The seven-fold rise in trade deficit in the last decade is mainly due to the country’s weak production base

                            — Naindra Prasad Upadhyay, Commerce Secretary

Kathmandu, October 23

Sluggish export against accelerating growth in import has resulted in a trade deficit of Rs 201.69 billion in the first quarter of the current fiscal (mid-July to mid-October).

The trade deficit widened by 80 per cent compared to the corresponding period in the previous fiscal, according to the Department of Customs.

As per the ‘Foreign Trade Direction’ unveiled by the DoC today, the country imported goods worth Rs 220.62 billion against exports worth Rs 18.9 billion. The country’s export increased by around eight per cent against import growth of 70.7 per cent.

The country’s foreign trade had contracted slightly in the corresponding period of the previous fiscal because of supply line disruptions due to protests at border points by Madhes-based parties.

But the widening gap between import and export witnessed this fiscal is a cause of anxiety among policy makers.

Along with slowdown in remittance inflow, the Balance of Payment situation is already in a negative trend this fiscal. Imports are projected to increase further as the country requires a huge quantity of construction materials for post-earthquake reconstruction activities, which are expected to gather pace.

The country does not have any immediate remedy for this alarming trade deficit.

Many industries have pulled down their shutters as they failed to compete with imported goods in the country because production cost went up due to power shortage, labour unrest and strikes.

“The premature de-industrialisation and low yields in agriculture due to lack of modernisation are the major causes for the country’s over-dependence on imports,” said Commerce Secretary Naindra Prasad Upadhyay, adding, “The seven-fold rise in trade deficit in the last decade is mainly due to the country’s weak production base.”

The country thus needs to focus on achieving self-reliance in agriculture production and on creating conducive environment to bring fresh investments in the manufacturing sector by ensuring cheap and reliable energy supply and maintaining cordial relations between labourers and employers as the country cannot afford de-industrialisation, according to Upadhyay.

According to DoC, the country’s top imports in the review period were vehicles and spare parts worth Rs 25 billion, petroleum (Rs 23 billion) and iron and steel (Rs 21 billion).

The major exports were carpets worth Rs 1.8 billion, tea, apparel and clothing accessories worth Rs 1.7 billion and coffee worth Rs 1.4 billion.