BoP deficit balloons three-fold to Rs 12b
KATHMANDU, APR 05:
The balance of payments (BoP) deficit has soared in the first seven months of the current fiscal year despite the pledge by Nepal Rastra Bank (NRB) to turn deficit to surplus.
The BoP refers to the dollar difference of the amount of exports and imports including all financial exports and imports. A negative BoP means that more money is flowing out of the country than coming in.
According to NRB’s report on the country’s macro-economic situation, the BoP deficit ballooned three-fold to Rs 12.57 billion as of the end of the seventh month from Rs. 4.43 billion in the sixth month. NRB governor Yubaraj Khatiwada had predicted that the BoP would be positive within five months while releasing the monetary policy for the current fiscal year.
The central bank has not revised its target to achieve a surplus of Rs 9 billion in the BoP at the end of the year in the mid-term review of the monetary policy.
“Slow growth in remittance and delay in getting reimbursement for government expenditure from donors are the main reasons behind the swelling BoP deficit,” said a senior NRB official.
Remittance growth slowed to 11.7 percent as of the seventh month compared to 13.6 percent in the corresponding period last year. Remittance inflow actually declined by 6.5 percent in the seventh month compared to the sixth month, according to central bank statistics. The previous two months had, however, seen a growth in remittance.
Given the chronic problem of delay in getting reimbursement, the government has provisioned in the current fiscal year that projects not seeking reimbursement will not be sanctioned a budget this year.
The BoP situation didn’t improve despite some improvement in the balance of trade. The country’s exports grew 6.6 percent to Rs 37.91 billion as of the seventh month while imports declined by 0.1 percent to Rs 218.59 billion.
With the government taking stern measures to discourage imports of gold and motor vehicles, the overall import growth started to decline.
For the last few months, import growth has been decreasing. “However, we are still far from narrowing the increasing trade imbalance,” said the NRB official. With a rise in petroleum prices internationally, the volume of imports is expected go up. Both imports from and exports to India have gone up compared to third countries during the review period, according to the NRB report.
Foreign exchange reserves have also declined both in terms of Nepali rupees and US dollars. Foreign exchange reserves came down to US$ 3.54 billion in mid-February from US$ 3.61 billion in mid-July 2010. They declined to Rs 257.81 billion in mid-February from Rs 268.91 billion in mid-July 2010 in local currency, according to NRB.
Meanwhile, an imbalance in deposit mobilization and credit flow continued in the seventh month. Deposits of commercial banks increased by Rs. 7.64 billion while lending increased by Rs. 49.35 billion in the review period. In contrast to the sluggish increase in deposit mobilization, credit to the private sector jumped Rs. 44.79 billion during the review period.
Source: ekantipur
The balance of payments (BoP) deficit has soared in the first seven months of the current fiscal year despite the pledge by Nepal Rastra Bank (NRB) to turn deficit to surplus.
The BoP refers to the dollar difference of the amount of exports and imports including all financial exports and imports. A negative BoP means that more money is flowing out of the country than coming in.
According to NRB’s report on the country’s macro-economic situation, the BoP deficit ballooned three-fold to Rs 12.57 billion as of the end of the seventh month from Rs. 4.43 billion in the sixth month. NRB governor Yubaraj Khatiwada had predicted that the BoP would be positive within five months while releasing the monetary policy for the current fiscal year.
The central bank has not revised its target to achieve a surplus of Rs 9 billion in the BoP at the end of the year in the mid-term review of the monetary policy.
“Slow growth in remittance and delay in getting reimbursement for government expenditure from donors are the main reasons behind the swelling BoP deficit,” said a senior NRB official.
Remittance growth slowed to 11.7 percent as of the seventh month compared to 13.6 percent in the corresponding period last year. Remittance inflow actually declined by 6.5 percent in the seventh month compared to the sixth month, according to central bank statistics. The previous two months had, however, seen a growth in remittance.
Given the chronic problem of delay in getting reimbursement, the government has provisioned in the current fiscal year that projects not seeking reimbursement will not be sanctioned a budget this year.
The BoP situation didn’t improve despite some improvement in the balance of trade. The country’s exports grew 6.6 percent to Rs 37.91 billion as of the seventh month while imports declined by 0.1 percent to Rs 218.59 billion.
With the government taking stern measures to discourage imports of gold and motor vehicles, the overall import growth started to decline.
For the last few months, import growth has been decreasing. “However, we are still far from narrowing the increasing trade imbalance,” said the NRB official. With a rise in petroleum prices internationally, the volume of imports is expected go up. Both imports from and exports to India have gone up compared to third countries during the review period, according to the NRB report.
Foreign exchange reserves have also declined both in terms of Nepali rupees and US dollars. Foreign exchange reserves came down to US$ 3.54 billion in mid-February from US$ 3.61 billion in mid-July 2010. They declined to Rs 257.81 billion in mid-February from Rs 268.91 billion in mid-July 2010 in local currency, according to NRB.
Meanwhile, an imbalance in deposit mobilization and credit flow continued in the seventh month. Deposits of commercial banks increased by Rs. 7.64 billion while lending increased by Rs. 49.35 billion in the review period. In contrast to the sluggish increase in deposit mobilization, credit to the private sector jumped Rs. 44.79 billion during the review period.
Source: ekantipur
