Nepal’s BoP in deficit, again

- Post Report, Kathmandu
The BoP deficit of Rs5.9 billion indicates Nepal needs to find more ways to earn foreign currency, otherwise foreign exchange reserve will come under pressure

Oct 30, 2017-Nepal recorded a balance of payments (BoP) deficit for the second consecutive month in the current fiscal year, as outflow of money from the economy surpassed inflows.

The outflow of money from Nepal’s economy surpassed inflows by Rs5.9 billion in 

the second months of the current fiscal year ended mid-September, as remittance income growth rate petered out while imports continued to increase, shows the latest Macroeconomic Report of the Nepal Rastra Bank (NRB), the central bank.

The BoP deficit of Rs5.9 billion indicates Nepal needs to find more ways to earn foreign currency, otherwise foreign exchange reserve will come under pressure.

One of the main sources of foreign currency for Nepal has been money sent by Nepalis working abroad. 

But Nepal’s remittance income went up by mere 0.7 percent to Rs115.6 billion in the two-month period between mid-July and mid-September. One of the reasons for negligible growth rate in remittance income is fall in number of Nepalis leaving the country for employment purpose. 

Number of people leaving for foreign job destinations has fallen for three consecutive years. Also, Qatar is now reeling under economic blockade and Saudi Arabia has decided to cut back on public spending due to low international oil prices. These are two of the largest recipients of Nepali labourers and problems facing these countries are expected to hit Nepal’s remittance earnings in the coming days.

Also, inflow of grants to Nepal, another source of foreign income, fell by 12.3 percent to Rs7.8 billion in the first two months of the current fiscal year.

While Nepal’s foreign income is taking a hit, the need for foreign currency in growing due to continuous hike in imports.

Nepal’s imports went up by 11 percent to Rs165.4 billion in the two-month period of the current fiscal year driven by hike in shipments of petroleum products, aircraft spare parts, gold, cement, and telecommunications equipment and parts, says the NRB report.

On the contrary, exports went up by a marginal 3 percent to Rs13.6 billion in the first two months of the current fiscal year.

A hike in imports and drop in exports caused the country’s merchandise trade deficit to widen by 11.8 percent to Rs151.8 billion in the two-month period.

Also, the country’s services trade deficit widened by 27.3 percent to Rs6.8 billion in the period between mid-July and mid-August due to 26.4 percent hike in repatriation of income generated by foreign airline companies operating in Nepal. 

The country’s services trade deficit also widened as Nepal generated earnings of Rs8.1 billion from foreign travellers while Nepalis travelling abroad spent Rs13.6 billion in the first two months of the current fiscal year.

This combination of widening trade deficit and moderate growth in remittance income prompted the current account to slip into a deficit of Rs17.9 billion in the first two months of the current fiscal year.

Published: 30-10-2017 08:35

User's Feedback

Click here for your comments

Comment via Facebook

Don't have facebook account? Use this form to comment