India to import additional 251 MW of power from 12 Nepali hydropower projects

India’s designated authority for cross border trade has approved an additional 251 MW of power exports from 12 hydropower projects in Nepal.

"For the first time Nepal would be exporting power to Bihar through a medium term power sales agreement," according to a press note issued by the Indian Embassy in Kathmandu.

This takes the total allowed quantum from 690 MW from 16 projects to 941 MW from 28 projects, it reads, adding that even before this 251 MW approval, Nepal had already become a net exporter of electricity and net revenue generator in the last fiscal year selling Rs 16.93 billion worth of electricity. "In October 2021, India had approved 39 MW power exports from Nepal to India for the first time."

In less than 3 years, this figure has grown by more than 24 times.

Nepal first began its power exports by selling in the Day Ahead Market of the Indian Energy Exchange (IEX). Since then, India has also granted access to the Real Time Market (RTM).

Nepal Electricity Authority (NEA) has also entered into medium term power sales agreements with discoms in Haryana and Bihar, the press note adds. 

India has also opened the provision of counting hydropower imports from Nepal as a part of Hydropower Purchase Obligation (HPO) for buyers in India, which further incentivises buyers to purchase power from Nepal.

The Agreement for Long Term Power between India and Nepal envisages the sale of up to 10,000 MW power from Nepal to India in the next 10 years. This is the first year of the agreement and around 1000 MW exports have already been reached.

With the new development, Nepal is on track to become the leading hydropower exporter of the South Asia region. An agreement for sale of 40 MW power to Bangladesh has also been finalised and was planned to be signed on 28 July 2024 but got postponed due to recent political developments in Bangladesh.

प्रधानमन्त्रीको चीन भ्रमणः ल्हासामा सुन छ, कान मेरो बुच्चै

प्रधानमन्त्री पुष्पकमल दाहाल आफ्नो एक साता लामो चीन भ्रमणपछि शनिबार ल्हासाबाट काठमाडौं फर्कदै छन् । तर, जम्बो सरकारी टोली लिएर तामझामका साथ गत शनिबार न्यूयोर्कबाट सिधैं चीन पुगेका प्रधानमन्त्री दाहालको उत्तरी छिमेकीको भ्रमण भने ‘ल्हासामा सुन छ, कान मेरो बुच्चै’ भनेझैं भएको छ ।

व्यापारविद् पुरुषोत्तम ओझाकाअनुसार पहिला-पहिला भएका सम्झौताका विषयहरुमात्र दोहोरिने तर कार्यान्वयनमा नजाने कमजोरीका कारण नेपालको चीनसँगको व्यापार घाटा चुलिदो छ ।

व्यापार तथा निर्यात प्रवर्धन केन्द्रको तथ्यांकअनुसार गत आर्थिक वर्षमा चीनसँग नेपालको व्यापार घाटा २ खर्ब २० अर्ब ९५ करोड छ । नेपालले गत आर्थिक वर्ष २०७९/ ८० मा चीनतर्फ १ अर्ब ७६ करोडको मात्र वस्तु निर्यात गरेकोमा चीनबाट भने २ खर्ब २२ अर्ब ७१ करोडको वस्तु आयात गरेको थियो ।

२०७२ सालको भूकम्पपछि नै चीनतर्फका नाका नियमित सञ्चालन भएनन् । कहिले भूकम्प, कहिले कोरोना त कहिले अन्य कारणले सिन्धुपाल्चोकको तातोपानी तथा रसुवाको केरुङ नाका नियमित सञ्चालनमा नआउँदा चीनतर्फ नेपालको निर्यात खुम्चेको छ । ‘नेपालले चीनमा पनि विशेषतः तिब्बतमा निर्यात गर्ने हो’, ओझा भन्छन्, ‘तर चीनको नाकाबन्दीले तिब्बततिरको निर्यात घट्दा समग्रमा नै नेपालको निर्यात खुम्चेको हो ।’

केन्द्रको तथ्यांकअनुसार गत एक दशकमा नेपालले सबैभन्दा धेरै निर्यात आव २०७४/७५मा गरेको छ । आव २०७४/७५ मा २ अर्ब ४७ करोडको निर्यात गरेको नेपालले त्यसअघि वा त्यसपछि पनि गत आवसम्ममा २ अर्बको निर्यात गर्न हम्मे हम्मे परेको देखिन्छ ।

तर आयात भने विगत एक दशकमा नै १ खर्बभन्दा बढी मात्र नभएर कुनै आवमा साढे २ खर्ब पनि नाघेको छ । साढे २ खर्ब र जम्मा २ अर्बको बीचको व्यापारको खाडल मेट्न ६ जना मन्त्री सहितको प्रधानमन्त्री भ्रमणको जम्बो सरकारी टोलीले घुमघामबाट फुर्सद् पाए कि पाएनन् होला, आगामी दिनमा देखिने नै छ ।

व्यापारविद् ओझाकाअनुसार व्यापार अभिवृद्धिको पहिलो शर्त नै सहज सडक सञ्जाल हो । नेपालले चीनसँगको व्यापार बढाउन नाकासम्म पुग्ने अत्यावश्यक सडक निर्माण तथा स्तरोन्नतीमा जोड दिन सकेको छैन । हरेक पटक काठमाडौं वा बेइजिङबाट हुने उच्चस्तरीय भ्रमण अगाडि तथा पछाडि केहि दिन यी नाका खुल्छन् फेरि बन्द भै हाल्छन् ।

यसपटकको संयुक्त वक्तव्यमा पनि नेपाललाई भूपरिवेष्टित मुलुकबाट भू–जडित मुलुकमा परिणत गर्न चीनको पारवहन यातायात र राजमार्गको उपयोगसम्बन्धी यसअघि हस्ताक्षर गरिएका सहयोगसम्बन्धी दस्तावेजहरू कार्यान्वयनलाई निरन्तरता दिन दुबै पक्ष सहमत भएका छन् ।

संयुक्त वक्तव्यका अनुसार नेपालको आवश्यकतालाई मध्यनजर गर्दै अरनिको राजमार्ग मर्मतसम्भार आयोजनाको चौथो चरणको काम सुरू गर्न चिनियाँ पक्ष तयार भएको छ । त्यस्तै, स्याफ्रुबेसी–रसुवागढी राजमार्ग मर्मतको काम चाँडो सुरु गर्न पनि चिनियाँ पक्ष सहमत भएको छ ।

हरेकपटका उच्चस्तरीय भ्रमणमा उहि कुराहरु आउँछन् तर कार्यान्वयनको तहसम्म आइपुग्दैनन् । जस्तै, करिब एक दशकदेखि केरुङ नाकाबाट हुने व्यापार सहजीकरणको लागी स्याफ्रुबेशीको बाटो स्तरोन्नतीको चर्चा भइरहेको छ तर कार्यान्वयन भएको छैन । यसैगरि, तातोपानी नाका पुग्ने बाटोको दूरावस्थामा पनि परिवर्तन आएको छैन ।

लिजी–नेचुङ बन्दरगाह सञ्चालन र यात्रु सेवाका लागि झाङ्मु–खासा बन्दरगाह पुनः सञ्चालन गरिएकोमा काठमाडौं बेइजिङ दुबै पक्षले स्वागत गरेका छन् । लिजी–नेचुङ बन्दरगाहमा नेपाली पक्षको सुविधाका लागि यथाशीघ्र सुधार गर्न सहयोग गर्ने प्रतिवद्धता पनि चिनियाँ पक्षले जनाएको छ ।

