KATHMANDU, MARCH 11
Nepal's ballooning trade deficit coupled with slowdown in remittance inflow is exerting pressure on the country's current account, balance of payments (BoP) and foreign exchange reserves, the latest macroeconomic update of the Nepal Rastra Bank unveiled today shows.
During the seven months of fiscal year 2021-22, the country's merchandise exports soared 88.3 per cent to Rs 131.66 billion compared to an increase of 7.6 per cent in same period of previous year. However, due to a surge of 42.8 per cent in imports to Rs 1,147.46 billion against an increase of 0.01 per cent a year ago. While the export-import ratio rose to 11.5 per cent in review period from 8.7 per cent in same period of previous year, the total trade deficit increased by 38.4 per cent to Rs 1,015.81 billion.
Consequently, the current account remained at a deficit of Rs 413.86 billion in review period compared to deficit of Rs104.39 billion in the same period of the previous year. The BoP deficit stood at Rs 247.03 billion in the review period against a surplus of Rs 97.36 billion in the same period of the previous year.
As per the Broad Economic Categories (BEC), the intermediate and final consumption goods accounted for 48.2 per cent and 51.7 per cent of the total exports respectively, whereas the ratio of capital goods in total exports remained negligible at 0.02 per cent in the review period. In the same period of the previous year, the ratio of intermediate, capital and final consumption goods had stood at 32.4 per cent, 0.6 per cent and 67 per cent of total exports respectively.
On the imports side, the share of intermediate goods remained 53.7 per cent, capital goods 10.9 per cent and final consumption goods at 35.4 per cent in the review period. Such ratios were 53.3 per cent, 11.9 per cent and 34.8 per cent, respectively in the same period of the previous year.
Moreover, the gross foreign exchange reserves slumped by 16.2 per cent to Rs 1,173.02 billion in mid-February from Rs 1,399.03 billion at the start of the fiscal (in mid-July 2021). Based on the imports of seven months, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 7.4 months, and merchandise and services imports of 6.7 months.
Meanwhile, remittance inflows decreased 4.9 per cent to Rs 540.12 billion in the review period against an increase of 10.9 per cent in the same period of the previous year. In the review period, travel payments increased 91.6 per cent to Rs 36.30 billion, including Rs 22.60 billion for education under the service account.
In the review period, capital transfer decreased 19.4 per cent to Rs 6.31 billion and net foreign direct investment (FDI) increased 80.6 per cent to Rs 16.29 billion. In the same period of the previous year, capital transfer and net FDI amounted to Rs 7.83 billion and Rs 9.02 billion, respectively.
Broad money increased 2.8 per cent in the review period compared to the growth of 10.3 per cent in the corresponding period of the previous year. On year-on-year basis, M2 expanded 13.5 per cent in mid-February 2022.
A version of this article appears in the print on March 12, 2022, of The Himalayan Times