BOP registers deficit of Rs 25 billion in first month of FY

Published On: September 29, 2018 08:40 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Sept 29: The first month of the current Fiscal Year 2018/19 has seen a surge in the deficit of balance of payment (BOP) amid widening trade imbalance of the country.

According to the 'Current Macroeconomic and Financial Situation of Nepal (based on first month's data of 2018/19)' released on Friday, the BOP slipped into a deficit of Rs 24.77 billion in mid-August, up from the deficit of Rs 3.29 billion in the same period of the last Fiscal Year 2017/18.

The BOP refers to the record of all international financial transactions of a country. The deficit of the BOP is attributed mainly to the rising import and slow growth of export, which means the country imports more goods, services and capital than it exports.

There was only 3.2 percent of increase in the total merchandise exports of the country to Rs 6.92 billion, while the imports jumped a whopping 54.3 percent to Rs 120.61 billion, resulting into the trade deficit of Rs 113.69 billion. This has also led to a deficit of the current account.

According to the central bank's report, the current account registered a deficit of Rs 25.38 billion in the review period compared to a deficit of Rs 5.98 billion in the same period of the previous year.

Similarly, the foreign direct investment inflow also fell to Rs 295.7 million till mid-August from Rs 4.61 billion in the corresponding period of the last fiscal year.

NRB officials are worried that the freefall of Nepali currency against the US dollar in recent weeks is likely to further worsen the external sector position of the country. Due to the sharp depreciation of the Nepali rupee compared to the US dollar, the import bill of the country is going to swell further.

However, the export sector, which stands to benefit from the rupee depreciation, is not in a position to immediately increase production, according to the central bank officials.


Meanwhile, the country has received Rs 73.95 billion in workers' remittance in the first month of the current fiscal year, up by 33.1 percent from the corresponding period of the last fiscal year. The remittance inflow amounted to Rs 55.55 billion in the first month of the last Fiscal Year 2017/18. Experts say that the appreciation of the value of US dollar vis-à-vis Nepali rupee has led to the rise in remittance.

Nepali rupee depreciated 2 percent in mid-August 2018 from mid-July 2018 while it had appreciated 0.6 percent depreciation in the same period of the previous year, according to the NRB. The buying exchange rate per US dollar stood at Rs 111.54 in mid-August 2018 compared to Rs 109.34 in mid-July 2018.

While the value of the total remittance gets increased in the domestic currency for the same amount of the US dollar, workers abroad are also tempted to send additional saving back to the country when the US dollar's value appreciates.

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