Trade deficit rises to Rs 52.72b

Kathmandu, February 6:

Due to a sharp rise in imports vis-à-vis exports, Nepal’s trade deficit continues to widen, as it crossed Rs 52.72 billion during the first five months of the current fiscal year 2006-07.

However, trade imbalance slowed down to 14 per cent compared to a significant rise of 30 per cent during the corresponding period of the previous year, reveals the macro-economic situation report released by Nepal Rastra Bank (NRB), on Tuesday.

The total exports declined by 0.9 per cent to Rs 26.59 billion in contrast to an increase of 12.2 per cent in 2005-06. Of the total exports, export to India declined by 0.3 per cent as against a significant growth of 24.6 per cent in the same period in the previous year. Exports to other countries also declined by 2.2 per cent in comparison to a decline by 8.1 per cent in the corresponding period of the previous year.

Decline in exports to India was attributed to a decline in exports of polyester yarn, plastic utensils, cattle feed, copper wire and rod, GI pipe, noodles, jute goods and bags. Likewise, decline in exports to other countries was due to a decline in the export of readymade garments, Pashmina and woollen carpets, states the report.

Growth in total imports decelerated to 8.5 per cent to Rs 79.32 billion compared to a growth of 22.8 per cent in the same period of the preceding year. While imports from India decelerated to 7.6 per cent in the review period in comparison to a higher growth of 33.1 per cent in the corresponding period of 2005-06, imports from other countries increased by 10 per cent in comparison to a growth of 9.0 per cent last year, adds the release.

The central bank states that a rise in the import of petroleum products, vehicles and parts, thread, hot rolled sheet in coil and other machinery and parts from India and crude palm oil, computer parts, chemical fertiliser, copper wire and rod, medicine and textiles from other countries led to a rise in total imports during the period.

Despite a huge trade deficit, the overall balance of payments (BoP) recorded a surplus of Rs 5.68 billion, almost the same level of surplus of Rs 5.73 billion in the corresponding period of 2005-06. The surplus in BoP is attributed to a continuous rise in workers’ remittances, which registered a rise of 9.5 per cent to Rs 40.28 billion.

Under the current account the receipts from tourism declined to Rs 3.85 billion compared to a decline of 23.4 per cent in the previous year. Under the financial account, the government received Rs 2.89 billion as foreign loan and repaid Rs 3.23 billion in amortisation.

In comparison to mid-July 2006, gross foreign exchange reserves rose by 3.7 per cent to Rs 171.27 billion in mid-December 2006. Such reserves had risen by 7.6 per cent in the corresponding period last year. The current level of reserve is adequate for financing merchandise imports of 10.8 months and merchandise and service imports of 8.9 months, states the report.

On the government budgetary front, total expenditure, on a cash basis, slowed down

by seven per cent to Rs 32.75 billion compared to a rise of 12.8 per cent during the previous year. Deceleration in both recurrent and capital expenditure in the review period accounted for such a smaller growth of the expenditure.

The government revenue collection recorded an increase of 13 per cent to Rs 26.73 billion compared to a growth of 9.8 per cent in the same period last year. Increased consumers’ confidence, adjustment in tariff rates and improvement in custom’s valuation, and increased tax compliance contributed to such a high growth of revenue.

The foreign cash-grants recorded a robust growth of 177.2 per cent to Rs 7.23 billion as of mid-December 2006. The foreign cash loans of the government, on the other hand, recorded a modest growth of 5.7 per cent, states the report.