Nepal faces trade deficit with 133 countries

Published On: August 3, 2023 06:00 PM NPT By: Dilip Paudel

KATHMANDU, Aug 3: Despite the government's efforts to increase domestic production and reduce the trade deficit, Nepal continues to experience trade imbalances with more than 133 countries. In the fiscal year 2022/23, Nepal engaged in trade with over 171 countries, but only managed to achieve a trade surplus with 38 of them.

India remains Nepal's largest trading partner with a substantial trade deficit of Rs 921.16 billion. Imports from India amounted to Rs 1.03 trillion, while exports to India were only Rs 166.8 billion. The second-largest trade deficit is with China, amounting to Rs 220.95 billion. Nepal imported goods worth Rs 222.71 billion from China and exported goods worth only Rs 1.76 billion.

The trade deficit is particularly significant with neighboring countries like India and China, both of which share geographical borders with Nepal. While India exhibits a larger trade deficit in terms of absolute numbers, China's deficit is considerable in terms of ratio. Nepal's exports to China have declined significantly, while imports have surged, increasing by 126 times.

Besides India and China, Nepal faces trade deficits with other countries as well. According to the DoC, Nepal has a trade deficit of Rs 41.51 billion with Indonesia, Rs 22.9 billion with Malaysia, Rs 13.19 billion with Qatar, Rs 11.21 billion with Thailand, and Rs 10.7 billion with Oman.

Similarly, Nepal has a trade deficit of Rs 10.3 billion with Saudi Arabia, Rs 7.26 billion with Vietnam, Rs 6.53 billion with Singapore, Rs 6.46 billion with Jordan, Rs 6.29 billion with France, Rs 6.74 billion with Korea, Rs 4 billion with Japan, Rs 3.37 billion with Taiwan, Rs 2.4 billion with Germany, Rs 2.51 billion with Hong Kong and Rs 2.28 billion with Canada.

In the last fiscal year, while imports totaled Rs 1.61 trillion, exports amounted to only Rs 157 billion. This widening trade deficit poses challenges, with a significant portion of remittances received from abroad flowing back to foreign countries.

Comparing the fiscal year 2022/23 to the previous year, imports decreased by Rs 390 billion, dropping to Rs 1.61 trillion. The share of exports in total foreign trade was 8.88 percent, while imports constituted 91.12 percent.

Fuel remains the most imported commodity in Nepal, along with items like diesel, petrol, cooking gas, soybean crude oil, mobile phones, ready-made garments, food grains, and vegetables. Despite the government's policy of offering subsidies to encourage exports and narrow the trade deficit, the country's export business has faced challenges. Global economic problems resulting from the Russia-Ukraine war have hampered the demand for goods from Nepal.

Nepal's major exports include soybean oil, yarn, cardamom, carpets, jute woven fabrics, tea, and fruit juice, among others. In an effort to stimulate exports, the government has introduced a policy of providing up to eight percent subsidies for around three dozen items, including cement. This incentive has led to an increase in cement exports over the past year.

The government is optimistic about the export potential of clinker, cement, steel, footwear, treated water, and other products. To promote exports, the Ministry of Industry, Commerce, and Supplies has enacted the '(Second Amendment) Procedure 2079 BS on providing export subsidies. Additionally, the government has launched the 'Made in Nepal and Make in Nepal' campaign in collaboration with the private sector to encourage mass production, marketing, use, and export of indigenous goods.

The strategy also involves striving for self-sufficiency in essential products such as cement, medicine, iron rods, furniture, and shoes. By focusing on increasing the production and quality of these goods, the government aims to bolster the country's export capacity and reduce dependency on imports.



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