Nepal's balance of payments (BoP) surplus dwindled to Rs 1.23 billion in fiscal year 2020- 21 (mid July 2020 to mid-July 2021) compared to a surplus of Rs 282.41 billion recorded in the previous fiscal year, the latest macroeconomic update of Nepal Rastra Bank (NRB) shows.

The central bank report unveiled by the central bank also reveals that the current account deficit ballooned to Rs 333.67 billion in the review year compared to a deficit of Rs 33.76 billion in the fiscal 2019-20.

Similarly, in the review year, capital transfer increased 7.4 per cent to Rs 15.26 billion and net foreign direct investment (FDI) increased 0.2 per cent to Rs 19.51 billion. In the previous year, capital transfer and net FDI amounted to Rs 14.21 billion and Rs 19.48 billion, respectively.

Meanwhile, remittance inflows increased 9.8 per cent to Rs 961.05 billion in the review year against a decrease of 0.5 per cent in the previous year.

This was despite the fact that the number of Nepali workers (institutional and individual-new and legalised) taking approval for foreign employment slumped 62.8 per cent in the review year. It had decreased 20.5 per cent in the previous year.

The number of Nepali workers (renew entry) taking approval for foreign employment decreased 46.8 per cent in the review year against a drop of 34.7 per cent in fiscal 2019-20.

During 2020-21, the country's merchandise exports surged 44.4 per cent to Rs 141.12 billion compared to an increase of 0.6 per cent in the previous year.

Destination-wise, exports to India and other countries increased 51.7 per cent and 27.7 per cent respectively whereas exports to China decreased 14.7 per cent.

At the same time, Nepal's merchandise imports jumped 28.7 per cent to Rs 1,539.83 billion in fiscal 2020-21 against a decrease of 15.6 per cent a year ago. Destination-wise, imports from India, China and other countries increased 32.1 per cent, 28.6 per cent and 19.6 per cent, respectively.

The huge imbalance in the country's exports and imports resulted in the total trade deficit of staggering Rs 1,398.71 billion during 2020-21. Consequently, the trade deficit that had narrowed 16.8 per cent in the fiscal 2019-20 widened by 27.3 per cent last fiscal. The export-import ratio increased to 9.2 per cent in the review period from 8.2 per cent in the year 2019-20.

More worryingly, the outstanding government debt amounted to Rs 1,728.25 billion in mid-July 2021, which was 40.5 per cent of the gross domestic product (GDP). Such ratio was 36.5 per cent a year earlier and 27.1 per cent in fiscal year 2018-19.

Releasing the whitepaper in the Parliament earlier this month, Finance Minister Janardan Sharma had also flagged the mounting government debt while fund mobilisation in the production sector remains tepid.

"This won't just result in shortage of financial resources for development projects but a large portion of government revenue will be spent to offload interest and loan repayment,"

Minister Sharma had said while presenting the whitepaper.

Against the contraction of 2.09 per cent in the fiscal year 2019-20, the Central Bureau of Statistics has estimated the GDP growth of 4.01 per cent for 2020-21, the NRB report says.

Agriculture, industry and service sectors are estimated to have grown 2.64 per cent, 5.05 per cent and 4.43 per cent, respectively.

The share of agriculture, industry and service sectors in GDP is projected at 25.83 per cent, 13.11 per cent and 61.06 per cent, respectively in 2020- 21. Gross domestic saving to GDP is estimated at 6.6 per cent in the review year, while the ratio of gross fixed capital formation and gross national saving to GDP at 27.26 per cent and 32.30 per cent, respectively.

A version of this article appears in the print on August 27 2021, of The Himalayan Times.