Nepal | July 22, 2019

Trade deficit puts pressure on forex reserve

Himalayan News Service

Forex reserveKathmandu, June 29

Nepal’s widening trade deficit is eroding the country’s capability of earning foreign currency through exports.

The country’s import-export ratio slipped to 11:1 during the first 11 months of this fiscal year, according to the Trade and Export Promotion Centre (TEPC). This means merchandised goods worth Rs 11 were imported into the country against export of one rupee during the review period. The ratio stood at 9:1 in the same period of the
previous fiscal.

The gap between export and import has increased in this fiscal as exports plunged by 23.11 per cent in the review period. Contraction in overall trade has been witnessed during the review period as supply from India was disrupted for four-and-a-half months — from last week of September to first week of February. The country’s overall trade declined by 5.7 per cent as compared to same period last year.

Drop in import of petroleum products — the major import commodity — was the major cause for contraction in the overall trade in this fiscal. Import of petroleum products slumped by 43.1 per cent to Rs 58.23 billion as compared to last year.

MS billet, petroleum products, transport vehicles and parts, machinery parts and cereals are the top five imports of the country, according to TEPC. On the other hand, woollen carpets, readymade garments, yarns, cardamom and iron and steel products are the major exports.

Trade with India — the country’s largest trading partner — dropped by nine per cent to Rs 456.93 billion in the first 11 months. The country’s export to India declined by 33.7 per cent to Rs 33.95 billion. However, import fell by just 6.2 per cent to Rs 423 billion in the review period.

Country’s import is gradually picking up after the supply line from India was normalised. The country’s import has dropped by only 3.8 per cent to Rs 680.95 billion against export of Rs 60.82 billion, which is a decline of 23.11 per cent. Export has dropped significantly because the country has been largely reliant on import of raw materials to produce goods that are exported. Decline in import of raw materials and unfavourable economic situation in the country caused by supply disruptions were the major reasons for decline in export.

Interestingly, the country has also lost trade surplus with the United States in the review period. The country was enjoying trade surplus with the world’s largest economy since long. The country imported goods worth Rs 8.35 billion from the United States against exports worth Rs 8.28 billion to the US.

 


A version of this article appears in print on June 30, 2016 of The Himalayan Times.


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