Export-import ratio falls moderately

KATHMANDU:

The country’s export to import ratio fell moderately in the first eight months of the current fiscal year due to depreciation in Nepali rupee, which gave a lift to exports.

The country’s export-import ratio stood at 13.3 between mid-July 2013 and mid-March, as against 14.1 in the same period last fiscal, shows the latest macroeconomic report of Nepal Rastra Bank. This means Nepal imported Rs 13.3 worth of goods for every rupee of merchandise exports made in the eight-month period of this fiscal, as against imports worth Rs 14.1 for every rupee of exports in the same period last fiscal.

The moderate fall in export-import ratio was largely due to growth in exports following fall in value of Nepali rupee vis-à-vis US dollar, which made Nepali goods cheaper in the foreign markets.

Nepal’s merchandise exports went up by 19.4 per cent to Rs 60.89 billion in the first eight months of the current fiscal. In the same period last fiscal, exports had gone up by five per cent to Rs 51 billion.

Some of the major products that Nepal had exported during the review period were zinc sheets, hand-knotted woollen carpets, textiles, polyester yarn and cardamom.

Despite recording comparatively healthy growth in exports, the country could not significantly narrow down the export-import ratio because of surge in imports.

Nepal imported merchandise worth Rs 457.85 billion in the first eight months of the current fiscal year — up 27 per cent than in the same period last fiscal. In the same period last fiscal, the country’s imports had surged by 22.1 per cent to Rs 360.56 billion.

Although import growth should have shrunk following depreciation in Nepali rupee, the textbook theory does not generally apply here because large portion of the country’s imports is relatively price inelastic. This means consumers tend to purchase many of the imported goods even when their prices rise — owing to fall in value of domestic currency — because they cannot do without them.

This includes essential commodities like petroleum products, which are not produced in the country.

The country footed a bill of Rs 87.42 billion (Rs 86.65 billion from India) just to import petroleum products in the first eight months —almost 20 per cent of the total import bill. In the same period last fiscal, Nepal had imported petroleum products worth Rs 69.45 billion.

The country recorded 26 per cent growth in imports of petroleum products in the eight-month period despite price hike, because these are the only alternative fuel to power factories, offices and home during loadshedding, which currently stretches to 12 hours per day.

This means sharp depreciation in Nepali rupee tends to fuel inflation because higher import prices raise retail prices.

Despite footing a huge import bill largely because of surge in imports of petroleum products, the country’s current account recorded a surplus of whopping 619 per cent and stood at Rs 68.41 billion. This was largely due to steady rise in inflow of remittance and hike in tourism income coupled with lower spending by outgoing Nepali tourists.

Nepal received remittance of Rs 356.72 billion in the eight-month period, up 34.1 per cent than in the same period last fiscal, while tourism income surged by 41.8 per cent to Rs 30.43 billion.

On the other hand, tourism expenditure by outgoing Nepali tourists went up by a moderate 1.7 per cent to Rs 26.87 billion following depreciation of rupee, which made foreign trips expensive for the Nepalis. Because of these reasons, the country’s foreign exchange reserve surged by 19.3 per cent to $6.70 billion, while balance of payments — the difference between money coming in and funds that left the country — stood at a surplus of Rs 102.81 billion.

Source: THT