Annual Macroeconomic Report: Trade deficit up 23.9pc to Rs 479.82b

KATHMANDU, AUG 16 -

Nepal ’s trade deficit rose by 23.9 percent to reach Rs 479.82 billion in last fiscal year, thanks to a surge in imports compared to exports.

Imports surged by 20.6 percent to Rs 556.74 billion, while exports grew by just 3.6 percent to Rs 76.92 billion in 2012-13. Due to the massive trade deficit, the export income is sufficient for financing just 13.8 percent of imports. In fiscal year 2011-12, exports income would finance 16.1 percent of the imports.

NRB Spokesperson Bhaskar Mani Gnawali said besides the quantity of goods imported, the values of goods also surged, contributing heavily to the trade deficit.

Inflation, however, remained at single digit of 9.9 percent. There were fears that inflation would touch double digits as the price rise stood around 10 percent in most of the months of the last fiscal year. In 2011-12 the annual inflation was at 8.3 percent, according to an annual report on the country’s macro-economy published by the Nepal Rastra Bank (NRB). Inflation remained on the higher side due to the rise in both food and non-food prices. The price rise in non-food items was even higher than in food items. Non-food items saw an average price rise of 10 percent over the year, while prices food items witnessed a rise of 9.6 percent, according to the NRB.

Gnawali said the price rise in petroleum products and devaluation of the Nepal i rupee against the US dollar were the major contributors to the price rise in non-food items. “Reduced production of food items and a necessity to import heavily contributed to the rise in the prices of food items too,” he said.

Among the food items, meat price witnessed the highest surge of 14.4 percent, while furnishing and household equipment saw the highest price rise of 13.3 in the non-food category.

The Balance of payment (BoP) surplus remained at Rs 68.94 billion at the end, despite a gloomy beginning of the fiscal year. The figure, however, is still low compared to the record high BoP surplus of Rs 131.63 billion in the previous fiscal year.

Nepal ’s foreign exchange reserves posted a 21.4 percent rise to reach Rs 533.30 billion at the end of 2012-13.

In the last fiscal year, both deposit collection and lending posted growth. Deposit collection of banks and financial institutions grew by 17.4 percent (Rs 176.27 billion), while credit disbursements rose by 18.6 percent (Rs 180.2 billion).

Thanks to the central bank’s focus on increasing lending to the productive sector, credit growth to the sector stood at Rs 34.21 billion — up from a growth of Rs 27.29 billion in 2011-12. “The positive impact of the heavy rise in lending to the productive sector will be seen in the current fiscal year,” said Gnawali.

Due to mergers, the number of banks and financial institutions (BFIs) decreased by 12. At the end of 2012-13, Nepal had 254 BFIs.

Spread rate down to 6.84pc

The spread of interest rates (difference between credit and deposit rates) came down to 6.84 percent in mid-July — down from 7.14 percent in mid-June. The average interest rate on deposits at the end of the last fiscal year stood at 5.25 percent, while that on credit was at 12.09 percent. The central bank, through the monetary policy for the current fiscal year, has asked BFIs to bring down the spread rate to 5pc.

Source: The Kathmandu Post