Nepal’s trade deficit surges to record Rs1 trillion

July 05, 2018

The Kathmandu Post, 5 July 2018

Nepal’s trade deficit swelled to a record high of over Rs1 trillion in the first 11 months of the current fiscal year on the escalating import expenses and slow progress in earnings from exports.

According to the record of Department of Customs, the country posted negative trade balance worth Rs1.03 trillion during the review period. While the import value stood at Rs1.10 trillion, the export recorded Rs74.32 billion. Over the period, the imports surged by 23.82 percent compared to a 10.46 percent rise in exports.

Between mid-July 2017 and mid-June 2018, the country’s export-import ratio stood at 1:14.9, meaning Nepal imported goods worth Rs14.90 against export of every rupee. The ratio had stood at 1:13.3 in the same period last fiscal.

Former commerce secretary Purushottam Ojha said the supply constraints and underlying non-tariff barriers with the trading partner countries, including India, have been affecting the country’s exports. India is Nepal’s single largest trading partner, with the total trade accounting for more than 65 percent.

According to Ojha, Nepal still faces a number of obstacles when it comes to exporting its products such as vegetables, herbs and aromatic plants to the Indian market. “Although the Nepal-India Trade Treaty revised in 2009 talks about improving cooperation for trade, it has not happened in practice,” he said.

Out of 153 trading partner countries, Nepal enjoyed trade surplus with only 27 countries over the period. According to the department, the country achieved the largest net gain of Rs1.93 billion from its business with Turkey, followed by the United Kingdom with a trade surplus of Rs336.71 million.

However, Nepal faced a huge deficit from its trading with the rest of the countries. Of the trading partners, Nepal had the largest deficit of Rs689.85 billion with India. The country earned Rs42.46 billion from its exports to the southern neighbour while paying the import bills worth Rs732.31 billion.

The department’s record shows that the negative trade gap is also widening with countries such as China, Vietnam, Thailand and Indonesia.

In the review period, the country imported fuel worth Rs175.87 billion--the largest in import bill. The imports of mills and machinery accounted for Rs115.30 billion and iron and steel Rs112.11 billion, followed by vehicles Rs77.82 billion and electronic and telecommunications equipment worth Rs69.81 billion.

Likewise, coffee, tea, mate and spices posted the largest export amounting to Rs8.49 billion. Yarn, carpets, apparel and iron and steel were among top five exports over the period.