Trade Deficit Of Nepal At Rs. 1.20 Trillion

May 22, 2023 | Investopaper

The trade deficit has dropped by 15.85 percent in the first ten months of the current fiscal year (Mid July 2022 to Mid May 2023) as the imports have decreased by 16.78 percent. With the tightening by the government in order to ease the pressure on the foreign exchange reserve, the trade deficit has declined by about Rs 226.88 billion as compared to the corresponding period of the previous fiscal year.

According to the data released by the Customs Department, the trade deficit in the first ten months of the current fiscal year 2079/80 has reached Rs 1,204.42 billion. The trade deficit during the same period last year was Rs 1,431.30 billion.

The import of goods has reached Rs. 1,335 billion in the ten months months period, which stood at Rs 1,604 billion in the same period last year.

However, the export has also fallen by 24.49 percent as compared to the corresponding period of previous fiscal year. About Rs 130 billion worth of items have been exported in Shrawan, 2079 BS-Baisakh, 2080 BS [Mid July 2022 to Mid May 2023].

International Trade Situation Of Nepal- FY 2079/80

SN	Trade Indicators	FY 2079/80 (First 10 Months)	FY 2078/79 (First 10 Months)	Change (%)
1	Imports (Rs.in `000)	1,335,322,462.27	1,604,652,517.50	-16.78
2	Exports (Rs.in `000)	130,900,037.21	173,348,211.98	-24.49
3	Trade Deficit (Rs.in `000)	1,204,422,425.06	1,431,304,305.52	-15.85
4	Total Foreign Trade (Rs.in `000)	1,466,222,499.48	1,778,000,729.48	-17.54
5	Imports/Exports Ratio	10.20	9.26	10.20
6	Exports Share to Total Trade (%)	8.93	9.75	-8.43
7	Imports Share to Total Trade (%)	91.07	90.25	0.91

Source: Department of Customs

International Trade Situation Of Nepal- FY 2078/79

In the previous fiscal year 2078/79, the trade deficit had widened with the increase in imports due to dependence on foreign commodities including daily necessities. Compared to the fiscal year 2077/78, the trade deficit had increased by about Rs 321 billion in the fiscal year 2078/79.

The trade deficit from Shrawan to Ashad (12 months) of the last fiscal year 2078/79 had reached Rs 1.720 trillion. The trade deficit during the same period of the fiscal year 2077/78 was Rs 1.398 trillion.

The import of goods had reached Rs. 1.920 trillion in the twelve months period, which stood at Rs 1.539 trillion in the same period last year.

Although the export had increased by 41.74 percent as compared to the previous fiscal year, the value of exports is significantly lower than the imports. About Rs 200 billion worth of items have been exported in the last fiscal year.

SN	Trade Indicators	FY 2078/79 (12 Months)	FY 2077/78 (12 Months)	Change (%)
1	Imports (Rs.in `000)	1,920,448,349.38	1,539,837,067.89	24.72
2	Exports (Rs.in `000)	200,030,961.70	141,124,080.46	41.74
3	Trade Deficit (Rs.in `000)	1,720,417,387.68	1,398,712,987.43	23.00
4	Total Foreign Trade (Rs.in `000)	2,120,479,311.08	1,680,961,148.36	26.15
5	Imports/Exports Ratio	9.60	10.91	-12.01
6	Exports Share to Total Trade (%)	9.43	8.40	12.36
7	Imports Share to Total Trade (%)	90.57	91.60	-1.13

Source: Department of Customs

The decline in growth of remittance inflows and increase in imports of goods in the last year had led to decline in foreign exchange reserves in the country. The trade deficit has also affected the economy. Foreign exchange reserves are under pressure due to high trade deficit and imports.

Although the government has introduced the concept of Special Economic Zone (SEZ) for export by increasing production to reduce trade deficit, effective implementation has not been possible. The government had announced to build SEZs in 14 places.

Strategies have been formulated to promote export by becoming self-reliant in the production of cement, medicine, iron bars, furniture, footwear, etc., and to increase production based on local raw materials and labor by protecting domestic, small and medium enterprises. In order to increase exports, a policy of subsidizing certain items has been adopted. Cash subsidy has been implemented for herbs, cardamom, tea, carpets, pashmina, jute goods, readymade garments and other items.