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After the government eased import restrictions, the country's imports increased for the second straight month. Nepal imported goods worth Rs 143.123 billion in Chaitra (mid-March to mid-April), the highest on a month-to-month basis, in the current fiscal year. The Nepal Rastra Bank (NRB), which resorted to strict import-cutting measures a year ago after foreign exchange reserves depleted drastically, is said to be watching the rise in imports closely as this growth can again derail the external sector of the economy. The country had imported goods worth Rs 139.22 billion in Falgun (mid-February to mid-March), an increase of 10 percent compared to Magh (mid-January to mid-February). Nepal had imported goods worth Rs 142.31 billion in Bhadra (mid-August-mid-September), the second highest on a month-to-month basis in FY 2022/23. However, the country's total imports in the first nine months of the current fiscal year are lower than the last fiscal year. According to the Department of Customs, Nepal imported goods worth Rs 1,201.508 billion in the current fiscal year compared to Rs 1,466.662 billion during the same period of the last fiscal year. The imports during the first nine months of this fiscal have declined by 18.08 percent. With the government imposing restrictions on luxury items and NRB introducing cash margin provisions on Letters of Credit issuance, the imports have declined till mid-February. The country's Balance of Payment (BoP) has remained positive by Rs 148.11 billion during the first eight months of the current fiscal year while foreign exchange reserves also increased by 15.2 percent to Rs1401.21 billion till mid-March, according to NRB data. Though these restrictive measures contributed to reducing imports and improving the country's external sector, they also resulted in a huge decline in government revenues which are heavily reliant on imports. The slowdown in revenue collection forced the government to lift import restrictions on the imports of vehicles, alcohol, and expensive mobile phones in mid-December, 2022. The central bank also removed the provision of cash margin in January this year. Along with the surge in imports, the amount of money going out of the country for education abroad has also increased significantly. A total of Rs 54.7 billion went out of the country in the first eight months of the current fiscal year, an increment of 80 percent. Central bank officials say they are observing the situation cautiously. "If the imports continue to surge, it would put pressure on the external sector," said Dr. Prakash Kumar Shrestha, Executive director of NRB. According to him, the source of foreign exchange income is not strong at the moment. "Currently, Nepal is receiving monthly remittances of around Rs 100 billion which is not enough to cover the imports." Monthly Import Bill

There has been a sharp rise in non-performing loans (NPLs) of commercial banks as they grapple with economic recession, the slowdown in loan recovery, and debt servicing. The unaudited financial reports of 21 commercial banks for the third quarter of the current fiscal year 2022/23 show their NPL has reached 3.03 percent, an increase of a whopping 148 percent compared to the same period of the last fiscal year. The NPL of the commercial banks stood at 1.21 percent as of mid-April, 2022. The banks have been dealing with growing bad loans in the current fiscal year. The NPL of commercial banks stood at 2.29 percent till the second quarter of this fiscal (mid-January 2023). The third quarter reports show NPL has further deteriorated in the last three months. Bankers attribute the rise in NPL to the slowing economic activities coupled with higher interest rates, and borrowers' inability to repay debts. According to them, loan recovery and debt servicing have become difficult of late. According to Sanima Bank CEO Nischal Raj Pandey, the rise in NPLs is basically due to the chain impacts of the economic downturn. "The cash flow in the market has been affected severely. In addition, the demand for goods and services has also declined dramatically," said Pandey. Besides, the government's inability to pay billions of rupees it owes to the contractors has added problems, according to Pandey. He says that borrowers related to the construction sector have not been able to repay their loans. "With the slowdown in the real estate and stock market, common people's investments have gotten trapped," said Pandey. With the sharp rise in NPLs, the loan loss provisions of banks have also increased. As per the unaudited financial reports for the third quarter of banks, the amount for provisioning has increased by 341 percent. Banks have set aside Rs 30.86 billion for loan loss provisions till mid-April 2023 compared to Rs 7 billion during the same period of the last fiscal year. The total provisioning amount of banks increased by Rs 23.86 billion in the last 12 months. Among the commercial banks, NPLs of three banks crossed 4 percent. Himalayan Bank has the highest NPL of 4.56 percent, followed by the Agricultural Development Bank with 4.35 percent, and Nepal Bank with 4.16 percent. Four banks have managed to keep their NPL below 1 percent. Nepal SBI Bank, Standard Chartered Bank Nepal, NIC Asia Bank, and Everest Bank have less than 1 percent NPL. SBI's NPL stood at 0.97 percent, Standard Chartered’s at 0.90 percent, NIC Asia's at 0.85 percent, and Everest's at 0.70 percent. The rise in NPL levels and provisioning amount has hit the commercial banks' profit in the current fiscal year. The profit of banks surged by 11.68 percent to Rs 48.70 billion by the third quarter of this fiscal. The banks' profit stood at Rs 43.61 billion during the same period of the last fiscal year. Among the commercial banks, Nabil Bank posted the highest profit of Rs 5.11 billion in the third quarter of the current fiscal year. The Global IM Bank is at number two with a profit of Rs 4.35 billion followed by NIC Asia with Rs 4.01 billion. Banks' NPL

The price of gold has dropped by Rs 900 per tola in the domestic market on Sunday. According to the Federation of Nepal Gold and Silver Dealers’ Association, the yellow bullion is being traded at Rs 109, 300 per tola today. The yellow metal was traded at Rs 110, 200 per tola on Friday. Meanwhile, tejabi gold is being traded at Rs 108, 800 per tola. It was traded at Rs 109, 650. Similarly, the silver is being traded at Rs 1,440 per tola today.

