Soaring imports widen trade deficit

Due to soaring imports of consumer goods, the trade deficit has more than doubled in the first eight months of current fiscal year.

The total trade deficit has increased by 61.2 per cent amounting to Rs 213.33 billion as compared to the 30.1 per cent increase in the same month of last fiscal year, the Central Bank's macroeconomic report of first eight months of current fiscal year revealed. Trade deficit with India alone has risen by 50.3 per cent against 15.6 per cent rise in last year's corresponding period.

According to the Central Bank, the imports from India compose of consumer goods like vehicles and spare parts, MS billet, MS wire and rods, hot rolled sheet in coils and electrical equipments. "Similarly, Nepal has been importing gold, telecommunication equipment and parts, other machineries and parts, steel rods and sheet and polythene granules from other countries," the Nepal Rastra Bank (NRB) said.

Increasing consumerism has, though, increased the government revenue; which is not good for the national economy.

"It shows that the current trade deficit is increasing by high demand for foreign luxury goods like vehicles and electronics. Likewise, the relatively capital goods that are being imported are also used for the construction of houses and buildings, thus having minimum forward linkages," according to the economists.

Earlier Central Bank's governor Dr Yuva Raj Khatiwada has himself shown serious concern over the growing trend of consumerism. He has also hinted at curbing such imports as the remittances inflow and easy credits have fuelled the consumerism.

On one hand the commercial banks are facing liquidity crunch and on the other consumerism is increasing -- suggesting there is enough money in the market -- creating confusion to the economists.

Due to the dwindling imports and escalating exports, the ratio of export to import has dropped to 15.9 per cent from 24.9 per cent in the same period of last year.

The goods import has gone up by 43.9 per cent to Rs 253.74 billion while on the same period last year the product imports had increased by 26.3 per cent. Imports from India alone have grown by 38.5 per cent.

However, merchandise exports from Nepal have dropped by eight per cent against the growth of 16.2 per cent in the same period of last fiscal year, according to the Central Bank. The goods exports to India alone have decreased by 2.9 per cent compared with the growth of 3.7 per cent in the same period of last fiscal year.