Trade deficit increasing at an alarming rate

Merchandise exports during the first eight months of current fiscal year declined by eight per cent to Rs 40.41 billion agsinst a growth of 16.2 per cent in the same period of the last fiscal year. On a monthly basis the merchandise exports, however grew by 8.9 per cent in February-March against a decline of 0.8 per cent in the same month last year.

"We are suffering from trade deficit of around Rs 24 billion due to uncertain political scenario," said Prashant Kumar Pokharel, president of Garment Association Nepal (GAN).

In terms of destination, exports to India dropped by 2.9 per cent against a growth of 3.7 per cent in the same period last year.

However, Pokharel opined that compared to other countries export to India is more flexible and easier. "Export with India has flexibility as Indian market has no more trade barriers and there is no time bound problems too," he said adding that the garment export to India is quite encouraging. "The only problem hampering export trade is political uncertainty, load shedding, and labour unrest."

Exports to other countries plummeted by 16 per cent against a growth of 42.9 per cent in the same period last year. The drop in the exports to India was contributed to the decrease in the exports of readymade garments, zinc sheet, plastic utensils, pulses and GI pipe among others. Likewise exports to other countries decreased considerably due mainly to the decline in the exports of pulses, woollen carpet, readymade garments, silverware and jewelleries and herbs among others.

The merchandise imports, on the other hand, grew by 43.9 per cent to Rs 253.74 billion compared with a growth of 26.3 per cent in the corresponding period of last year. On a monthly basis, the growing trend of the merchandise imports continued during the month of February-March. During the month, the merchandise imports soared by 57.6 per cent compared to a growth of 30.5 per cent in the same month of the previous year.

Imports from India grew by 38.5 per cent in the review period compared to a growth of 12.1 per cent in the corresponding period of the previous year. Likewise, imports from other countries grew at the same rate of the previous year that is by 50.9 per cent, the central bank said in its report.

The growth in the import of vehicles and spare parts, MS billet, MS wire and rods, hot rolled sheet in coil and electrical equipment among others from India and gold, telecommunication equipment and parts, other machinery and parts, steel rod and sheet and polythene granules among others from other countries contributed significantly in the rise of the total imports in the review period.

The country has a whopping trade deficit. "Total trade deficit expanded by 61.2 per cent to Rs 213.33 billion," said the Nepal Rastra Bank (NRB). Trade deficit had risen by 30.1 per cent compared with the same peiod last year. Trade deficit with India rose by 53.8 per cent compared with a growth of 15.6 per cent in the same period of last year. "Likewise trade deficit with other countries expended by 70.41 per cent compared with a growth of 53.4 per cent in the same period last year."

As a result of the slowdown in exports and accelerated import growth, the ratio of export to import dropped to 15.9 per cent from 24.9 per cent a year earlier.