Nepal’s trade deficit balloons

  • Fuel, agro imports reach Rs 483.75b, export earnings at Rs 29.28b
- Rajesh Khanal, Kathmandu

Nov 30, 2018-

Nepal’s trade deficit ballooned 40.3 percent in the first four months of the

fiscal year as rising imports of fuel and agricultural goods continue to dent

the economy.

According to the Trade and Export Promotion Centre (TEPC), Nepal’s trade deficit amounted to Rs454.47 billion as of mid-November, as exports of tariff-targeted goods have been nominal to balance the trade.

While the country’s import bills stood at a staggering Rs483.75 billion, up 38.1 percent, export earnings inched 10.6 percent up to Rs29.28 billion.

The ratio of import to export jumped 16.5:1. This means that Nepal’s export earning is Re1 against import expenses of Rs16.5.

Suyash Khanal, deputy executive director at the TEPC, said trade deficit has ballooned as a result of Nepal’s dependence on imported goods caused by the constraints in production and supply.

“Although exports of yarn, carpet, iron products, tea and textile are getting better, they are not enough to balance the ever-increasing trade deficit,” he said.

The biggest contributor to the imbalance is fuel. Nepal spent Rs69.07 billion to import petroleum products in the first four months of the fiscal year, up 68.2 percent compared to the same period last year.

Imports of iron and related products took the second spot. Nepal spent Rs58.2 billion to import iron and iron related products in the review period, up 62 percent. This was due to increased infrastructure and reconstruction works in the country, according to Khanal.

Nepal’s agricultural imports are also getting costlier. The TEPC said that the share of agro and petroleum imports is 30 percent of the total import bill.

Machinery and equipment, vehicles and spare parts, and electronic appliances were other items coming in in greater volumes in the past few years.

In terms of export, earnings from yarn exports increased 19 percent to Rs2.93 billion in the first four months of the fiscal year. Yarn’s share in total export stood at 13 percent. Exports of woollen carpet increased 17.9 percent to Rs2.76 billion.

Readymade garment export increased 12.1 percent to Rs2.40 billion and iron and related products increased 47 percent to Rs2.21 billion.

Khanal said Nepal needs a solid strategy to promote Nepali products in the international market to boost income in order to balance trade.

According to Khanal, there were some good signs in boosting tariff-targeted goods. For instance, many traders in woollen carpet and yarn are attaching priority to high-value products rather than focusing on the export volume.

As a result, Nepali woollen carpet fetches up to Rs18,000 per square metre in the international market these days, Khanal said.

“We must diversify our export basket, particularly handmade goods which are in high demanded in the overseas market, so that our export shipments increase rapidly.”

Posh Raj Pandey, executive chairman of the South Asia Watch on Trade, Economics and Environment, said there is the need for identifying the niche market to improve export earnings.

“Nepal needs to sign bilateral agreements to promote export of specific goods to the countries where their demand is growing,” he said.

Published: 30-11-2018 07:09

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