Nepal’s first BoP deficit in 11 months

- Post Report, Kathmandu

Sep 23, 2017-

The outflow of money from Nepal’s economy surpassed inflows by Rs3.3 billion in the first month of the current fiscal year, as rise in remittance income could not offset pressure exerted by a combination of hike in imports and drop in exports.

With this, the country has recorded the first deficit in balance of payments (BoP)—which gauzes inflow and outflow of funds in the economy—in the last 11 months.

One of the biggest sources of income in the country is money sent home by Nepalis working abroad. Nepal’s remittance income went up by 7 percent to Rs55.6 billion in the one-month period between mid-July and mid-August, shows the latest Macroeconomic Report of the Nepal Rastra Bank (NRB). One of the reasons for hike in remittance income is the low base in the same period of the last fiscal year when remittance income had dropped by 2.5 percent.

However, chances of Nepal being able to sustain growth in remittance income are slim as the number of Nepalis leaving the country for employment purpose has been falling for quite some time. 

The number of Nepali workers who had accepted jobs abroad dropped 11.8 percent in the one-month period between mid-July and mid-August, as against 6.9 percent in the same period a year ago. As a result, country’s remittance income has been growing modestly.

While income is falling, expenses are growing due to surging imports. Nepal’s imports went up by 9.3 percent in the first month of the current fiscal year to Rs77.3 billion driven by hike in shipments of petroleum products, gold, clinker, hot rolled sheet in coil and aircraft spare parts, says the NRB report.

On the contrary, exports shrunk by 3.9 percent to Rs6.7 billion in the first month of the current fiscal year on the back of decline in demand for woollen carpet, polyester yarn, toothpaste and cardamom abroad.

A hike in imports and drop in exports caused the country’s merchandise trade deficit to widen by 10.7 percent to Rs70.6 billion in the one-month period. 

Also, the country’s services trade deficit stood at Rs2.4 billion in the period between mid-July and mid-August due to higher spending by Nepalis travelling abroad and hike in repatriation of income generated by foreign airline companies operating in Nepal.

This combination of widening trade deficit and moderate growth in remittance income prompted the current account to slip into a deficit of Rs5.4 billion in the first month of the current fiscal year.

Published: 23-09-2017 07:55

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