पुलान र जिलोङ बन्दरगाहमा यात्रु र कार्गो सेवाको सहज तथा व्यवस्थित सञ्चालनका लागि दुबै पक्षले प्रशंसा गरेका छन् । वक्तब्यकाअनुसार परम्परागत रूपमा सञ्चालन भइरहेका चीन–नेपाल सीमा व्यापार नाकाहरू पुनः खोल्न पनि चीन सहमत भएको छ । चेन्ताङ–किमाथाङ्का, रिवु–ओलाङचुङ्गोला बन्दरगाहलाई छिट्टै खोल्नका लागि निरन्तर सम्पर्क गर्ने विषयमा दुबै पक्ष सहमत भएका छन् ।

यसपटक पनि दुई देशबीचको यातायात सञ्जाल बिस्तार गर्न टोखा–छहरे सुरूङमार्गको सम्भाव्यता अध्ययन चाडो टुङ्गाउन, काठमाडौंको दोस्रो चरणको चक्रपथ विस्तार आयोजनालाई तीव्र गतिमा अघि बढाउन दुबै देश सहमत भएका छन् ।

साथै, जिलोङ–केरुङ–काठमाडौं अन्तरदेशीय रेलवेको सम्भाव्यता अध्ययनको प्रगतिप्रति सन्तुष्टि जनाउदै चीन–नेपाल रेलवे सहयोगसम्बन्धी आठौं कार्यदलको बैठक यथाशक्य चाँडो गर्नेमा पनि नेपाल–चीनबीच सहमति भएको छ । चिनियाँ पक्षले नेपालमा रेलवेसग सम्बन्धित तालिम दिन पनि तयार भएको छ ।

विगतको अनुभवका आधारमा भन्ने हो भने, यो संयुक्त वक्तव्यको मसी सुकिसक्दा पनि कार्यान्वयनमा भने न काठमाडौं न बेइजिङ, दुबैले त्यति वास्ता गर्ने छैनन् । र अर्को उच्चस्तरीय भ्रमणमा यी बुँदाहरु फेरि पनि दोहोरिने छन् ।

तर, बाटो सहज हुँदैमा मात्र नेपालको निर्यात बढ्ने होइन, झनै आयात बढ्न पनि सक्छ, व्यापारघाटाको खाडल झन् बढ्न सक्छ । त्यसैले निर्यात बढाउन चिनियाँ बजारलक्षित नेपाली वस्तुको उत्पादनमा पनि जोड दिनु आवश्यक छ ।

चीनले नेपालसहितका अतिकम विकसित मुलुकहरूबाट निर्यात हुने ९८ वस्तुहरूमा भन्सार शुल्क शून्य सुबिधा दिएको छ । त्यसबाहेक पनि चीनले नेपालका करिब ८ हजार वस्तुको निर्यातमा भन्सार शुल्क मिनाहा गरेको छ । तर, त्यसको फाइदा नेपालले उठाउन सकेको छैन । किनकि नेपालमा ती भन्सार शुल्क मिनाहामा सूचीकृत वस्तुहरुको गुणस्तरीय उत्पादन तथा चिनियाँ बजारको मागअनुरुपको परिमाणमा निर्यात गर्न सक्ने क्षमता छैन ।

चिनियाँ बजारको मागअनुरुपको परिमाण तथा गुणस्तरमा नेपाली वस्तु उत्पादकहरुको चासो तथा रुची नभएको उद्योग मन्त्रालयका एक अधिकारीले बताए । उनका अनुसार नेपाली वस्तु निर्यातमा भएका क्वारन्टाइनमा समस्या तथा गैरभन्सार अवरोध त छँदैछ, त्यसबाहेक पनि नेपालका आफनै कमजोरी पनि चीनतर्फ नेपाली निर्यात नबढ्नुको कारण हो ।

यसका साथै, चीनसँग निरन्तर व्यापार नबढ्नुको कारण भने नेपाली तथा चिनियाँ मुद्राबीचको परिवर्त्य दर पनि एउटा प्रमुख कारण रहेको मन्त्रालयको अध्ययन रहेको उनको भनाइ छ ।

त्यसैले चीन भ्रमणमा रहेका प्रधानमन्त्री दाहाल र उनका चिनियाँ समकक्षी ली छ्याङबीच प्रतिनिधिमण्डलस्तरीय वार्तापछि जारी संयुक्त वक्तव्यमा व्यापार प्रवर्द्धन तथा सहजीकरण, कूटनीतिक सम्बन्ध विस्तार तथा क्षेत्रीय सहयोगका लागि सहकार्य गर्ने विषयमा सहमति भएको भनिए पनि कुटनीतिकरुपमा यस्ता वक्तव्यको अर्थ त होला तर काठमाडौं र बेइजिङबीच देखिने गरि आर्थिक सम्बन्ध कसिलो हुनुको साटो ब्यावहारिकरुपमा झन् खुकुलो हुँदै गएको पाइन्छ ।

राजनीति हाबी, आर्थिक कूटनीति फेल

व्यापारमात्र नभएर नेपालमा चीनको लगानी पनि उल्लेख्य आएको देखिन्न । नेपाल राष्ट्र बैंकको आर्थिक अनुसन्धान विभागले गरेको अनुसन्धान प्रतिवेदनका अनुसार २०७९ असार मसान्तसम्ममा नेपालमा ५७ देशको प्रत्यक्ष वैदेशिक लगानी रहेकोमा चीन दोस्रो स्थानमा छ । तर, पहिलो हुने भारत र दोस्रो हुने चीनबीच लगानी रकममा दोब्बरभन्दा बढी फरक छ ।

प्रतिवेदनका अनुसार भारतबाट सबैभन्दा बढी ८८ अर्ब ५९ करोड वैदेशिक लगानी आउँदा चीनबाट जम्मा ३३ अर्ब ४५ करोडमात्र लगानी आएको छ ।

कुनै समय नेपालमा भित्रने वैदेशिक लगानीमा पहिलो स्थानमा रहेको चीन पछिल्ला वर्षहरुमा नेपालमा लगानी बढाउन चासो नदिनु नेपालप्रति चीनको विश्वासमा आएको कमी तथा नेपालको कमजोर आर्थिक कूटनीतिको परिणाम हो ।

जसका कारण पछिल्ला वर्षहरुमा उत्तरी छिमेकि नेपालको विकासमा भन्दा पनि राजनीतिमा बडि सकृय रहेको आरोप लाग्न थालेको छ । विश्वको एक नम्बर अर्थतन्त्र बन्ने लक्ष्यका साथ अगाडि बढेको छिमेकिबाट नेपालले कुनै आर्थिक फाइदा लिन नसक्नुमा नेपालका राजनीतिक दल अनि नीति निर्माताको पनि असफलता हो । (https://clickmandu.com/2023/09/268812.html)

Nepal resumes exports through Rasuwagadhi border after 3 years

The northern border that has remained almost closed after 2015, has opened from today as Nepal exported some eight containers of goods to China through the Rasuwagadhi border customs.

Export from Nepal has been completely stalled for about 36 months citing the Covid-19 pandemic, whereas trade has been irregular though Tatopani customs since 2015 devastating earthquake. 

Chief Customs Officer at Rasuwa Customs Office Narayan Prasad Bhandari confirmed the export of goods worth around Rs 5.07 million today through the Rasuwagadhi customs today. 

“Exports that had stalled due to the Covid pandemic have started from today,” he said, adding that bamboo stools, handicrafts and copper ornamental items were exported to China today. "The export of goods and the movement of people through Rasuwagadhi customs was closed from January 29, 2020."

According to the customs report, goods worth Rs 763 million were exported to China in the fiscal year 2019-20. However, a limited import was allowed and about 14 Chinese containers were imported from the border daily, though irregularly. 

