Nepal | May 22, 2019

Trade deficit surges to Rs 79.99bn in first month

Himalayan News Service

Kathmandu, August 30

The country’s trade deficit has widened to Rs 79.99 billion in the first month of the current fiscal 2017-18 along with exponential surge in imports against the negative export growth.

According to data unveiled by the Department of Customs (DoC) today, the country imported goods worth Rs 86.7 billion against total exports of Rs 6.7 billion in the review
period. Imports recorded a 23.55 per cent growth while exports recorded a negative 3.5 per cent growth as compared to the corresponding period of the previous fiscal.

The gap between exports and imports has been widening every passing year due to the country’s weak production base and Nepal has become import dependent. As per
the data of DoC, the country imports goods worth Rs 12.9 against exports worth one rupee.

Comparative figures
Fiscal 2016-17  Fiscal 2017-18
Import  70.17 86.7
Export  6.95 6.7
Trade deficit  63.21 79.99

Imports have been rising especially in recent months as the Nepali currency is getting stronger against the US dollar and traders are encouraged to raise imports because imports have become cheaper due to the appreciation of the Nepali currency. Meanwhile, export earnings also go down (in terms of Nepali rupees) along with the depreciation of the US dollar.

Economists have said that the country’s alarming deficit can be addressed only by boosting production. “The country has been gradually losing competitiveness in the production of goods and one aspect that has been hurting the economy is that both the government and private sector have not paid attention to designing products of
competitive and comparative advantage,” said senior economist Shankar Sharma.

“We have to focus on developing products for niche markets,” said Sharma. He also added that the government’s lethargic approach for the early operation of special economic zones (SEZs) is also affecting the possibility to raise exports. Though all the structures have been developed, Nepal Electricity Authority has been unable to supply adequate power to the industries set up in the priority zone. Sharma argued that the country must have a robust production base to overcome the challenge of ballooning trade deficit.

However, Commerce Secretary Naindra Prasad Upadhyay said that the government has realised that the root cause of the low production base is due to the relatively higher production cost. The country has initiated reforms on the legal and administrative fronts to create a conducive environment for investment.

“Development of robust infrastructure, regular supply of power, and an end to labour unrest, donation drive and strikes are critical to improve the investment climate to
address the supply side constraints,” said Commerce Secretary Upadhyay.

He further stressed on the need for a collaborative effort between the government and the private sector to boost production in the country to cope with the alarming trade deficit.

 


A version of this article appears in print on August 31, 2017 of The Himalayan Times.


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