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Nepals BoP in deficit, again

- Post Report, Kathmandu

The BoP deficit of Rs5.9 billion indicates Nepal needs to find more ways to earn foreign currency,
otherwise foreign exchange reserve will come under pressure

Oct 30, 2017-Nepal recorded a balance of payments (BoP) deficit for the second consecutive month in
the current fiscal year, as outflow of money from the economy surpassed inflows.

The outflow of money from Nepals economy surpassed inflows by Rs5.9 billion in the second months of
the current fiscal year ended mid-September, as remittance income growth rate petered out while
imports continued to increase, shows the latest Macroeconomic Report of the Nepal Rastra Bank (NRB),
the central bank.

The BoP deficit of Rs5.9 billion indicates Nepal needs to find more ways to earn foreign currency,
otherwise foreign exchange reserve will come under pressure.

One of the main sources of foreign currency for Nepal has been money sent by Nepalis working abroad.

But Nepals remittance income went up by mere 0.7 percent to Rs115.6 billion in the two-month period
between mid-July and mid-September. One of the reasons for negligible growth rate in remittance
income is fall in number of Nepalis leaving the country for employment purpose.

Number of people leaving for foreign job destinations has fallen for three consecutive years. Also, Qatar
is now reeling under economic blockade and Saudi Arabia has decided to cut back on public spending
due to low international oil prices.

These are two of the largest recipients of Nepali labourers and problems facing these countries are
expected to hit Nepals remittance earnings in the coming days.

Also, inflow of grants to Nepal, another source of foreign income, fell by 12.3 percent to Rs7.8 billion in
the first two months of the current fiscal year.

While Nepals foreign income is taking a hit, the need for foreign currency in growing due to continuous
hike in imports.

Nepals imports went up by 11 percent to Rs165.4 billion in the two-month period of the current fiscal
year driven by hike in shipments of petroleum products, aircraft spare parts, gold, cement, and
telecommunications equipment and parts, says the NRB report.

On the contrary, exports went up by a marginal 3 percent to Rs13.6 billion in the first two months of the
current fiscal year.

A hike in imports and drop in exports caused the countrys merchandise trade deficit to widen by 11.8
percent to Rs151.8 billion in the two-month period.

Also, the countrys services trade deficit widened by 27.3 percent to Rs6.8 billion in the period between
mid-July and mid-August due to 26.4 percent hike in repatriation of income generated by foreign airline
companies operating in Nepal.
The countrys services trade deficit also widened as Nepal generated earnings of Rs8.1 billion from
foreign travellers while Nepalis travelling abroad spent Rs13.6 billion in the first two months of the
current fiscal year.

This combination of widening trade deficit and moderate growth in remittance income prompted the
current account to slip into a deficit of Rs17.9 billion in the first two months of the current fiscal year.

Published: 30-10-2017 08:56

http://kathmandupost.ekantipur.com/news/2017-10-30/nepals-bop-in-deficit-again.html

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