Nepali traders have been blaming China for imposing an 'undeclared blockade' on Nepal by halting the free movement of goods to and from the landlocked country via both Tatopani-Khasa and Rasuwagadhi-Kerung customs points. Nepali traders have been voicing their concerns time and again but the apathy from the Chinese side pushed them into huge losses. 

Ready-made clothes, apples, shoes, bags, motor batteries, plastic goods are imported from China through the border, whereas pashmina, carpets, bamboo stools, broom grass, refined flour, vegetable ghee, noodles, pasta, biscuits, juice, jam, beaten rice, lapsi candy, chocolate, sugar and chewing gum are exported to China.

According to a press note issued by the Chinese Embassy in Kathmandu, “The opening of two-way trade of Kerung port will promote Nepal’s exports to China, reduce the trade deficit in Nepal, solve the trade imbalance, and further improve the connectivity between China and Nepal.”

Nepal and China trade through Tatopani and Rasuwagadhi border points. But the Tatopani border point is still closed for two-way trade. 

The resumption of bilateral trade could be a coincidence with the formation of a new government, that is said to be orchestrated by the northern neighbour, a day ago in Nepal.

There will be an official ceremony to celebrate the resumption of two-way trade tomorrow. The ceremony will be attended by delegates of the Department of Commerce of Xizang Autonomous Region, the Lhasa Customs, the General Station of Immigration Inspection of Xizang Autonomous Region, the Health Commission of Xizang Autonomous Region, and other relevant departments.

The Chinese Embassy in Kathmandu has released pictures of export from Nepal.

NEA stops exporting electricity to India

Nepal has stopped exporting electricity to India due to dry season.

Nepal Electricity Authority (NEA) has stopped export of electricity as it has stopped producing excess electricity due to the start of the dry season, confirmed NEA spokesperson Suresh Bahadur Bhattarai. 

“NEA is likely to stop exporting electricity until the 2023 monsoon” he said, adding that the NEA had been exporting electricity to India since May 15 through the Indian Energy Exchange Ltd. “NEA has sold electricity worth Rs 11 billion during this period.”

As the flow of water in the rivers is decreasing due to dry season, the production of electricity from hydropower stations – based on river flow – has also decreased forcing the state electricity monopoly to stop export. 

The NEA has, currently, received permission to export up to 409 megawatts (MW) of electricity produced by eight hydropower stations of Nepal to India.

Due to electricity exports to India Nepal has earned Rs 10.38 billion during the first five-and-a-half months. Nepal started exporting power to India this June. According to NEA, some 1.26 billion units of surplus electricity were exported to India, earning Rs 10.389 billion in revenue by mid-November. 

Global economy will slow down in 2022

The growth in global real GDP will drop from 5.7 per cent in 2021 to 3.3 per cent in 2022, according to a report.

The report released by United Nations Conference on Trade and Development (UNCTAD) released today also shows that trade in both goods and services will slow down. “Growth in merchandise exports is expected to decline by half, from the strong 26.5 per cent increase recorded in 2021 to 13.8 per cent this year. “For services exports, which include transport and travel, the slowdown will be less pronounced – from 17.2 per cent to 14.6 per cent,” the Handbook of Statistics 2022 – the global reference for trade and development trends published each year – reads. 

Despite the strong growth in trade in services in 2021, the value of exports ($6.1 trillion) remained below their pre-Covid-19 levels ($6.3 trillion in 2019), it reads, adding that prices soared, especially for fuels, driving inflation. “The prices of primary commodities, such as food and energy, soared by 55 per cent in 2021.” Fuels accounted for 22 percentage points of the growth.

The upward trend continued this year, with prices hitting in August 2022 their highest levels in nearly three decades. Inflation also soared, especially in Africa, where consumer prices jumped by 22.7 per cent in 2021. Meanwhile, households in Latin America and the Caribbean saw prices rise by 15 per cent.

Likewise, trade surplus of developing economies also increased. “The trade surplus of developing economies grew, especially in Africa,” it reads, adding that the increase was mirrored by a widening trade deficit for developed economies. “Developing countries traded more with developed nations ($8 trillion) than among themselves ($5.4 trillion). Trade between developed nations was slightly higher at $8.5 trillion.”

The report also states that export diversification remains a challenge for developing countries. But the products that countries depended on varied across regions. Around three quarters of Africa’s exports consisted of primary goods (77 per cent), while developing economies in Asia and Oceania exported manufactured goods in nearly equal proportions (76 per cent).

Least developed countries fall short of growth targets, the report reads further. “The world's 46 least developed countries (LDCs) reported real GDP growth of only 2 per cent in 2021, less than half the global average of 5.7 per cent.”

GDP growth in LDCs fell far short of the 7 per cent annual per-capita growth target enshrined in the UN’s 2030 Agenda for Sustainable Development.

Likewise, population hits 8 billion while dependency rates increase. “The global population hit 8 billion in November 2022, even though growth has been declining since the late 1980s. In 2021, it stood at 0.87 per cent,” it adds. “Global dependency rates also increased among the population. On average, there are 54 dependent children or older people for every 100 workers. Africa has the highest dependency ratio at 72 per cent.”

The handbook provides in one report the key data and indicators on how the global economy has evolved – for regions, countries and sectors. It also provides projections based on real-time estimates – called nowcasts – to help governments anticipate ongoing shifts and improve policymaking.

“Timely and quality data are critical now more than ever as concurrent global crises test our resilience,” UNCTAD secretary-general Rebeca Grynspan said. “These statistics will help countries take evidence-based policy measures to cushion the blow of the global crisis on the most vulnerable.”

External sector improves after 14 months

After 14 months, money coming into the country has recorded a surplus than the money going out of the country, which has improved the external sector.

According to the ‘Current Macroeconomic and Financial Situation of Nepal’, published today by the central bank, the Balance of Payment (BoP) recorded a surplus of Rs 12.43 billion in the first three months of the current fiscal year as the remittance and foreign direct investment (FDI) inflow increased over the period.

For the last 14 months, the country was facing BoP deficit. As of mid-October last year, the country was in BoP deficit of Rs 87.71 billion. In the US Dollar terms, the BoP remained at a surplus of $91.8 million in the first quarter compared to a deficit of 741.2 million in the first quarter of last year.

The BoP records current account, capital account and financial account of a country’s financial transactions with the rest of the world. It is one of the key indicators to show a country’s net balance in terms of foreign currency reserves.

With the BoP surplus, gross foreign exchange reserves also increased by 2.5 per cent to Rs 1.246 trillion in mid-October from Rs 1.215 trillion in mid-July. According to the central bank, the foreign currency reserve is sufficient for merchandise and services imports of 8.3 months.

In the first three months of the current fiscal year, remittance inflows also increased by 16.8 per cent to post Rs 281.05 billion,, adding Rs 94 billion in a month, due to impressive migrant workers outflow in the recent months of the current fiscal year, and also due to government’s inability to create jobs in the country.

Likewise, imports decreased by 16.2 per cent to Rs 401 billion against an increase of 63.7 per cent a year ago due to government and central bank’s import restrictions, according to the central bank data.

According to the central bank, capital transfer also increased by 34.8 per cent to Rs 2.59 billion and net FDI inflow recorded Rs 79.6 million. In the first quarter of the last fiscal year, capital transfer and net FDI inflow amounted to Rs 1.92 billion and Rs 5.07 billion, respectively.

Nepal’s graduation from LDC will not impact development cooperation hugely

Nepal’s graduation from Least Development Country (LDC) status will impact development cooperation modestly only, according to a research report “Nepal’s graduation from the LDC category: Implications for international trade and development cooperation”.

