Nepal | June 26, 2019

Result-based approach to be proposed to reduce trade deficit

Pushpa Raj Acharya

Kathmandu, August 1
As the trade deficit has been ballooning in recent years, which reportedly hovered at around Rs 716.38 billion in fiscal 2014-15, the government is going to conduct a diagnostic review of its root causes. The Ministry of Commerce and Supplies (MoCS) has proposed a result-based approach from all stakeholder ministries to cope with the burgeoning trade deficit and identified its role on trade facilitation.

“There is a huge role of the Ministry of Energy and Ministry of Agricultural Development to reduce the burgeoning trade deficit as the import of petroleum and cereals has been increasing due to our incompetence in energy sector development and fall in agriculture output,” said Naindra Prasad Upadhyay, secretary of MoCS.

“Fundamentally, there are less chances of curbing the import of essential products like telecommunication equipment and fertilisers, among others, which are also the major import items. However, we can make the country self-reliant on cereals and electricity,” he added. “Yet, Nepal can reduce the import of luxury vehicles if it can improve the public transportation system, wherein comes the role of the Ministry of Physical Infrastructure and Transport.”

Nepal is widely known as an agricultural country, with 60.4 per cent of the working age population involved in the agriculture sector. Still, the import of food items has been increasing substantially in recent years. Secretary Upadhyay expressed surprise over the import of food items, which stood at Rs 35.26 billion in fiscal 2014-15, which was a whopping rise of 25.19 per cent as compared to the previous fiscal.

It is also an awkward situation for the agriculture ministry and irrigation ministry that they have completely failed to link increased budget with output. The budget of the agriculture ministry has doubled in the last five years, however, there have been no substantial results.

Likewise, the country has been losing money in the import of diesel, petrol and generators due to lack of supply of electricity, which has also been hitting industrial production. The import of diesel doubles especially in the winter season for production of electricity through generators.

Until the sectoral ministries realise their roles in reducing trade deficit caused by their underperformance, the MoCS cannot deal with the problem alone. In a bid to discuss the root causes of the alarming deficit, which surpassed the annual budget of the government, six ministers are going to hold discussions on Sunday, with participation of their secretaries and high level officials.

The finance minister, commerce minister, energy minister, agriculture minister, industry minister and forest minister will hold discussions under the coordination of commerce ministry to formulate a plan to cope with the challenges that have emerged due to the alarming trade deficit.

As per the recent data of the Department of Customs, the country imported goods worth Rs 801.22 billion against exports of Rs 84.84 billion that resulted in a deficit of 716.38 billion in fiscal 2014-15.

To cope with this problem, experts have suggested that the country needs to focus on removing supply side constraints to boost production. “Nepal needs to link import with productive sector and encourage predominantly the import of raw materials that are used for exports,” Ratnakar Adhikari, an expert on international trade, had said recently.

As per him, the government should massively develop infrastructure like electricity and roads and transportation to facilitate production and trade.

A version of this article appears in print on August 02, 2015 of The Himalayan Times.

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