Wednesday, June 19, 2019

External sector continues to worsen as BoP slips to deficit of Rs 68 billion

The balance of payment (BoP) has again slipped into a deficit of Rs 68.2 billion in the 10th month of the current fiscal year worsening the external sector position more.
Nepal has been facing BoP deficit since the last fiscal year mainly due to the rise in current account deficit and weak financial inflows. The BoP deficit was Rs 18.93 billion in the same period of the last fiscal year 2017-18, according to the Nepal Rastra Bank’s monthly report, ‘Current Macroeconomic and Financial Situation of Nepal’, based on 10 months' data of 2018-19 published today.
Painting a bleak picture of the external sector, the central bank report reads that the current account registered a deficit of Rs 221.4 billion in 10 months. “Such deficit was Rs 192.05 billion in the same period of a fiscal year ago.”
Likewise, Nepal has received Rs 9.47 billion in foreign direct investment (FDI) in ten months of the current fiscal year, down from Rs 14.15 billion in the same period of the last fiscal year, the report further reads, adding, “While the FDI has dropped, the remittance inflow, a major source of foreign currency earnings, jumped by 19.6 per cent to Rs 725.3 billion.”
Though, the growth in remittance has been increasing, it is insufficient to cover the whooping trade deficit of the country as the central bank data reveals that the trade deficit widened 19.7 per cent to Rs 1.10 trillion in ten months of current fiscal year 2018-19.
The merchandise imports increased by 19.6 per cent to Rs 1.18 trillion in the first 10 months of the current fiscal year 2018-19 compared to an increase of 21.8 per cent in the same period of a fiscal year ago. But, Nepal exported goods worth only Rs 78.53 billion in the same period of the current fiscal year.
Likewise, the central bank data also revealed that the foreign exchange reserves (forex) also fell to $9.42 billion in mid-May from $10.08 billion in mid-July last year. “The foreign exchange reserve is depleting in recent months as the higher external deficit was partly financed by drawing down international reserves,” according to the report.

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