Foreign Exchange Reserves Surges by 32.6 Percent | Trade Deficit Shrinks 1 Percent

August 18, 2024 | Investopaper

The gross foreign exchange reserves increased 32.6 percent to Rs.2041.10 billion in mid-July 2024 from Rs.1539.36 billion in mid-July 2023. In the US dollar terms, the gross foreign exchange reserves increased 30.4 percent to 15.27 billion in mid-July 2024 from 11.71 billion in mid-July 2023.

Of the total foreign exchange reserves, reserves held by NRB increased 37.4 percent to Rs. 1848.55 billion in mid-July 2024 from Rs. 1345.78 billion in mid-July 2023. Reserves held by banks and financial institutions (except NRB) decreased 0.5 percent to Rs. 192.55 billion in mid-July 2024 from Rs.193.59 billion in mid-July 2023. The share of Indian currency in total reserves stood at 22.5 percent in mid-July 2024.

Based on the imports of 2023/24, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 15.6 months, and merchandise and services imports of 13 months. The ratio of reserves-to-GDP, reserves-to-imports and reserves-to-M2 stood at 35.8 percent, 108.6 percent and 29.3 percent respectively in mid-July 2024. Such ratios were 28.8 percent, 83 percent and 25 percent respectively in mid-July 2023.

Exports & Imports

During 2023/24, merchandise exports decreased 3.0 percent to Rs.152.38 billion against a decrease of 21.4 percent in the previous year. Destination-wise, exports to India and other countries decreased 3.3 percent and 4.3 percent respectively whereas exports to China increased 46.6 percent. Exports of zinc sheet, particle board, juice, polyster yarn & thread, oil cakes among others, increased whereas exports of palm oil, soyabean oil, woolen carpet, brans, jute goods, among others, decreased in the review period.

Similarly, merchandise imports decreased 1.2 percent to Rs.1592.99 billion against a decrease of 16.1 percent a year ago. Destination-wise, imports from India and other countries decreased 3.0 percent, and 17.6 percent respectively whereas imports from China increased 34.2 percent. Imports of transport equipment, vehicle and other vehicle spare parts, readymade garments, aircraft spareparts, electrical equipment, other machinery and parts among others, increased whereas imports of crude soyabean oil, gold, hot rolled sheet in coil, crude palm oil, rice/paddy among others, decreased in the review year.

Based on customs points, exports from Bhairahawa, Jaleshwor, Krishnanagar, Mechi, Rasuwa and Tatopani Customs Offices increased whereas exports from all the other major customs points decreased in the review year. On the import side, imports from Dry Port, Jaleshwor, Kanchanpur, Krishnanagar, Nepalgunj, Rasuwa and Tatopani Customs Office increased whereas imports from all the other major customs points decreased in the review year.

Total trade deficit decreased 1.0 percent to Rs.1440.60 billion in the review year. Such a deficit had decreased 15.5 percent in the previous year. The export-import ratio decreased to 9.6 percent in the review year from 9.7 percent in the previous year.

Custom-wise Foreign Trade

The custom-wise foreign trade in the fiscal year 2023/24 is shown in the table below:

‘Rs. in million’

Source: Based on customs data

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