic measures to bolster its local asset base, aiding the stimulation of the local economy.

3. Total Assets and Liabilities:

• Total Assets (July 2024): NPR 206 billion

• Total Assets (August 2024): NPR 214 billion
  An increase of NPR 8 billion indicates positive progress in NRB’s asset portfolio, supporting more effective monetary policy management.

• Total Liabilities and Equity (July 2024): NPR 205 billion

• Total Liabilities and Equity (August 2024): NPR 214 billion
  The NPR 9 billion rise signals that NRB has successfully improved its reserve position, ensuring liquidity to meet market demands.

4. Decline in Government Cash Deposits:

• July 2024: NPR 312 billion

• August 2024: NPR 236.95 billion
  A reduction of NPR 75.5 billion in government cash deposits over the course of a month reflects increased government spending, leading to a reduction in surplus cash. Government reserves have dropped by NPR 118.5 billion from the previous year-end.

5. Cash Flow and Cash Position:

• July 2024: NPR 680 billion

• August 2024: NPR 665 billion
  Cash flow has decreased by NPR 14.71 billion, indicating reduced cash circulation in the financial market. This drop reflects improvements in liquidity management during the period.

6. NRB Reserve Position:

• July 2024: NPR 572.07 billion

• August 2024: NPR 601.78 billion
  A NPR 29.71 billion increase in reserves strengthens the NRB's position, providing more economic protection. The liabilities related to the IMF stand at NPR 39.48 billion.

7. Growth in National Assets:

• July 2024: NPR 2,056.53 billion

• August 2024: NPR 2,144.61 billion
  National assets grew by NPR 87.46 billion, a 4.25% increase, highlighting stability in the country’s financial reserves.

Comparing NRB’s financial position between July and August 2024 reveals overall improvement. Foreign liabilities have decreased, and assets have increased, reducing the country’s external financial risks. Likewise, the growth in both local liabilities and assets signifies strengthened local economic activities. A reduction in government cash deposits and lower cash flow indicate enhanced liquidity management.