KATHMANDU, AUGUST 16

Nepal's balance of payments (BoP) deficit stood at Rs 255.26 billion in the fiscal year 2021-22 that ended in mid-July compared to a surplus of Rs 1.23 billion recorded in the previous fiscal year, the latest macroeconomic update of Nepal Rastra Bank (NRB) shows.

The report unveiled by the central bank today also reveals that the current account deficit nearly doubled to Rs 623.33 billion in the review year compared to a deficit of Rs 333.67 billion in the fiscal 2020-21.

Similarly, in the review year, capital transfer slumped by 34.5 per cent to Rs 9.99 billion and net foreign direct investment (FDI) decreased 4.9 per cent to Rs 18.56 billion. In the previous year, capital transfer and net FDI amounted to Rs 15.26 billion and Rs 19.51 billion, respectively.

Meanwhile, remittance inflows increased 4.8 per cent to Rs 1,007.31 billion in the review year against an increase of 9.8 per cent to Rs 961.05 billion in the previous year.

This was due to the fact that the number of Nepali workers (institutional and individual-new and legalised) taking approval for foreign employment increased significantly to 354,660 in the review year. The number had plunged by 62.8 per cent in the previous year.

The number of Nepali workers (renew entry) taking approval for foreign employment soared by 198.5 per cent to 282,453 in the review year. It had fallen by 46.8 per cent in the previous year.

Meanwhile, during the 2021- 22 fiscal year, merchandise imports increased 24.7 per cent to Rs 1,920.45 billion compared to an increase of 28.7 per cent a year ago.

Even as merchandise exports increased 41.7 per cent to Rs 200.03 billion, the huge mismatch in the import and export amount resulted in total trade deficit surging by 23 per cent to Rs 1,720.42 billion in the review year. Such a deficit had increased by 27.3 per cent in same period of previous year.

The export-import ratio rose to 10.4 per cent in the review period from 9.2 per cent in the previous year.

As per the Broad Economic Categories (BEC), the intermediate and final consumption goods accounted for 47.5 per cent and 52.4 per cent of the total exports respectively, whereas the ratio of capital goods in total exports remained negligible at 0.04 per cent in 2021-22. In the previous year, the ratio of intermediate, capital and final consumption goods had stood at 28.6 per cent, 0.4 per cent and 71.1 per cent of total exports, respectively.

On the import side, the share of intermediate goods was 52 per cent, capital goods 10.1 per cent and final consumption goods at 37.9 per cent in the review year. Such ratios were 53.4 per cent, 12.1 per cent and 34.5 per cent, respectively, in the previous year.

Meanwhile, the gross foreign exchange reserves decreased 18.9 per cent to $9.53 billion in mid-July 2022 from $11.75 billion in mid-July 2021. The forex reserves has, nevertheless, gone up by $80 million compared to $9.45 billion recorded in mid- June, as the government has extended the ban on import of 10 non-essential items.

Based on the imports of 2021- 22, the foreign exchange reserve of the banking sector is sufficient to cover the prospective merchandise imports of 7.8 months, and merchandise and services imports of 6.9 months.

Consumer inflation at 8.08 per cent

The year-on-year consumer price inflation (CPI) soared to 8.08 per cent in mid-July 2022 compared to 4.19 per cent a year ago, the latest macroeconomic data of the central bank unveiled on Tuesday showed. Global rise of fuel and food prices, supply chain disruptions and devaluation of Nepali currency vis-à-vis US dollar contributed to build up inflationary pressures during the second half of 2021-22, as per the report. 'However, due to low level of inflation during the initial months, annual average consumer price inflation remained at 6.32 per cent in 2021-22 compared to 3.60 per cent a year ago.' For comparison, inflation in India was 6.71 per cent in July 2022.

A version of this article appears in the print on August 17, 2022 of The Himalayan Times.