Trade deficit increases, remittance inflow to match almost total budget outlay

The import-export gap has widened to six times.
According to the central bank's data, the country has imported merchandise worth Rs 254.95 billion in the seventh months of the current fiscal year, which is an increment by 16.9 per cent compared to the same period last fiscal year. "Similarly, the merchandise exports rose by 13.4 per cent to Rs 42.59 billion during mid-February compared to the same period of the fiscal year 2010-11," the central bank's macroeconomic situation for the seventh month said, adding that the total trade deficit went up by 17.6 per cent to Rs 212.36 billion.
"But trade deficit had declined by 1.4 per cent in the same period of the last fiscal year."
However, the increased remittance inflow and service accounts coupled with capital account surplus has pushed the Balance of Payment (BoP) to record surplus of Rs 75.09 billion compared to a deficit of Rs 13.04 billion in the same period of the last fiscal year, the central bank data revealed, though it has not elaborated swelled miscellaneous accounts.
The current account posted a surplus of Rs 34.67 billion in the mid-February compared to a deficit of Rs 6.67 billion in the same period last year due to rise in the growth of remittance inflow and improvement in service accounts. "In US dollar terms, the overall BoP recorded a surplus of $956.6 million against a deficit of $176.7 million in the same period of last year," it said, adding that the current account registered a surplus of $433.7 million compared to a deficit of $89.8 million in the same period last fiscal year.
Net service account witnessed a surplus of Rs 10.05 billion in contrast to a deficit of Rs 6 billion in the same period of last fiscal year. "Service receipts rose by 35.1 per cent while service expenditures declined by 15.1 per cent," it added. "Under services, tourism income rose by 28.4 per cent against a decline by 21.1 per cent in the same period of the last year. However, total travel expenses — under service account — saw decline by 27.2 per cent, including educational expenses by 24.9 per cent.
"But the net transfer account registered a growth of 30.2 per cent to Rs 222.12 billion compared to that of a year ago. "Under transfers, pension receipts declined by 1.2 per cent to Rs 15.44 billion, but remittance inflow increased by 35.5 per cent to Rs 188.19 billion compared to a growth of 11.7 per cent in the same period of the last fiscal year," it added.
If the current rate of remittance inflow continues, it is going to match almost the total budget outlay of Rs 384 billion. “The country will fall into remittance trap as it has only fuelled consumerism not helped increase domestic production," according to the economists.
In US dollar terms, remittance inflow increased by 25 per cent to $2.39 billion compared to a growth of 14.7 per cent in the same period last year.Likewise, under the financial account, foreign direct investment (FDI) of Rs 5.61 billion was recorded against Rs 4.84 billion in the same period a year fiscal year ago, the data revealed.

Price starts looking up
KATHMANDU: The year-on-year (y-o-y) inflation as measured by the consumer price index increased by seven percent in mid-February compared to 10.2 per cent in the same period of the last fiscal year. But the inflation has cooled down to 6.8 per cent in mid-January. The indices of food and beverage group and non-food and services group increased by 4.1 per cent and 9.6 per cent, respectively. These indices had increased by 16.6 per cent and five per cent respectively in the same period of last fiscal year. The rising price of petroleum prices coupled with transportation cost is likely to push the price further up. "Under the items of the food and beverage group, price index of milk products and egg sub-group increased by the highest rate, whereas under the non-food and services, the price index of transport increased by double to 18.5 per cent against an increase of 9.2 per cent in the same period of the previous year.”