KATHMANDU: Rise in import bill and slow export growth coupled with stagnation in remittances have resulted in current account deficit of Rs 17.88 billion in the first two months of the current fiscal year 2017/18. This is the second straight month that the country logged current account deficit. In the first month of the current fiscal year, the country saw deficit of Rs 5.43 billion. The deficit was Rs 11.12 billion in the first two months of 2016/17, according to the Nepal Rastra Bank (NRB).
The ‘Current Macroeconomic and Financial Situation of Nepal’ of first two months of 2017/18 made public by the NRB on Sunday shows that country’s merchandise imports increased by 11 percent to Rs 165.41 billion in the review period compared to a growth of 43.4 percent in the same period of the previous fiscal year. However, Nepal’s exports grew by a nominal 3 percent to Rs 13.58 billion in the first two months of the current fiscal year. Such was 7.7 percent in the first two months of 2016/17. According to the report, workers’ remittances grew by a paltry 0.7 percent to Rs. 115.55 billion in the review period, compared to a growth of 6.6 percent in the same period of 2016/17. Likewise, the country recorded a balance of payment (BoP) deficit of Rs 5.87 billion in the first two months of 2017/18, compared to a deficit of Rs 3.50 billion in the same period of the last fiscal year. BoP refers to the sum of all transactions between a nation and all of its international trading partners.
The deficit in the current account, which is the sum of balance of trade (goods and services export fewer imports), net income from abroad and net current transfers, indicates vulnerability of the country’s economy because of rising import bill amid slow export and remittance growth rates, according to the central bank. “Slow exports and meager remittance growth, as well as whopping rise in imports, contributed to current account deficit,” Rajendra Pandit, the deputy spokesperson of the NRB, told Republica. “But the vulnerability depends on whether we are importing goods and services for consumption only or machinery and equipment that can help other economic activities.” Meanwhile, consumer price inflation increased to 3.4 percent in mid-September 2017 compared to 2.3 percent in mid-August 2017. The central bank has attributed the rise in inflation to damage of vegetables due to floods in mid-August.
