With the amount of goods Nepal exports annually, they would not even cover the import of fuels
Nepal's alarming trade deficit, which stood at Rs 1.7 trillion last fiscal year ending mid-July, is simply unacceptable. The growing deficit year after year shows that neither the government nor the business community is serious about bridging the gap. According to the annual trade statistics released by the Department of Customs on Monday, the country's trade deficit surged by 23 per cent to Rs. 1.72 trillion in 2021-22, from Rs 1.39 trillion the previous fiscal.
Despite efforts by the government to rein in imports to save precious foreign exchange, Nepal's imports have set the highest record so far. As per the department, imports grew by 24.72 per cent to Rs 1.92 trillion in the review period, compared to Rs 1.53 trillion in fiscal 2020-21. While exports too showed significant improvement to reach Rs 200 billion last fiscal year – a 41.74 per cent increase over the Rs 141 billion seen in 2020-21 – it does not call for a celebration as half all exports comprise refined cooking oil, an industry that is totally dependent on imported crude oil. The import-to-exports ratio in the review period stands at 9.60, meaning for every dollar worth of goods exported, the country imported commodities worth $9.60.
Last fiscal year's trade deficit is larger than last fiscal's budget of Rs 1.56 trillion or about the size of the current fiscal's budget of Rs 1.79 trillion. Nepal's major imports included petroleum products, iron and steel products, machinery, refined and crude cooking oil, and foodstuffs. Petroleum products accounted for nearly a fifth of all imports at Rs 3.83 trillion, largely due to a spike in global oil prices following the Russian invasion of Ukraine on February 23 this year. Despite the many incentives provided by the government to grow more food and become self- sufficient, Nepal imported foodstuffs, namely paddy, rice, wheat and maize, worth more than Rs 74 billion. Import of refined and unrefined cooking oil – palm, soyabean and sunflower – accounted for Rs 1.2 trillion, making it the fourth largest import commodity. Crude oil worth Rs 93 billion, paid for in dollars, was refined and exported to India. However, the industry neither generates much employment in the country nor is there any local input in terms of raw materials, benefitting only a handful of industrialists. Other major imports of Nepal included vehicles, electrical goods, electronic gadgets, gold and semi-precious stones.
With the amount of goods Nepal exports annually, they would not even cover the import of petroleum products. Nepal's total reliance on remittances to fuel its burgeoning imports is unsustainable and objectionable. Although Nepal has trade relations with 171 countries, we suffer a trade deficit with 141 of them, with India and China accounting for the bulk of the deficit. Since all countries leverage aid to allow a free flow of goods into Nepal, we must opt for two-way trade that is also beneficial to us in lieu of aid. While Nepal mulls over how best to balance our foreign trade, the central bank's restrictions on the import of non-essential and luxury goods, such as vehicles, gold and expensive electronic gadgets, must stay until the country comes out of the woods.
Control usury
The local people in Siraha district held a demonstration on Monday, demanding legal action against the usurers. The usury victims also demanded a thorough investigation of the property of the loan sharks, who lend money at unusually high interest rates. The victims said the usury has mostly affected the so-called lower caste people, lower middle class and poor families. It has been found that the usurers make papers amounting to triple the sum lent to the borrowers. This practice is rampant in the rural and urban areas of Madhes, where many victims have lost their lands and homes as a result.
After learning that the usury was rampant in the Tarai region, Prime Minister Sher Bahadur Deuba had ordered the concerned authorities to crackdown on suchactivities to protect the poor families from falling into the hands of the loan sharks. Usury is not only practised in the Tarai, but even in the Kathmandu Valley, where even some police officials were found to have been involved in the illegal activity. The usurers lend money to those who are in need of cash during an emergency. In that case, they agree to pay high interest rates. Instead of relying on the usurers, the people should join cooperatives and take loans whenever they need them.
A version of this article appears in the print on July 27, 2022, of The Himalayan Times.