The impact on development cooperation will be modest as most of the development partners – multilateral and bilateral – have indicated that LDC status is not the main criterion for aid flows, concludes the study conducted by South Asia Watch on Trade, Economics and Environment (SAWTEE) to investigate the implications of graduation for Nepal in the areas of market access, development cooperation, and trade-related policy space. As, the motive of the study was also to offer recommendations in these areas for the government to consider when formulating the transition strategy, the study highlights that Nepal could lose access to specific instruments and funds dedicated exclusively to LDCs, particularly with regard to climate change-related funds, after a transition period.

Some development partners may switch from grants to concessional loans or increase interest rates for concessional loans, it reads, recommending that the government should explore new forms of finance, including blended finance, public-private partnerships, private philanthropies and co-financing, among others, and work with development partners for new forms of support mechanisms such as dedicated funds for graduated countries, disaster insurance, and technology transfer mechanisms.

Nepal is scheduled to graduate from the LDC category in 2026. While this is an important milestone in Nepal’s development journey and a testament to its achievements in socio-economic progress, Nepal’s exit from the category will result in the loss of a variety of international support measures that the international community has provided to help Nepal overcome development-related challenges. The government is also in the process of formulating a transition strategy to ensure smooth, sustainable, and irreversible graduation.

The study has also suggested that graduation from LDC status will have trade implications in terms of higher tariffs and more stringent rules of origin provisions in preference-granting countries. The projected loss in total exports emanating from the increase in tariffs is moderate, it reads, adding, however, the loss emanating from more stringent rules of origin, while uncertain, could be significant, especially in the garments sector.

The study has also recommended the government to aspire to become a party to the more generous preferential schemes such as the EU’s Generalised System of Preferences Plus (GSP+) and the UK’s GSP Enhanced Framework, while studying the implications of acceding to the additional conventions that Nepal needs to ratify to qualify for these schemes. “Nepal should also initiate dialogue with other trading partners seeking an extension to LDC-specific concessions and preferences for another 3-5 years following graduation,” it reads, adding that Nepal should lobby for lenient rules of origin (RoOs) for LDCs for a period sufficient for the private sector to adjust to the new RoOs. “To realise the untapped export potential of Nepal, the government should prepare trade strategies, in consultation with the private sector, to strengthen the overall competitiveness of the economy, upgrade exporter’s capabilities, diversify export products and markets, simplify and streamline processes to attract more foreign direct investment and encourage enterprises to participate in regional, global value chains.”

Likewise, the graduation could result in a loss of policy space, either through the loss of current flexibilities and special treatment, such as in the area of intellectual property rights, or through greater scrutiny of certain practices, such as the subsidy regime, the study reads, adding that the policy space to promote infant industries and exports, and pursue public health objectives, could be squeezed.

Government removes quota on import of betel nuts, peas, peppercorns and dates

Though, it has been restricting the imports to ease the pressure on the foreign currency (forex) reserve, the government today removed the quantitative restriction on import of betel nuts, peas, peppercorns and dates.

Publishing a notice in the Nepal Gazette today, the government has removed the quota restriction for the factories, if these goods are to be used as raw materials by the factories concerned. According to the provision, the Department of Commerce, Supplies and Consumer Protection will be providing import licenses to the firms on the recommendation of the Department of Industry (DoI).

The depleting forex reserve has recently forced the government to take strong measure to restrict the import of various luxury items including automobiles and gold. However, the government has turned flexible to the import of high-priced goods, when the country is reeling under a critical forex shortage.

The domestic demand has been fulfilled by the domestic production, the farmers claimed, adding that the government move to ease the restriction has surprised them. They also suspected ‘red-tape’ in removing the quantitative restriction of the  betel nuts, peas, peppercorns and dates.

“Taking advantage of the provision of the South Asian Free Trade Area (SAFTA) agreement, many Nepali traders are found importing the goods from third countries to resell them in the Indian market,” the farmers said. As the SAFTA has a zero tariff provision on goods exported from underdeveloped countries like Nepal, Nepali traders have been importing these goods from third countries paying minimum tariffs and then ‘exporting’ as the finished product to India with zero tariffs. The government had, thus, put the quantitative restriction on import of these goods.

Nepal imports Rs 5 billion rice in a month

 Despite claiming to be an agricultural country, Nepal has imported Rs 5 billion worth rice only in a month, revealed the data of Department of Customs (DoC).

According to the data of Department of Customs, the country imported Rs 18.20 billion worth rice only in five months of the current fiscal year 2020-21. “In the four months, the country had imported Rs 13 billion worth rice.”

Though, the government claims to have been encouraging the agriculture production in the country with various programmes, Nepal has imported Rs 33.03 billion worth food items – in the five months of the current fiscal year – including rice, as the domestic production fell short to meet the growing demand for food in the country. “In the four months, the country had imported Rs 25 billion worth food items.”

The country neither has manpower – due to flooding of youth to the foreign employment – nor has it adopted to the mechanisation in the agriculture to boost the production and productivity, apart from comparatively expensive production cost compared to India. “Nepal has imported rice from India,” according to the department.

The cheap rice from India is making Nepali rice face hard times to get market, and lack of government policy push has made it even worse making Nepal the import economy largely also due to growing dependence on remittance that has fuelled the imports. 

Trade deficit narrows, though export receipt can pay for only 10 per cent of import bill

 Though, the trade deficit in the first five months of the current fiscal year declined by 10.91 per cent compared to the same period last year, the export receipt is enough to pay for only 10 per cent of import bill. “The country's export increased by 5.12 per cent to Rs 50.05 billion, whereas the imports declined by 9.59 per cent to Rs 525.49 billion,” according to the government data.

According to the Department of Customs (DoC), Nepal’s trade deficit came down to Rs 475.44 billion from Rs 533.64 billion – though not remarkable, and also conditional not due to government policy push – during mid-July and mid-December as a result of a fall in import and a rise in export. The fall in imports has provided some cushion to the country’s foreign currency reserve that is being spent to imports merchandise.

Despite the increase in export earnings, the government is going to miss its target of export earnings to more than Rs 100 billion by 2020.

Nepal’s 70.65 per cent of total international trade worth Rs 575.44 billion is with India, the data revealed, adding that in terms of import too, some 65.78 per cent of Nepal’s total import is with the southern neighbour. “Nepal has a trade deficit with 112 of its 136 trading partner countries across the globe, and has a favourable trade balance with the remaining 24 countries in the five months of the current fiscal year 2020-21.”

