Trade deficit surpasses annual budget
KATHMANDU, Aug 22:
In what could set alarm bells ringing for the government, total trade deficit in Fiscal Year 2014/15 surpassed the total budget figure for the fiscal year.
According to the data unveiled by Nepal Rastra Bank (NRB) on Friday, total trade deficit rose by 10.8 percent to Rs 689.37 billion, compared to total fiscal budget of Rs 618 billion.
Trade deficit is in an upward trend in recent years as the country's dependence on imported commodities is increasing at an alarming rate. Trade deficit increased in 2014/15 due to increase in imports and decrease in exports. The growth rate, however, is slower compared to 29.7 rise in trade deficit in 2013/14.
The report entitled 'Current Macroeconomic Situation of Nepal (Based on the Annual Data of 2014/15)' has attributed slow growth of trade deficit to slowdown in import caused by the devastating earthquake in the last quarter of the review year.
According to the data, trade deficit with India, China and other countries increased by 4.2 percent, 39 percent and 16.5 percent, respectively. Such deficits had increased by 32.4 percent, 16.8 percent and 29.1 percent respectively in 2013/14.
In the review year, merchandise imports increased by 8.4 percent to Rs 774.68 billion. Such imports had gone up by 28.3 percent to Rs 714.37 billion in the previous year" "Import growth remained low mainly due to the decrease in price of petroleum products as well as gold, betel nut, coal, and crude soybean oil, among other"," reads the report.
Merchandise exports, however, decreased by 7.3 percent to Rs 85.32 billion in 2014/15. Such exports had increased by 19.6 percent to Rs 91.99 billion in the previous year. Country's total exports fell mainly due to drop in exports to India, China and other countries, according to NRB.
Exports to India dropped by 6.3 percent during the review year mainly due to decline in export of zinc sheet, textiles, cardamom, and copper wire rod, among others. Similarly, exports to China fell by 21.5 percent in the review year mainly due to decrease in exports of wheat flour, handicraft goods, incense sticks, and pashmina products, among others.
Meanwhile, NRB has said that overall balance of payment (BOP) registered a record high surplus of Rs 144.85 billion in 2014/15 compared to a surplus of Rs 127.13 billion a year earlier. Similarly, foreign exchange reserve increased by 22.8 percent to Rs 702.88 billion at mid-July 2015 compared to Rs 572.40 billion as of mid-July 2014. NRB estimates that the current level of foreign exchange reserves is sufficient for financing merchandise imports of 13 months, and merchandise and services imports of 11.2 months. The estimate is based on the total imports of the last fiscal year, according to the report.
REMITTANCE INCOME UP 13.6%
Remittance inflow jumped by 13.6 percent in the last fiscal year to Rs 617.28 billion. The country had received remittances worth Rs 543.09 billion in 2013/14.
Growth in remittance income is mainly due to the increase in the transfer by overseas workers to their family to build homes in the aftermath of the earthquake. The value of dollar, which has remained strong throughout the year, and government initiatives to encourage banking channel for transfer of money are the other reasons attributed for growth in remittance flow.
The number of the workers leaving the country for overseas jobs, however, declined in 2014/15. According NRB, Department of Foreign Employment granted final approval to 510,000 workers for foreign employment in 2014/15, a decline of 2.8 percent compared to figures of 2013/14. "
"The number of people going abroad for foreign employment has been declining in recent months due to impact of the April 25 earthquake as well as protest by manpower agencies against the government decision to enforce 'minimum cost' system for foreign jo"s," the report adds.
INFLATION BELOW PROJECTED RATE
Against the trend of rising price rise in the previous fiscal years, inflation, measured through average consumer price inflation, increased by 7.2 percent in 2014/15 compared to a rise of 9.1 percent in 2013/14.
NRB had targeted to contain inflation below 8 percent in the monetary policy for 2014/15. The central bank has said that the inflation remained below its projection mainly due to drop in price of petroleum products, containing monetary expansion within the desired limit through effective liquidity management, and lower inflation in neighboring trading partners.
The annual average indices of food and beverages group and non-food and services group increased by 9.6 percent and 5.2 percent, respectively, in the review year.
Source: Republica