The Power Summit 2023 that concluded on Wednesday saw Nepali and Indian power entities signing deals for the sale of 2,200 MW of electricity to India. India’s Manikaran Power Limited signed an agreement to purchase around 200 MW of electricity directly from the hydropower projects in Nepal while Vedanta India also started the process to sign a long-term power purchase agreement (PPA) with Nepal Power Exchange Limited to buy 2,000MW of electricity. The latest developments augur a positive future for electricity exports from Nepal as the country is gradually transforming from an energy importer to a net exporter of electricity. However, these deals will not yield results if the government does not bring a law that allows the Nepali private sector to get into power trading. As of now, the state-owned Nepal Electricity Authority (NEA) is the only entity involved in power trading. There is no provision in Nepal's electricity law that would let any entity other than NEA engage in power trade. While the private sector has been demanding a legal framework that allows them to enter electricity trading, the government is yet to take any concrete steps in this regard. As Indian companies in the power trading business increasingly show their interest to buy energy from Nepal, domestic power developers say there is an urgent need to introduce laws to facilitate the private sector's involvement in the power trade to sell electricity to the Indian market. The Nepali private sector is frustrated with the government as entrepreneurs have been waiting for a long time to engage in power trade within and outside the country. According to the Ministry of Energy, Water Resources and Irrigation (MoEWRI), around half a dozen companies have already applied for power trading licenses. While the Electricity Bill to amend the Electricity Act 1992 had reached the parliament, it got stuck for more than two years and failed to get endorsed. The then Energy Minister Pampha Bhusal withdrew the bill from the parliament in September 2022. A cabinet meeting on September 26, 2022, approved the ordinance to amend the Electricity Act and forwarded it to the President’s Office for approval. However, former President Bidya Devi Bhandari failed to authenticate the ordinance. After the fresh elections in November 2022, the country has got a new parliament and the government now plans to introduce the new bill in the House of Representatives. Now, the government has said it plans to introduce the new bill soon. “Draft of the bill is almost ready. We will soon register the new electricity bill at the parliament,” said a senior MoEWRI official. “The new bill will pave the way for the private sector to engage in trading of electricity. We will also include the recommendations of the lawmakers of the erstwhile House of Representatives.” Both government officials and private sector people agree that the involvement of the private sector could open new avenues for expanding the power market for Nepal’s electricity at a time when the country is producing excess power in the wet season. During the inauguration of the Power Summit on Tuesday, Prime Minister Pushpa Kamal Dahal said that the government expects Nepal to become a net power exporter by 2025. Independent power producers say it's high time for the government to show urgency when it comes to allowing the private sector into power trading. "The Nepali private sector has already signed deals with an Indian company for selling electricity," said Krishna Prasad Acharya, President of Independent Power Producers' Association, Nepal (IPPAN), "It’s high time the government removed legal barriers." According to him, IPPAN is of the view that a policy to allow the private sector to engage in power trading should be brought through a fast-track mechanism. "If we go through the parliament, then the process will take a long time as opposition parties may not support it," said Acharya, adding, "The government should open the way for the private sector through a special decision of the cabinet." IPPAN office-bearers say they can't wait for the government to introduce the new electricity bill. According to them, the government could grant the license to the private sector following the same procedure through which it awarded a power trade license to NEA's power trade company. "The cabinet granted the power trade license to Nepal Power Trade Company of NEA through clause 35 of the Electricity Act," said Ashish Garg, Vice President of IPPAN. "Why can't the same provision be applicable also to us?" According to Garg, this was among the two suggestions given by the IPPAN to Energy Minister Shakti Basnet a week ago. "The other way is to bring the ordinance," he said. Madhu Bhetuwal, Spokesperson at the Energy Ministry, said that the government is committed to facilitating the entry of the private sector into electricity trading. "As the private sector has already entered into a PPA MoU to sell electricity in India, we also want it to be successfully implemented," he said. While lobbying with the government for the license, the Nepali private sector is also signing agreements with Indian companies for cross-border electricity trade. In January 2022, Nepal Power Exchange Limited, a trading company established by private sector power developers signed an MoU with India’s Manikaran Power Limited on energy trading. As per the MoU, the Nepali company is supposed to supply up to 500 MW to the Indian company. Currently, a lot of hydropower projects are in the completion phase and the power generation capacity of the country is increasing rapidly. Nevertheless, the country is facing difficulty to find a market for surplus power. According to the NEA, power generation capacity in the country has now reached 2,650 MW and it is expected to increase to 2,853 MW by mid-July this year. The government-owned power utility projects that Nepal will produce 4,507 MW by the fiscal year 2023/2024 and 5,251 MW by FY 2024/2025. According to Garg, the Power Summit 2023 reinforced the fact that there are buyers for the electricity produced in Nepal. "If we do not act urgently, over 1,000 MW of electricity will be wasted in the upcoming wet season." Garg also stressed the need for a policy for open access to enable the private sector to use the same transmission line across the country. A MoEWRI official says the proposed bill would open the door for open access to all the power traders on the national grid. “A separate operation guideline needs to be introduced and works are ongoing in this regard,” the official said.