Palm oil tops the export basket

Export of high-value products – identified by Nepal Trade Integration Strategy (NTIS) – dropped by 6 per cent year-on-year to Rs14.8 billion in the first five months of the current fiscal year, though government has prepared the NTIS list with much hope and expectation.
The government – with the help of development partners – has prepared NTIS 2016, the third-generation trade integration strategy, with nine high-value products and three services to bridge the ballooning trade deficit. However, a non-NTIS product – palm oil – has topped the list of export basket failing the government’s home work of years. 
According to the Trade and Export Promotion Centre (TEPC), palm oil exports contributes to 25 per cent of the total exports as it rose to Rs 11.5 billion – in the first five months – also nearly eight times the amount shipped in the same period last year.
Tariff exemptions on Nepali exports to India under the South Asian Free Trade Area (SAFTA) Agreement have domestic traders an incredible advantage. As countries outside of South Asia are slapped with tariffs of 54 per cent on palm oil and 45 per cent on soybean oil, Nepali traders took the advantage of tariff difference to push exports of palm oil and soybean oil to India, according to the World Bank Nepal Development Update released in December. “Nepal capitalised on the arbitrage opportunity and significantly increased exports of the two products,” it reads, adding that it might, however, not be a sustainable option in the long run. “The export performance of products under the NTIS including all fabrics, textile, yarn and rope, cardamom, carpet, footwear, ginger, leather, medicinal and aromatic plants, pashmina, and tea was dismal in the last fiscal year, contracting by 4.8 per cent year-on-year compared with an expansion of 17.9 per cent year-on-year in the fiscal year 2017-18.”
The high-value products – under NTIS – also dropped due to a fall in production, eroding competitiveness of Nepali products because of lack of inspection and quality checks. Though, large cardamom exports soared by 50.7 per cent to Rs 1.86 billion, shipments of all other products including ginger, tea, medicinal and aromatic plants, fabrics, yarn, textiles, rope, leather, footwear, pashmina and carpets were down, compared to the same period last fiscal year.
Exports of pashmina – one of the ‘pride products’ – declined by 17 per cent to Rs 1 billion due to a lack of effective branding and promotional activities in the international market.
The TEPC data reveals that ginger exports slipped by 14.65 per cent to Rs 236 million, whereas tea plunged by 24.88 per cent to Rs 1.45 billion despite 5 per cent cash incentive on exports of processed tea, large cardamom, ginger, leather goods, processed medicinal herbs and oil products with value addition of at least 50 per cent.
According to the World Bank, Nepal’s export value to GDP ratio reached 1.1 per cent, lower than the 4 per cent target set for 2020, due to a lack of raw materials, skilled manpower and required infrastructure like processing centres, lab testing and storage facilities.
The sharp rise in exports of palm oil, which has no ‘value addition’, could largely impact Nepali farmers as it could offset the demand for Nepali products but traders keep exploiting easy loopholes on foreign products that yield them higher profits, and the incumbent government is also encouraging them to show off the increased exports during its tenure.
Time and again, traders have been taking advantage of the duty difference but it has not been sustainable business as there have been instances of betel-nut, vegetable ghee, and many more. 

Trade deficit down by 8.9 per cent

Trade deficit fell by 8.9 per cent year-on-year to Rs 414 billion in the first four months of the current fiscal year 2019-20 due to a sharp drop in imports of petroleum products, iron and steel, aircraft and aircraft parts and vehicles.
According to Department of Customs (DoC), imports dropped by 6.92 per cent to Rs 450.29 billion, whereas exports swelled by 23.90 per cent year-on-year to Rs 36.27 billion – totaling the foreign trade to Rs 486.57 billion – between mid-July and mid-November.
The drop in imports – the fourth consecutive month in the current fiscal year – has also resulted in a reduction in the trade deficit though it has hit the revenue mobilisation target of the government. However, there is no cause for celebration as the increase in exports of a single product – palm oil – is not the domestic product as Nepal does not produce palm oil. Palm oil is imported from third country and then re-exported to India as traders are cashing in on the tariff difference between Nepal and India. The data shows that palm oil accounts for nearly one-fourth of the total export.
Imports of iron and steel – the key construction materials – dropped sharply by 33 per cent to Rs 52.65 billion in the first four months, though the drop in the import of iron and steel does not augur well as it shows that construction activities in the country are slowing down.
Likewise, imports of fuel and bitumen also fell by more than 15 per cent as the country imported fuel and bitumen worth Rs 65.21 billion in the first four months of the current fiscal year. Similarly, imports of aircraft and parts also reduced pulling the imports figure down. According to customs data, imports of aircraft and parts dropped by 39 per cent to Rs 10.68 billion, whereas automobile imports dropped by more than 6 per cent to Rs 34.74 billion due to the government’s unfriendly policy towards auto mobile sector.
The central bank has also fixed the down payment for vehicle loans at 50 per cent of the value discouraging the auto imports. In the past, the down payment on a car was as low as 10 per cent.

BoP records Rs 14.43 billion surplus

The balance of payments (BoP) remained at a surplus of Rs 14.43 billion in the first three months of the current fiscal year despite a drop in remittance.
According to the Macroeconomic Status – of mid-July to mid-October – report published by the central bank today, the BoP remained in surplus in the first quarter of the current fiscal year compared to a deficit of Rs 35.42 billion in the same period of the last fiscal year.
The central bank report also revealed that remittance inflows decreased by 4.9 per cent to Rs 230.24 billion, which could have hit the BoP situation but due to surging exports by 14.4 per cent to Rs 27.17 billion the BoP remained surplus.
Though, the export witnessed an increament, the sustainability is under doubt as the largets export product palm oil is not the domestic product and is reexported by importing from Malaysia and Indonesia.
“Mainly exports of palm oil, cardamom, medicine (ayurvedic), jute goods, yarn (polyester and others), among others, increased while exports of zinc sheet, juice, readymade garments, woollen carpets, wires, among others, decreased in the review period,” the report reads, adding that the merchandise imports slumped by 10.3 per cent to Rs 334.95 billion – in first three months of current fiscal year – against a rise of 43.6 per cent in the same period of the last fiscal year. “However, the current account registered a deficit of Rs 27.18 billion in the review period compared to Rs 81.74 billion in the same period of the last fiscal year.”
But the trade deficit fell by 12 per cent year-on-year to Rs 307.78 billion in the first quarter largely due to a sharp drop in the import of electrical equipment, readymade garments, petroleum products and gold.
The export-import ratio increased to 8.1 per cent in the review period from 6.4 per cent in the corresponding period of the last fiscal year, the report adds.
Imports from China increased by 11.6 per cent while imports from India and other countries decreased by 12.2 per cent and 19.1 per cent, respectively, the report reads, adding that the share of electrical equipment in total imports fell to 1.9 per cent from 4.5 per cent. “Nepal imported electrical equipment worth Rs 16.81 billion in the first three months of the last fiscal year but in the first three months of the current fiscal year, electrical equipment imports dropped by 61.90 per cent to Rs 6.40 billion.”
Likewise, readymade garment imports dropped by half to Rs 10 billion from Rs 19.86 billion of the last fiscal year’s first quarter. “Gold imports plunged by 99 per cent to Rs 597 million due to increasing price of the precious yellow metal lately.”
According to the report, fruit imports dropped to Rs 2.99 billion in the first three months of the current fiscal year compared to Rs 3.76 billion in the same period last fiscal year. “Vegetable imports also dropped to Rs 3.82 billion from Rs 4.40 billion.”
Exports to India increased 35.8 percent while exports to China and other countries decreased 19.9 and 11.7 percent respectively. “Large cardamom export jumped to Rs 1.25 billion in the first three months of this fiscal year from Rs 767 million in same period last fiscal year.”
Nepal imported crude palm oil worth Rs 5.05 billion, which is not produced in Nepal and exported processed oil valued at Rs 5.75 billion.

