Trade deficit balloons to Rs 277.13bn

Kathmandu, December 16

The country’s total trade deficit in the first four months of this fiscal year (mid-July to mid-November) widened by 97.9 per cent to Rs 277.13 billion as against a contraction of 37.8 per cent in the same period of the previous year, shows the macroeconomic update of Nepal Rastra Bank unveiled today.

In the first quadrimester of 2016-17, merchandise exports increased by 17 per cent to Rs 24.52 billion as against a decline of 29.1 per cent in the same period of the previous year. Meanwhile, merchandise imports increased 87.4 per cent to Rs 301.66 billion in the review period in contrast to a drop of 36.8 per cent in the same period of the previous year. Last year, the country’s trade had taken a major hit due to the border blockade along the southern plains.

The export-import ratio fell to 8.1 per cent in the review period from 13 per cent in the corresponding period of fiscal 2015-16.

Meanwhile, workers’ remittances increased 7.8 per cent to Rs 232.14 billion in the review period compared to a growth of 19.4 per cent in the corresponding period of the previous year.

Consequently, net transfer receipts increased 6.7 per cent to Rs 265.43 billion in the review period. Such receipts had increased by 23.2 per cent in the same period of the previous year.

The remittance inflow has gone up despite the number of workers going abroad for foreign employment falling. The number of Nepali workers seeking foreign employment, based on final approval for foreign employment, decreased by 7.9 per cent in the first four months of 2016-17, as per the central bank report.

Also, the current account returned to a surplus of Rs 1.86 billion in mid-November after a consecutive deficit in preceding three months. The overall balance of payments recorded a surplus of Rs 21.98 billion in the review period against a surplus of Rs 83.70 billion in the same period of the previous year.

In the review period, total government expenditure on cash basis increased by 91.8 per cent to Rs 140.68 billion. Such expenditure had decreased 7.8 percent in the corresponding period of the previous year. With government budget announcement one-and-a-half months before the start of new fiscal year and timely approval of Appropriation Bill resulted in relatively higher growth in recurrent and capital expenditure, ‘outturns under various heads of government expenditure have remained far below annual targets’.

Capital transfer of Rs 3.38 billion and foreign direct investment (FDI) inflow of Rs 5.71 billion were recorded in the review period. In the same period of the previous year, capital transfer and FDI inflows were Rs 4.61 billion and Rs 1.12 billion, respectively.

Looking ahead, the NRB report says economic activity is expected to rebound on the back of post earthquake reconstruction of individual houses following the acceleration in disbursement of housing grants, improved power supply, and recovery in agricultural and industrial sectors this fiscal.

“However, the growth outlook is contingent upon the successful implementation of developmental projects, amelioration of fiscal drag of cash balances accumulated with the NRB and the external environment,” the report says. “The recent demonetisation of Indian high value banknotes is likely to have near-term dampening effect on tourism and export of agricultural commodities to India.”

Inflation decelerates further

KATHMANDU: Consumer price inflation further decelerated to 4.8 per cent in mid-November from a level of 6.7 per cent in mid-October, shows the latest macroeconomic report unveiled by Nepal Rastra Bank.

Such inflation was 10.4 per cent both in mid-July of 2016 and mid-November of 2015. The pressure on overall consumer price inflation eased on account of decline in both the food and non-food inflation in the review period compared to the corresponding period of the previous year. “The deceleration in inflation is expected to provide relief to the general public and create conducive environment for industrial production and businesses,” according to the central bank.

The year-on-year consumer price inflation was lower at 3.6 per cent in India in the review month showing an inflation wedge of 1.2 per cent. Such inflation was 5.4 per cent in India and 10.4 per cent in Nepal reflecting a wider inflation differential of five per cent in the corresponding period of the previous year. The slightly higher rate of inflation in Nepal than India is due to the relatively higher prices of vegetables and alcoholic products in Nepal.