Trade Deficit Of Nepal Declines By 19.15 Percent To Rs. 711 Billion
January 24, 2023 | Investopaper
The trade deficit has dropped by 19.15 percent in the first six months of the current fiscal year as the imports have decreased by 20.68 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 168 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 six months of the current fiscal year 2079/80 has reached Rs 711.85 billion. The trade deficit during the same period last year was Rs 880.49 billion.
The import of goods has reached Rs. 792.66 billion in the six months period, which stood at Rs 999.34 billion in the same period last year.
However, the export has also fallen by 32.01 percent as compared to the corresponding period of previous fiscal year. About Rs 80.80 billion worth of items have been exported in Shrawan-Mangsir.
International Trade Situation Of Nepal- FY 2079/80
| SN | Trade Indicators | FY 2079/80 (First Six Months) | FY 2078/79 (First Six Months) | Percent Change |
| 1 | Imports (Rs.in `000) | 792,666,289.26 | 999,342,707.53 | -20.68 |
| 2 | Exports (Rs.in `000) | 80,807,420.83 | 118,850,960.49 | -32.01 |
| 3 | Trade Deficit (Rs.in `000) | 711,858,868.43 | 880,491,747.05 | -19.15 |
| 4 | Total Foreign Trade (Rs.in `000) | 873,473,710.10 | 1,118,193,668.02 | -21.89 |
| 5 | Imports/Exports Ratio | 9.81 | 8.41 | 16.66 |
| 6 | Exports Share to Total Trade (%) | 9.25 | 10.63 | -12.96 |
| 7 | Imports Share to Total Trade (%) | 90.75 | 89.37 | 1.54 |
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.
Thanks for this nice article. While analysing trade deficit, trade deficit as a percentage of GDP is one of the most important measure, you have missed this one.