Government fixes support price of coffee

The National Tea and Coffee Development Board (NTCDB) – on the occasion of the 15th National Coffee Day – today fixed the support price of coffee for the current fiscal year.
Celebrating the National Coffee Day in Gulmi today, NTCDB has set the support price for six varieties of coffee, according to the board that has fixed the price of fresh cherry ‘A’ grade coffee (organic certified) at Rs 85 per kg while ‘B’ grade coffee (organic uncertified) Rs 75 per kg, Rs 5 less than last year. “Last year, price of ‘A’ grade fresh cherry and ‘B’ grade fresh cherry is set at Rs 85 per kg and Rs 80 per kg, respectively.”
Likewise, the board has set Rs 425 per kg for parchment ‘A’ grade coffee and Rs 375 per kg for parchment ‘B’ grade coffee. Last year, the price was settled at Rs 425 per kg and Rs 410 per kg for ‘A’ grade parchment coffee and ‘B’ grade parchment coffee, respectively.
Likewise, the board has set Rs 140 per kg for dry cherry ‘A’ grade coffee and Rs 90 per kg for dry cherry ‘B’ grade coffee. In previous year price of ‘A’ grade and ‘B’ grade dry cherry was set at Rs 140 per kg and Rs 100 per kg, respectively.
The board fixes the floor price annually to ensure that farmers get a reasonable rate for their crop and are not exploited by middlemen in the supply chain. The coffee farmers, however, say that they have no complaints about the reduction in the minimum support price for this year, but they want the government to formulate policy to increase production to benefit from rising market demand.
According to the board, the price of coffee has been fixed based on the investment cost of coffee farming. Currently, coffee farming is done on around 61,228 hectares of land. However, a total of 1.1 million hectares of land across the country is suitable for coffee farming, according to the board. Some districts like Gulmi, Palpa, Argakhanchi, Lalitpur, Tanahu, Kavre, Sindhupalchowk, Lamjung, Kaski, Gorkha, Syangja, Parbat and Baglung are successfully growing and producing coffee beans and production has been increasing gradually.
According to the board, Nepal exported a total of 530 tonnes of coffee in the last fiscal year while in the fiscal year 2017-18 a total of 513 tonnes of coffee had been exported to different countries. While the country had exported coffee worth Rs 996 million, coffee worth Rs 980 million had been imported in the last fiscal year. Nepal is exporting coffee beans mostly to Japan, America and European countries.
Due to surge in demand, the earnings from coffee export increased by 6.28 per cent compared to a a rise of 49 per cent of coffee imports in the fiscal year 2018-19.
Nepal exported Rs 99.61 million worth of coffee in the last fiscal year – up from Rs 93.72 million in a fiscal year ago in 2017-18, according to the board. “During the period, Nepal imported coffee worth Rs 65.89 million and Rs 98.01 million, respectively.”
Nepal imported eight-folds to 1,262 tonnes in the review period, whereas exports remained fairly stable at 84 tonnes, which means Nepali coffee is expensive than imported coffee. Nepal coffee is recognised as one of the high value agri products in the international market. Nepali product costs up to $10 per kg abroad.
Coffee is grown in 42 districts of Nepal that produces and exports Arabica coffee, which is typically grown at an altitude of 1,000 to 2,000 meters. According to the board, Nepal produced 530 tonnes of coffee in the fiscal year 2018-19, compared to 513 tonnes in the fiscal year 2017-18.
According to Trade and Private Sector Development Project – a European Union-funded programme –1.19 million hectares of land in Nepal is suitable for coffee farming. “Of them, some 61,228 hectares have the potential to give high yields,” it revealed, adding that Nepal is utilising only 4 per cent of the acreage potential.

Trade deficit narrows by 12 per cent in first quarter

Trade deficit shrinks to Rs 307 billion by 12.02 per cent in the first quarter of the current fiscal year compared to the same period of the last fiscal year, due to government move to tighten imports of luxury goods including automobiles. This is the third straight month imports have fallen and export earnings have swelled.
According to the Department of Customs (DoC), Nepal spent Rs 334.94 billion in imports – between mid-July and mid-October – which is down by 10.34 per cent compared to the imports of the same period in the last fiscal year. “Likewise, the export earnings soared by 14.41 per cent to Rs 27.16 billion during the period.”
Based on the new import and export data, Nepal spends Rs 12.3 for import for every export worth Re 1. “The import to export ratio has also declined to 12.3:1, compared to the ratio was 15.7:1 during the same period last year,” the department data revealed, adding that
Though, the government boosted the decline in imports to an outcome of the policy reforms to restrict import of luxury goods including the automobiles and boost exports, the slowdown in imports has bleed the government coffer as the government failed to meet the revenue mobilisation target. The government has doubled the excise duty on imported automobiles through the budget for the current fiscal year 2018-19, whereas the central bank has jacked up the down payment on auto loans to 50 per cent of the value of the vehicle tightening the auto imports.
Nepal exported goods worth Rs 17.87 billion to India – almost 66 per cent of the total export earnings in the first quarter – due to increased exports of palm oil. Similarly, Nepal imported Rs 207.41 billion –which is 62 per cent of the total imports during the period – worth goods from India. “The trade deficit with India has also dropped to Rs 189.54 billion from Rs 222.95 billion in the first quarter of the last fiscal year.”
The rosy picture of the rise in exports is mainly because traders have been importing crude palm oil and refining it for export to India. According to the department, Nepal exported palm oil worth Rs 5.7 billion in the first three months of this fiscal year compared to Rs 374 million in the same period in the last fiscal year.
The government has raised the export incentives in major exportable items to 3 per cent to 5 per cent from 1 per cent to 2 per cent. The government provides export incentives to the goods that have at least 50 per cent value addition inside the country.
Despite the incentives, the country has seen a slump in the export of other major commodities including ginger, woollen carpets and textile floor coverings, shawls, scarves, and iron wire and non-alloy steel.

Rental charge for factories within Simara GPZ to be reduced

The government is going to review the fee for factories within Garment Processing Zone (GPZ) in Simara as the manufacturers’ showed no interest to invest in the protected zone citing high rental charges.
The SEZ Authority has fixed the rental fee of Rs 20 per square feet per month for investors to establish factories within Simara GPZ. Since the investors seemed not interested in the current rate, the Ministry of Industry, Commerce and Supply (MoICS) has formed a rental fee fixation committee to revise rental rate inside the Simara GPZ.
According to joint secretary at the ministry Chandika Bhatta, who is also the former executive director of Special Economic Zone (SEZ) Authority, the government is going to reduce the rental fee as garment manufacturers have refused to invest – at the current rate – in Simara GPZ.
The SEZ Authority – six months ago in May – had asked for applications from interested garment manufacturers to invest within the GPZ. But not a single investor applied forcing the government to revisit the rate. The garment manufacturers, however, asked the government to reduce the rental fee at Simara GPZ to Rs 5 per square feet per month.
“The committee will soon determine a new rental fee rate to encourage garment manufacturers to invest in the Simara GPZ,” he said, adding that the investors did not express interest to invest within the GPZ, even after repeated notices stating the zone is open due to rental fee. “As the GPZ in Simara was developed to promote production and exports of garments, the government will give ear to the investors and encourage them to invest in the GPZ.”
Once the rental fee is competitive, garment manufacturers are expected to invest in the Simara GPZ, according to the Garment Association of Nepal (GAN).
The government – since long – is planning to start GPZ and SEZ – to promote export – offering the investors basic infrastructure, including internal road, electricity and water supply, sewage system, weighing bridge, waste water treatment plant, petrol pump, banks and insurance service.
After the US government extended zero tariff preference for 66 products – including apparels – into its market through the ‘Trade Facilitation and Trade Enforcement Act’ in February 2016, the government came up with the concept of GPZ expecting to bring down the production and export cost as Nepali garments are relatively higher compared to South Asian countries.
But the services and facilities, apart from rental fee in the GPZ has created dilemma. 
Likewise, the establishment of SEZ in Bhairahawa has already taken more than 18 years but it has not yet been operational hindering the government move to boost the export. 

