Nepal’s foreign trade declines, trade deficit reaches over Rs 1.3 trillion

KATHMANDU, June 24: Nepal's trade deficit has soared to Rs 1.3 trillion, largely due to heavy reliance on foreign imports, even for goods that could be produced domestically. In the 11 months of the current fiscal year, imports amounted to Rs 1.454 trillion, while exports stood at only Rs 139.26 billion. This imbalance has resulted in a staggering trade deficit of Rs 1.315 trillion.

Overall, Nepal's foreign trade has declined compared to the previous year. Data from the Department of Customs shows that the Nepali month of Jestha (mid-May to mid-June) witnessed the highest imports, totaling Rs 150.34 billion.

During this period, both imports and exports saw a decrease compared to the previous year, with imports declining by 1.84 percent and exports by 3.01 percent. Total foreign trade in the first 11 months of the current fiscal year amounted to Rs 1.593 trillion. The widening trade deficit underscores the trend of importing goods that could be domestically produced.

Nepal engages in trade with 170 countries, with the largest share of trade being with India. Imports from India alone totaled Rs 982.9 billion, while exports were significantly lower at Rs 94.51 billion. China follows as the second-largest trading partner, with imports from China amounting to Rs 272.81 billion.

The most imported commodities include fuel (diesel, petrol, cooking gas), agricultural inputs, food products, and vegetables. Despite government efforts to subsidize exports and reduce trade deficits, enthusiasm for exporting from Nepal remains subdued.

To boost exports, the government has implemented an up-to-eight-percent subsidy scheme for exports of around three dozen items, including cement. This initiative has stimulated the cement industry, which started exporting after receiving subsidies last year.

Furthermore, the Ministry of Industry, Commerce, and Supplies has introduced the 'Second Amendment Procedure 2079 BS' to facilitate subsidies for exports. A 'Made in Nepal and Make in Nepal' campaign is also planned in collaboration with the private sector to enhance production, marketing, and export of local goods like cement, medicine, iron rods, furniture, and shoes.

Despite these measures, Nepal continues to face challenges in increasing exports, prompting concerns among economic experts about the declining export figures. Addressing the decline in exports, particularly amidst a high trade deficit, remains a critical economic challenge for Nepal.

The government's strategy focuses on protecting domestic industries, enhancing local production using local resources and labor, attracting foreign investment in export industries, and promoting quality products such as mountain spring water to Gulf countries. However, diversifying Nepal's foreign trade on a national and strategic basis is essential to mitigate the trade deficit effectively.