The Macroeconomic Situation report of the first two months of the current fiscal unveiled by Nepal Rastra Bank (NRB) today has painted a bleak picture of the country’s economy as the sharp decline in remittance growth rate and alarming trade deficit may exert pressure on the country’s balance of payments situation in coming days.
According to the central bank’s report, the country’s current account deficit registered deficit of Rs 17.88 billion compared to Rs 11.12 billion in the corresponding period of the previous fiscal. Balance of payments deficit also increased to Rs 5.87 billion as the trade deficit increased alarmingly by a whopping 12 per cent compared to the corresponding period of the previous fiscal to stand at Rs 151.83 billion in the first two months.
Export to import ratio was at 1:12 in the review period compared to 1:11 in the same period of the previous fiscal. The country imported goods worth Rs 165.4 billion against exports of Rs 13.58 billion in the review period. Import of petroleum products, vehicles and machinery parts surged in the review period. Meanwhile, major export items like woollen carpets, readymade garments and pashmina recorded negative growth.
Similarly, consumer price inflation marginally increased as compared to the previous months due to lack of adequate supply of vegetables and food items because of the floods and landslides. The central bank’s macroeconomic situation report has highlighted that the deficiencies in the supply side might raise the consumer price inflation further.
Remittance inflow has sharply declined to 0.7 per cent in the review period compared to 6.6 per cent of the previous fiscal year. In fact, remittance inflow sharply dropped in the review period as compared to seven per cent growth of the previous month. The country received remittances worth Rs 115.55 billion in the review period.
Sharp decline in remittance is considered to be risky for the country’s economy as remittance is considered a major source to make the foreign exchange reserve robust. Remittance is also a major contributor in increasing the purchasing capacity of the people, which creates the ground for sound growth of both wholesale and retail trade.
A version of this article appears in print on October 30, 2017 of The Himalayan Times.