Trade deficit narrows

Trade deficit narrowed by 3.1 per cent to Rs 211 billion in the two months of the current fiscal year 2019-20.
While merchandise exports increased by 25.9 per cent to Rs 18.5 billion in the two months of this fiscal compared to an increase of eight per cent in the same period of previous fiscal year, merchandise imports decreased by 1.2 per cent to Rs 229.50 billion, according to the Current Macroeconomic and Financial Situation of Nepal – based on two months’ data of fiscal year 2019-20 – narrowing the trade deficit gap, though in per cent only.
As the government tightened imports of luxury goods, imports of vehicles and spare parts fell by 9.3 per cent to Rs 16.30 billion, the data revealed, adding that oil imports also declined by 8 per cent to Rs 28.46 billion. The export has increased as the country witnessed an export of palm oil, which – according to the economists – is not sustainable.
Nepal’s imports from China, however, went up by 39.2 per cent due to an increased inflow of clothes, fruits and electronic goods for the festival season. Likewise, shipments to India jumped by 46 per cent while export earnings from India dropped by 17.4 per cent in the first two months of the current fiscal year. “Export earnings from third countries increased by less than 1 per cent.”
Likewise, earnings from the export of cardamom, cinnamon, handicrafts and thread to India almost doubled, apart from exports of Nepali lokta paper and its products and other handicraft items which also increased by a notable amount to third countries.
Similarly, the balance of payments (BoP) remained at a surplus of Rs 8.83 billion compared to a deficit of Rs 25.45 billion in the first two months of the previous fiscal year.
Based on the imports of two months of current fiscal year, the foreign exchange reserves of the banking sector is sufficient to cover prospective merchandise imports of 9.6 months, and merchandise and services imports of 8.4 months, according to the report.
However, year-on-year consumer price inflation stood at 6.16 per cent in mid-September against 3.86 per cent a year ago due to increasing price of food. “Food and beverage inflation stood at 6.51 per cent, whereas non-food and service inflation stood at 5.89 per cent in mid-September,” the report revealed.
The government has targeted to contain the inflation under 6 per cent in the current fiscal year, but the increasing price hike has challenged the government target.

Economy may grow above 6 per cent: ADB

The economic growth will remain strong at 6.3 per cent in the current fiscal year, according to the Asian Development Bank’s (ADB) Nepal Macroeconomic Update 2019 released today.
The strong growth, despite poor performance of the agriculture sector caused by late paddy transplantation, is though less than the government projection of 8.5 per cent.
The economy can expand further, if the execution of public capital expenditures, including at sub-national levels, improves substantially and private investment remains strong, according to the report.
“Near normal monsoon this fiscal year, efforts to accelerate the implementation of large infrastructure projects, and increase in tourist arrivals will support high growth,” said ADB country director for Nepal Mukhtor Khamudkhanov.
The floods in early July damaged paddy saplings in many parts of the country, which could lower agriculture growth compared with last fiscal year’s figures, the report reads, adding that the industry sector is expected to expand by 7.9 per cent in the current fiscal year, buoyed by improved electricity supply and efforts to improve investment, including in major infrastructure. “The services sector will likely grow by 6.9 per cent in the current fiscal year with the expansion of wholesale and retail trade, financial intermediation, and travel and tourism subsectors.
The Manila-based development bank – in its report – also said that the gross domestic product (GDP) expansion in the fiscal year 2018-19 that ended on July 16 exceeded the Asian Development Outlook 2019 forecast achieving a growth rate of 7.1 per cent, with growth in all sectors. Agriculture sector grew by 5 per cent on a favourable monsoon that brought a record 8.3 per cent increase in paddy production, it reads, adding that industry advanced by 8.1 per cent on increased electricity production, accelerated earthquake reconstruction, and strong consumer demand. “The services grew at 7.3 per cent as higher remittances supported retail trade and as higher tourist arrivals favoured hotels and restaurants.”
On the demand side, growth in private consumption markedly accelerated in the last fiscal year on higher remittances and agricultural income, contributing to two-thirds of GDP expansion, it reads, “Fixed investment moderated from a year earlier.”
Private investment spending, mostly in energy and services, grew by 27 per cent to account for 29 per cent of the GDP in the last fiscal year. Likewise, public investment increased by 5.5 per cent from the high level achieved in the last fiscal year, but the construction of national pride projects suffered delays, the report reads. “However, floods in early July 2019 delayed paddy planting, which probably means lower growth in agriculture this fiscal year but an increase by almost half in the current budget for capital expenditure promises to offset that shortfall, if realised in actual spending.”
Likewise, inflation slightly exceeded the 2018-19 projection as food inflation accelerated from 2.8 per cent in the fiscal year 2017-2018 to 3.1 per cent on account of flooding and landslides in July that affected some supply channels and a delay in food supply owing to strict tests along the India-Nepal border over concern about pesticides.
“Inflation will likely to rise in the current fiscal year, assuming a somewhat smaller harvest, a marked pickup in government expenditure, and a moderate rise in inflation in India, the main supplier,” the report reads, adding that the inflation is projected to rise to 5.5 per cent in the current fiscal year from 4.6 per cent in the last fiscal year.
However, the fiscal deficit moderated to 5.1 per cent of gross domestic product (GDP) in the last fiscal year, down from 6.7 per cent of GDP in the fiscal year 2017-18, on lower-than-planned capital expenditures. “Likewise, execution of capital expenditures at 75.9 per cent in the fiscal year 2018-99 was less than that of fiscal year 2017-18 at 81 per cent. “Bunching of capital expenditure continued in the last fiscal year 2018-19, undermining the quality of investment.”
The current account deficit, forecast to widen, narrowed substantially instead as implementing large national pride projects experienced delays and markedly curbed import growth. “Export growth exceeded expectations but earnings remained small, allowing the trade deficit to widen by 4.6 per cent.”
Nepal increasingly faces the risk of external sector instability due to large trade and current account deficits, the report reads, adding that the current account deficit moderated to 7.7 per cent of GDP, down from 8.2 per cent in the fiscal year 2017-18, on implementation delays of large national pride projects and markedly curbed import growth. “The current account deficit will slightly narrow to the equivalent of 7.6 per cent of GDP in the current fiscal year 2019-20 from 7.7 per cent of GDP in the fiscal year 2018-19.”
Likewise, merchandise export growth exceeded expectations, but with low export base, earnings remained small, widening the merchandise trade deficit by 4.4 per cent, whereas remittance has shown healthy growth, a substantial rise in the near future is unlikely to offset the rise in the trade deficit.
The growth in workers’ remittances was at 7.7 per cent in the last fiscal year, sufficient to keep the current account deficit stable at $2.3 billion. With financing inflows somewhat down from a year earlier, foreign exchange reserves fell by 5.8 per cent to $9.5 billion, the second year of decline nevertheless leaving import cover for 7.8 months.
The current account deficit is now forecast to be much narrower than projected in the last fiscal year as it continues to shrink in response to measures that curtail imports of low-priority goods, as well as higher hydroelectricity production, which will replace fuel imports for generators, and more workers going to high-income destinations like Japan, the report reads.
Downside risks to outlook in the current fiscal year 2019-20 centers on challenges to the smooth implementation of federalism. “Adequate human resources, mainly technical staff, and capacity in the relatively new sub-national governments coupled with necessary legislative frameworks are required for the smooth implementation of federalism,” it adds.
The theme chapter of this edition of ADB report sheds light on existing implementation challenges of Special Economic Zones (SEZs) in Nepal and suggests measures to overcome them. “SEZs can play a key role in developing economies like Nepal to expand exports, bridge the huge trade deficit and mitigate pressure on external stability,” it reads.

