Current account deficit at over Rs6b

April 13, 2017

The Kathmandu Post, Post Report, 13th April 2017, Kathmandu

The country’s current account deficit stood at Rs6.3 billion in the first eight months of the current fiscal year, as imports surged and inflow of remittance income decelerated.

Nepal imported merchandise goods worth Rs628.56 billion in the first eight months of the current fiscal year, up 44.2 percent than in the same period last fiscal year, shows the latest Macroeconomic Report of the Nepal Rastra Bank (NRB). The surge comes on the back of higher demand for petroleum products, vehicles and spare parts, MS billet, machinery and parts, and cement in the country.

While imports jumped, merchandise exports grew by a moderate 12.8 percent to Rs48.2 billion in the eight-month period between mid-July and mid-March. Exports went up due to higher demand for goods such as juice, oil cakes, rosin, noodles and wires in the foreign market.

Although export grew, it could not catch up with the pace of import growth, which caused country’s trade deficit to widen by 47.6 percent to Rs580.3 billion in the first eight months of the current fiscal year, shows the NRB report.

The means, of Rs628.56 billion that exited the country to cover import bills, only Rs48.2 billion was recovered through exports of goods, while Rs580.3 billion could not be retrieved. During the eight-month period, Rs50.6 billion also flew from the country to cover travel expenses of Nepalis who visited different countries for various purposes. Also, Rs20.7 billion exited the country to finance education of Nepalis studying abroad.

These capital flights, to a large extent, were covered by Rs450 billion that Nepalis working abroad sent home in the eight-month period. But the inflow of this amount represented a hike of mere 5.3 percent, as against growth rate of 15.2 percent recorded in the same period a year ago, indicating deceleration in remittance inflow.

Among others, Rs61.5 billion in grants and Rs33.3 billion in pensions of Nepalis who had worked abroad entered the country in the first eight months of the current fiscal year.Inflows of these funds, however, could not fully cover import bills, which caused the current account to widen by Rs6.3 billion in the eight-month period, shows the NRB report.

Despite booking a current account deficit, the country managed to record a balance of payments surplus of Rs50 billion in the first eight months of the current fiscal year. This was largely because of surge in foreign direct investment. Foreign direct investment jumped 257.2 percent to Rs8.4 billion in the eight-month period, show the latest NRB data.