Nepal seeing trade deficit of Rs 1.68 billion every day

KATHMANDU, July 25:

Nepal is seeing trade deficit of Rs 1.68 billion per day as the country's export receipt dropped by Rs 3.9 billion while import bills soared by Rs 45 billion in the eleven months of 2014/15 compared to figures of the same period 2013/14.

"Merchandise exports decreased by 4.8 percent to Rs 77.83 billion in the first eleven months of 2014/15," according to the Nepal Rastra Bank.

Increased imports and decreased exports further widened country's trade deficit to Rs. 612.87 billion, the report stated, adding, "Nepal had exported merchandise goods worth Rs. 81.73 billion in the eleven months of 2013/14, Rs 3.9 billion more than the last fiscal year."

Eroding competitiveness and lack of product diversification have been blamed for fall in exports to two major export markets India and China that has pulled overall exports down. Exports to India -- the country's major trading partner -- decreased by 6.3 percent by mid-June 2014 against an increase of 17.5 percent in same period a fiscal year ago. "Exports to India decreased mainly due to drop in the exports of zinc sheet, textiles, cardamom and tooth paste," the report stated, adding that exports to China decreased mainly due to drop in exports of handicraft goods, wheat flour, incense sticks and pashmina.

Likewise, exports to other countries decreased by 1.8 percent against an increase of 15.9 percent recorded in same period a fiscal year ago. "Exports to other countries decreased due to the drop in exports of pulses, woolen carpet, tanned skin, and readymade garments," the report stated, adding that exports to other countries decreased by 2.4 percent to $247.9 million by mid-June.

However, merchandise imports increased by Rs 45 billion to Rs 690.70 billion, in the first eleven months of 2014/15, compared to Rs 645.70 billion in the same period a fiscal year ago, despite decrease in petroleum price, and drop in imports of gold, betel nut, coal, and MS wire rod.

Imports from India went up primarily due to increased imports of vehicle and spare parts, electrical equipment, rice, and medicine, whereas imports from China increased sharply due to increase in the imports of telecommunications equipment and parts, machinery and parts, chemical fertilizers, and electrical equipment and tools.

Likewise, imports from other countries rose mainly due to rise in the imports of aircraft and spare parts, silver, edible oil, crude palm oil, among others.

Despite ballooning trade deficit, the overall Balance of Payment (BoP) recorded a surplus of Rs. 127.20 billion during the eleven months of 2014/15 - compared to a surplus of Rs. 109.56 billion during the same period of 2013/14, due to surplus of Rs 95.29 billion in current account.

Current account registered a surplus as net transfers increased by 10.4 percent to Rs 631.33 billion compared to a growth of 28.1 percent in the same period a fiscal year ago. "Under transfers, workers' remittances increased by 12.4 percent to Rs. 551.74 billion compared to a rise of 26.4 percent in the same period a fiscal year ago."

In recent months, however, flow of remittance has slowed down. The slowdown in outflow of migrant workers due to devastating earthquake of April 25 and aftershocks thereafter is expected to further decrease country's remittance receipt in the coming months.

Source: Republica