BoP deficit surges against central bank's projection

The Balance of Payment (BoP) deficit doesnot seem to come under control, though export-import gap has been reduced marginally.
The central bank has projected BoP to be at Rs 9 billion surplus in the Monetary Policy for the current fiscal year, however, during the seventh month, it recorded a deficit of Rs 12.57 billion against the first six months' deficit of Rs 4.43 billion.
Similarly, the country's import is still six times the export as Nepal exported Rs 37.91 billion worth merchandise and imported Rs Rs 218.59 billion.
"The current account also registered a deficit of Rs 6.78 billion compared to a deficit of Rs 31.67 billion in the same period last year, said the central bank's macroeconomic situation report of the seventh month (January15-February 15) published here today.
The decline in trade deficit along with improvement in service account and transfer income attributed to such a remarkable decline in the current account deficit compared to that of the previous year. "However, the overall BoP could not improve as expected on account of increased imbalances in financial account," the report added.
Merchandise exports increased by 6.6 per cent to Rs 37.91 billion against a decline of 10.4 per cent to Rs 35.57 billion in the same period last year. "Exports to India increased by 10.8 per cent in contrast to a drop of five per cent in the same period last year, whereas exports to other countries decreased by 0.8 per cent against a plunge of 18.5 per cent in the same period last year," according to the central bank.
Merchandise imports also declined by 0.1 per cent to Rs 218.59 billion against a growth of 40.1 per cent to Rs 218.79 billion in the same period last year. Imports from India grew by 24.7 per cent compared to a growth of 35.5 per cent in the same period last year, whereas imports from other countries declined by 29.6 per cent in contrast to a growth of 46 per cent in the same period last year creating a total trade deficit of Rs 180.68 billion.
The Freight on Board (FOB)-based merchandise trade deficit dropped marginally by 3.1 per cent to Rs 174.58 billion against the growth by 62 per cent in the same period last year, whereas service account deficit declined significantly by 30.4 per cent to Rs 5.99 billion. Service account deficit had increased by 9.4 per cent to Rs 8.60 billion in the same period last year.
"The net transfer account registered a growth of 13 per cent to Rs 170.6 billion compared to the same period of last year," it said, adding that under the transfers sub-group, grants increased by 26.2 per cent to Rs 16.06 billion while pension receipts rose marginally by 0.4 per cent to Rs 15.63 billion, workers' remittances increased by 11.7 per cent to Rs 138.9 billion compared to its growth of 13.6 per cent in the same period last year. "But on a monthly basis, the remittance inflows decreased by 6.5 per cent in January-February compared to the value of the previous month of this fiscal year."
However, under the financial account foreign direct investment (FDI) of Rs 4.84 billion was recorded against Rs 1.45 billion in the same period a year ago.

Inflation in double digit
KATHMANDU: The y-o-y inflation as measured by the consumer price index (2005-06=100) increased to 10.2 per cent in mid-February 2011 from 10.9 per cent in the same period of last year. The index of food and beverage group increased by 16.6 per cent and the index of non-food and services group increased by five per cent against an increase of 17.5 per cent and 5.6 per cent respectively in the asme period last year.