KATHMANDU, Sept 30: The balance of payment (BoP) surplus fell in the first month of the current fiscal year as the country´s trade deficit widened.
The overall BoP, the country´s transaction with other nations, hit a surplus of Rs 3.85 billion in the one-month period through Aug 16, which was lower than the surplus of Rs 8.10 billion recorded in the same period last fiscal year.
“The low level of surplus is primarily due to a substantial rise in the merchandise import in the review period,” the latest macroeconomic report published by Nepal Rastra Bank on Sunday shows.
Although the pressure created by hike in imports was cushioned by 54.6 percent hike in workers´ remittances, it was not enough to retain the surplus of the last fiscal year.
In the first month of the current fiscal year, Nepalis working abroad sent Rs 33.81 billion to the country. In terms of US dollar, workers´ remittances increased by 24.4 percent to $381 million. Likewise, foreign direct investment of Rs 457 million was also recorded in the review period, which helped to post a BoP surplus despite widening trade deficit.
Nepal´s trade deficit surged by 49.4 percent to Rs 39.78 billion in the first month of the current fiscal year, as the country´s imports of merchandise goods exceeded those of exports. Total trade deficit had risen by a marginal 4.9 percent in the same period last fiscal year.
The latest macroeconomic report of Nepal Rastra Bank shows that the country´s trade deficit with India increased by 58.9 percent in the one-month period through August 16 as against the decline of 8.5 percent recorded in the same period last year. Trade deficit with other countries, on the other hand, increased by 36.3 percent in the first month of the current fiscal year.
In the one-month period, the country´s merchandise imports reported a growth of 43.7 percent to Rs 46.98 billion, as against the growth of 7.1 percent in the same period last fiscal year. “The total imports increased in the review period primarily due to a sharp increase in imports from both India and other countries,” the report says.
Imports from India, for instance, went up by 48.1 percent in the first month, in contrast to a decline of 4.3 percent recorded in the same period last fiscal year. Among goods that were shipped in from India, imports of chemical fertilizers shot up by 610 percent in the first month, while that of cement surged by 183.2 percent. Likewise, imports of baby food cum milk products, hot-rolled sheet in coil and plastic utensils surged by 334.1 percent, 371.3 percent and 299.5 percent, respectively.
Among imports from other countries, edible oil, petroleum products and readymade garments went up by 962.1 percent, 568.7 percent and 569.4 percent, respectively. Hike in imports of merchandise goods pushed up total imports from third countries by 37.2 percent in the one-month period.
In contrast to the rise in imports of these goods, the country´s merchandise exports in the first month of the current fiscal year rose by mere 18.5 percent to Rs 7.20 billion. Exports had increased by 18.4 percent to Rs 6.07 billion in the same period last year.
The Rastra Bank report shows that exports to India marked a growth of 5.7 percent in the first month, compared to an increase of 17.1 percent in the same period last year.
“Slow growth of export to India is attributed to the decline in the export of thread, MS pipe and zinc sheets, among others, although exports of GI pipe, jute sackings, polyester yarn, textiles and cardamom, among others went up during the period,” the report shows.
Exports to other countries, meanwhile, grew by 42.1 percent in the first month as against the increment of 20.9 percent in the same period last fiscal year. These consignments mainly comprised pulses, tanned skin and readymade leather goods, among others.
Forex reserve swells
The gross foreign exchange reserve increased by 1.9 percent to Rs 447.86 billion in mid-Aug from Rs 439.46 billion as of mid-July. Such reserve had increased by 4.2 percent to Rs 283.72 billion in the same period of the last fiscal year. The current level of reserve is sufficient to finance merchandise imports of 9.8 months and merchandise and service imports of 8.3 months.