Nepal | November 25, 2020

Trade deficit narrows down nearly 25 per cent

Himalayan News Service
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While the adverse impact of coronavirus has been witnessed on various sectors of the economy, it was more pronounced on external trade and credit expansion of banks and financial institutions (BFIs) in the first two months (mid-July to mid-September) of the current fiscal year.

The macroeconomic update report of the Nepal Rastra Bank (NRB) unveiled today shows merchandise exports increased 10.5 per cent to Rs 20.44 billion in the first two months of this fiscal compared to an increase of 25.9 per cent in the same period of the previous year. Merchandise imports decreased 22.1 per cent to Rs 178.85 billion compared to a decrease of 1.2 per cent a year ago.

Consequently, the total trade deficit narrowed down 24.9 per cent to Rs 158.41 billion in two months of 2020-21. Such deficit had contracted 3.1 per cent in the corresponding period of the previous year. The export-import ratio increased to 11.4 per cent in the review period from 8.1 per cent in the corresponding period of the previous year.

The year-on-year unit value export price index, based on customs data, increased 0.7 per cent and the import price index decreased four per cent in the second month of 2020-21. The terms of trade (ToT) index increased 4.9 per cent in the review month compared to an increase of 4.1 per cent a year ago, as per the NRB report.

A closer look, however, reveals that imports of industrial supplies, fuel, capital goods, transport equipment, parts and accessories decreased owing to the impact of COVID-19 on the economy. Meanwhile the import of food and beverages escalated in the review period.

Meanwhile, remittance inflows increased 8.1 per cent to Rs 165.73 billion in the review period against a decrease of 0.6 per cent in the same period of the previous year.

Net services income remained at a deficit of Rs 5.45 billion in the review period compared to a deficit of Rs 5.80 billion in the same period of the previous year. Under the service account, travel income plummeted 90.5 per cent to Rs 973.7 million in the review from Rs 10.21 billion in the same period of the previous year. Also, travel payments slumped 80 per cent to Rs 2.92 billion, including Rs 2.47 billion for education. Such payments were Rs 14.63 billion and Rs 7.64 billion, respectively in the same period of the previous year.

The current account remained at a surplus of Rs 26.07 billion in the review period against a deficit of Rs 22.69 billion in the same period of the previous year.

The balance of payments (BoP) registered a surplus of Rs 67.63 billion in the review period.

Such surplus was Rs 8.83 billion in the same period of the previous year.

At the same time, private sector credit from BFIs increased by paltry 0.5 per cent in the review period compared to a growth of 2.5 per cent in the corresponding period of previous year.



A version of this article appears in print on October 22, 2020 of The Himalayan Times.

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