Oil, autos top import list as deficit swells

January 19, 2018

The Kathmandu Post, 19 Jan 2018 

Nepal’s trade deficit swelled to Rs397.79 billion between mid-July and mid-December, up 13 percent year-on-year, as imports ballooned and exports slowed. 

The data for five months unveiled by Nepal Rastra Bank shows that the country’s import value surged 12.8 percent to Rs431.48 billion while export earnings increased 10 percent to Rs33.69 billion.

During the review period, imports from third countries soared 18.9 percent while imports from India and China rose 13.2 and 1.4 percent respectively. India accounted for 66 percent of Nepal’s spending on imports, according to the central bank.

Nepal imported Rs54.4 billion worth of petroleum products and Rs42.78 billion worth of vehicles and spare parts from India which top the list of the country’s imports.

Imports of mild steel billets, which are used to manufacture steel rods, took the third position with an import value of Rs21.95 billion.

With regard to imports from third countries, gold took the number one spot with imports totalling Rs12.92 billion, up 36.1 percent compared to the same period last year. Similarly, Nepal spent Rs11.37 billion on telecommunication equipment and parts from China. 

Compared to the immense import bill, Nepal’s export earnings from India increased a mere 5.5 percent to Rs17.95 billion. The share of export earnings from India stood at 53 percent out of the total export value. Jute products gave Nepal the largest earnings of Rs1.81 billion from India.

Similarly, Nepal’s export earnings from China surged 78.4 percent to Rs1.32 billion. With shipments valued at Rs1.28 billion, metal craft and woollen products among handicraft items topped the list of exports to China.

Likewise, exports to third countries rose 12 percent to Rs14.4 billion. Woollen carpets were the largest export with shipments worth Rs2.89 billion.

A growing trade deficit exerts pressure on the country’s foreign exchange reserves as more money leaves the country to settle import bills. Lifestyle changes, increased consumption expenditure resulting from remittance inflow and poor performance of the production sector are among the major reasons for the widening gap between the country’s export earnings and import expenses.

Nepal has been paying for its soaring imports with foreign exchange earned from remittance over the last one decade. Remittance inflow dipped 0.8 percent to Rs285.4 billion during the review period.

Rabi Shankar Sainju, spokesperson for the Ministry of Commerce, said the ministry in coordination with other line agencies had started a study to analyse the reasons behind the soaring trade deficit.

“Among other things, the study will identify components for import substitution and ways to boost production of high value added products,” Sainju said.