Commodity-dependent developing countries need financial and technical support

Economic and export diversification is the best response to the challenges posed by climate change in developing countries that depend on commodities, according to UNCTAD’s Commodities and Development Report 2019.
The diversification could be horizontal, which entails venturing into new goods and sectors to reduce dependence on a narrow range of commodities, or vertical, which involves moving the value chain of a commodity up to increase its worth, says the report ‘Commodity Dependence, Climate Change and the Paris Agreement’.
According to the report, a successful diversification strategy will likely include a combination of horizontal policies, such as strengthening human capital through investments in education and health, and targeted measures to promote individual sectors.
“The climate crisis poses an existential threat to commodity-dependent developing countries and will result in the collapse of some economies if decisive action is not taken now,” UNCTAD secretary general Mukhisa Kituyi said, adding that now more than ever before, these countries need to assess their diversification potential and reduce their commodity dependence, which for decades has kept them exposed to volatile markets and climate change.
Although commodity-dependent developing countries contribute only modestly to climate change, the climate crisis puts them at most risk. They are more vulnerable primarily because they are economically dependent on sectors that are highly exposed to extreme weather events, the report reads. “Small island developing states (SIDS) are among the worst affected.”
Rising sea surface temperatures pose significant risks to the SIDS that derive a large share of their merchandise export earnings from fisheries, such as Kiribati (88 per cent in 2013–2017), Maldives (79 per cent) and the Federated States of Micronesia (75 per cent).
The negative effects of climate change on crop and fisheries production are more severe in low-latitude regions, where most commodity-dependent developing countries are located, the report observes.
Equally at risk are high-income, fossil-fuel-dependent countries, such as Brunei Darussalam, Kuwait and Qatar, which have some of the highest levels of greenhouse gas emissions per capita. They could be profoundly affected by the stranding of their major natural resource as a result of the growing push towards greener sources of energy, the report adds.
The report also underscores that the high risk faced by commodity-dependent developing countries reinforces their need to adapt, diversify and modernise their economies. They must also adapt to the effects of the climate response measures undertaken by other countries, which are expected to reduce the demand for some key commodities on which they depend.
Tackling climate change presents some opportunities to commodity-dependent developing countries, according to the report that also notes that the global push towards renewable energy and energy efficiency creates opportunities in countries with large reserves of materials used in clean technologies, such as solar photovoltaic cells, wind turbines and electric vehicle batteries.
Fighting climate change could also create opportunities to boost production of alternatives to cattle meat and milk, the report says. It points out the case of livestock in some drylands in Africa, where increased drought frequency and declining feed availability have encouraged pastoralists to adopt camels to supplement or replace cattle.
According to the report, the quest for climate mitigation and adaptation has spurred investments in technological innovations that could benefit commodity-dependent countries. One example is the adoption of cost-efficient solar photovoltaic cells, which could bolster energy security and support commodity sectors in remote areas that are not connected to national power grids.
The report echoes warnings from experts that commitments made by countries to mitigate climate change under the Paris Agreement are not ambitious enough. The commitments need to quadruple to limit global temperature rise to 1.5°C above pre-industrial levels, the report notes, making clear that adopting a higher ambition in the implementation of countries’ climate commitments will require stronger political will and greater mobilisation of financial and human resources. “It underlines that climate-related funding, which is currently only a fraction of actual requirements, needs to be substantially scaled up given the high cost of climate change mitigation and adaptation.”
For example, the total cost of implementation of climate action plans for 80 developing countries that have specified their financing needs is estimated at $5.4 trillion, the report notes. “This is the order of magnitude of the total amount spent on energy subsidies every year in the world.”
In addition, the report states that greening fiscal policies can help to ensure taxes, subsidies and similar policy instruments contribute to the implementation of climate action plans and the achievement of the sustainable development goals. It suggests reforming fossil fuel subsidies to further green fiscal policies. It is estimated that the wealthiest 20 per cent of households in developing countries receive 43 per cent of the benefits from fossil fuel subsidies, while the poorest 20 per cent get only 7 per cent.
Also, the capacities of commodity-dependent developing countries to undertake climate actions need to be strengthened, according to the report. This includes building technical and regulatory capacities to design institutions and implement policies to support mitigation and adaptation strategies.
Further, developed countries need to meet their commitment under the Paris Agreement to transfer environmentally friendly technologies to developing countries to help them effectively participate in global efforts to mitigate and adapt to the climate crisis.

Country records Rs 67.4 billion BoP deficit

The outflow of money surpassed by Rs 67.4 billion in the last fiscal year 2018-19 due to a rise in imports that increased by 13.9 per cent to Rs 1,418.54 billion, according to a central bank report.
According to the annual macroeconomic statistics of the last fiscal year 2018-19 published by the central bank today, the balance of payments (BoP) remained a deficit of Rs 67.4 billion compared to a surplus of Rs 960 million a fiscal year ago.
The imports increased by 13.9 per cent to Rs 1,418.54 billion in the last fiscal year, whereas merchandise exports increased by 19.4 per cent to Rs 97.11 billion in the fiscal year 2018-19 widening the total trade deficit by 13.5 per cent to Rs 1,321.43 billion. The trade deficit stands at 38.1 per cent of the country’s total gross domestic product (GDP).
The central bank data revealed that the current account also registered a deficit of Rs 265.37 billion in the last fiscal year. “The current account deficit stood at Rs 247.57 billion a fiscal year ago in 2017-18,” the report reads, adding that the gross foreign exchange reserves decreased to Rs 1,038.92 billion as on mid-July 2019 from Rs 1,102.59 billion in the previous year. “Of the total foreign exchange reserves, reserves held by the central bank decreased to Rs 902.44 billion in mid-July 2019 from Rs 989.40 billion a year ago.”
The decision of reference price for the customs has helped capital flight, said an economist without wanting to be named. “The finance minister Dr Yuba Raj Khatiwada claimed that the reference price will help check revenue leakage,” he said, adding that the commodity price is very unstable in the international market and the notorious traders got an opportunity for capital flight. “The decision of reference price cost the country dearly as it has put pressure on foreign exchange reserve.”
However, reserves held by banks and financial institutions – except central bank – increased to Rs 136.47 billion in mid-July 2019 from Rs 113.19 billion a year ago.
“The domestic credit expanded by 20.1 per cent in the last fiscal year compared to a growth of 26.5 per cent a fiscal year ago,” the macroeconomic report reads, adding that claims on private sector increased 19.1 per cent compared to a growth of 22.3 per cent a fiscal year ago. “
Though, the number of Nepali migrant workers – institutional and individual-new and legalised – decreased by 32.6 per cent in the last fiscal year against a decrease by 9.3 per cent a fiscal year ago, the remittance inflows increased by 16.5 per cent to Rs 879.27 billion.
The central bank macroeconomic report also claims that inflation remained at 4.6 per cent on an annual average in the last fiscal year. “Though the Nepali economy has been growing in the last three fiscal years at a higher pace than the average growth rate of the last decade, some of the macroeconomic indicators, particularly related to the external sector, are still worsening,” the report adds.
While the government has been harping about the above-average growth, economists claim that the current remittance-led and consumption-based growth is not sustainable. “The economy is estimated to have grown by 7.1 per cent in the last fiscal year 2018-19.”
Apart from boosting exports to improve the BoP position and bettering the growth, economists call for creating a favorable environment to attract private sector investment, particularly foreign direct investment (FDI), to make the growth investment and productivity driven. Despite the government's efforts to bring in foreign investment, the FDI inflow fell to Rs 13.07 billion in the last fiscal year 2018-19 compared to Rs 17.51 billion FDI a fiscal year ago in 2017-18.
Even the private sector investment – within the country – has been hit by shortage of loanable funds in the banking sector resulting to the lending rate going up to 16 per cent, which is very high.