The figures that Nepal Rastra Bank (NRB) released on Friday indicate that the central bank could face difficulty in achieving even the revised targets on its core area of operation. Its revised target was to attain BoP surplus of Rs 9 billion and contain inflation at 9 percent.[break]
NRB attributes the continued high BoP deficit to financial account deficit and also widening of trade deficit.
According to the report, Nepal´s exports grew by 6.6 percent and touched Rs 52.83 billion during the first eight months of 2010/11. Good news is that exports to India grew by 10.8 percent, thanks to rise in exports of zinc sheet, jute products, thread, MS pipe and plastic utensils, among others.
However, exports to third country dropped by 1 percent due mainly to decline in export of readymade garments, handicraft goods, Nepalese paper & paper products, herbs and silverware and jewelries.
Imports, meanwhile, grew by lower rate of 1.4 percent, but because of the larger base, that still caused the import to jump to Rs 253.49 billion. Mainly, import from India grew by 25 percent as import of petroleum product, MS billet, cold rolled sheet in coil, other machinery and parts and medicine jumped. Imports from third country, however, slipped by more than 27 percent, thanks to drop in import of gold, readymade garments, other machinery and parts and betel nuts.
This widened country´s trade deficit widened by 0.4 percent to Rs 210.66 billion during the first eight months of the current fiscal year. During the period, remittances increased by 12.3 percent to Rs 161.62 billion. Pension receipts too rose by 9.4 percent to Rs 19.43 billion. The country also received foreign direct investment of Rs 5.47 billion during the period.
High BoP deficit, meanwhile, caused country´s gross foreign exchange reserves to decline by 4.4 percent to Rs 257.05 billion in mid-March. The reserve had Rs 268.91 billion in mid-July 2010.
Consumer price inflation increased to 10.7 percent in mid-March, as prices of food and beverage group grew by 17.3 percent and prices of non-food and services increased by 5.3 percent. Among the food items, the prices of vegetables increased by the highest rate of 73.1 percent, according to the report. Vegetables prices had increased by 2.3 percent in the same period last year.
The prices of fruits and spices also went up by 33.4 percent and 22.1 percent respectively. The prices of cereal grains and legumes rose by 13.4 percent and 30 percent respectively.
Under non-food and services, the price of clothing and footwear increased by 13.7 percent.
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