Laxmi Capital News
Trade deficit balloons to Rs 398.76 billion

Thecountry’s trade deficit widened to Rs 398.76 billion in the first five monthsof the ongoing fiscal, as the import bill of the country surged by 13 per centto reach Rs 432.48 billion, whereas exports slowed to a crawl.

Accordingto data unveiled by the Department of Customs, the country exported goods worthRs 33.72 billion in the first five months of the current fiscal, which isslightly better compared to Rs 30.61 billion in the corresponding period of theprevious fiscal.

Thecountry’s trade deficit has been ballooning every passing year. The tradedeficit of the first five months of this fiscal is more than the total annualimport bill of the country eight years ago.

Comparative figures

2009-10 (annual)

2017-18 (first five months)

Export

Rs 59.39bn

Rs 33.72bn

Import

Rs 368.38bn

Rs 432.48bn

Trade deficit

Rs 308.99bn

Rs 398.76bn

Accordingto DoC, in fiscal 2009-10, the total annual import was worth Rs 368.38 billion.

Inthe review period, the country imported petroleum products worth Rs 61.20billion, iron and steel worth Rs 43.09 billion, machinery parts worth Rs 40.95billion, vehicles worth Rs 35.56 billion and electric equipment worth Rs 29.66billion, according to DoC.

Themajor export commodities were coffee and tea (worth Rs 3.71 billion), productsmade of staple fibres (Rs 3.19 billion), carpets (Rs 2.97 billion), apparels —ready-made garments (Rs 2.84 billion) — and iron/steel (Rs 1.96 billion).

Amajority of imports and exports took place with India, with the share ofimports and exports with the southern neighbour in the review period standingat 65.3 per cent and 53.8 per cent, respectively. Other major trading partnerswere China, the United States of America, Germany, Thailand, Turkey andArgentina.

Expertshave said that Nepal’s energy shortfall is the major reason behind the tradedeficit as the import bill of petroleum products surged by 55 per cent to Rs61.20 billion in the first five months of this fiscal compared to Rs 39.45billion in the corresponding period of the previous fiscal.

Moreover,Nepal is importing around 372 megawatts of electricity from India, which is notincluded in the goods trade. Nepal’s electricity import bill from India isaround Rs 15 billion per annum, according to Nepal Electricity Authority.

“Increasingdependence on fossil fuel and lack of electricity are the major constraints inboosting production in the country,” said Yubraj Khatiwada, former vice chairmanof the National Planning Commission.

“Apartfrom tapping into our hydro resources, we should also explore the potential ofsolar and wind energy for localised generation from the perspective of energysecurity as well as to unleash industrialisation possibilities.”

Tradeeconomist Posh Raj Pandey opined that Nepal should review the policy, which haspegged Nepali rupee with the Indian currency that has been in place since 1993.“It’s high time we reconsider the correct anchor to boost production in Nepal,”said Pandey. “Unless we review the exchange rate, Nepal’s dependency with Indiawill remain longer.”

Cheaperimport from India has been distorting the production base in Nepal, he said.For example, if a commodity used to cost $30 in Bangkok in 1993, it was cheaperfor Nepal to import the product from Thailand. However, appreciation of thecurrency in other countries gradually resulted in Nepal’s import beingconcentrated on India because import from India became cheaper due to the fixedexchange rate regime. Meanwhile, as inflation in Nepal is higher than in India,Nepali products could not be competitive for export to the Indian market.“Fixed exchange rate is the major challenge in diversifying Nepal’s trade,” headded.

Source: The Himalayan Times, 9th January 2018

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