Kathmandu, January 4:

Trade deficit continues to widen due to a higher growth of imports vis-à-vis exports and crossed Rs 41.25 billion during the first four months of the current fiscal year.

However, trade imbalance slowed down to 15.8 per cent compared to a rise of 25.3 per cent during the corresponding period last year, states Nepal Rastra Bank in its report of current macroeconomic situation released today.

In the first four months of 2006-07, total exports declined by 0.1 per cent in contrast to an increase of 14.5 per cent in 2005-06. Total exports value stood at Rs 20.84 billion, while it was Rs 20.86 billion in the previous fiscal.

Of the total exports, export to India declined by 1.1 per cent during the period as against a significant growth of 29.4 per cent in 2005-06. The continuation of the imposition of the additional duty of four per cent by India on a number of products from Nepal was one of the factors responsible for the decline in the rate of growth of exports, says the report.

Exports to other countries, on the other hand, rose by 1.9 per cent in comparison to a decline by 8.4 per cent in the corresponding period of the previous year.

The growth in total imports accelerated to 9.9 per cent during the period compared to a growth of 21.1 per cent in the previous year. While the rate of increase in imports from India decelerated to 7.8 per cent in the review period and imports from other countries surged by 13.4 per cent in comparison to a growth of 4.3 per cent last year.

Total imports bill crossed Rs 62.09 billion with imports from Indian contributing Rs 38.29 billion and Rs 23.80 billion from other countries.

As a result, the overall balance of payment (BOP) registered a surplus of just Rs 81.1 million compared to a higher surplus of Rs 4.35 billion in the previous year. Despite the increase in workers’ remittances, the surplus in the BOP was lower than that of the previous year because of the decline in exports and net services income, among others.

In comparison to mid-July 2006, gross foreign exchange reserves fell slightly by 0.4 per cent to Rs 164.44 billion at mid-November 2006 owing to the appreciation of the Nepali rupees against the US dollar. The reserves had risen by 7.2 per cent in the corresponding period of the preceding year.

On the basis of US dollar, gross foreign exchange reserves went up by 2.1 per cent to $2.27 billion at mid-November 2006. In the same period last year, reserves had increased by 3.1 per cent. The current level of reserves is adequate for financing merchandise imports of 10.6 months and merchandise and service imports of 8.7 months, states the central bank.

On the government budgetary front, total government expenditure grew by 9.9 per cent to Rs 25.69 billion during the period, which is lower against 10.3 per cent rise in the same period of 2005-06.

The decline in capital expenditure accounted for such a low growth of actual expenditure in the review period. The decline in capital expenditure is attributed to sluggish development activities. Recurrent expenditure increased because of increasing government administrative expenses as well as an increment in the allowances of government employees.

The government revenue showed a significant growth of 20.3 per cent to Rs 21.5 billion during the period. Revenue had grown by only 6.9 per cent in the corresponding period last year. A continuous rise in workers’ remittance and resulting expansion in consumers’ spending contributed to the increase in VAT revenue as well as excise revenue.

Total foreign cash grants picked up with a significant growth of 97.9 per cent in contrast to a decline of 43.4 per cent in the corresponding period of the previous year. Conversely, foreign loan depicted a decline of 22.8 per cent in the review period in contrast to an increase of 18.5 per cent last year. The year-to-year consumer price inflation moderated to 7.1 per cent at mid-November 2006. The inflation was 8.5 per cent at mid-November 2005. The moderation of consumer price inflation was on account of the lower rate of rise in the prices of cereal products by 5.1 per cent during the period in comparison of 14.8 per cent rise last year.