BoP refers to the financial position of a country’s international transactions over a period of time. It measures the transaction of goods, services and income between an economy and rest of the world.
Economists attribute the high surplus BoP position of the country to the rise in the remittance, fall in imports and disbursement of foreign aid and grants by donors for reconstruction activities after last year’s earthquakes.
The BoP surplus was Rs 35.07 billion in the corresponding period of Fiscal Year 2014/15.
“Merchandise imports -- particularly petroleum fuels and automobiles -- have fallen drastically in the last few months which in turn has reduced the flow of the money out of the country. On the other hand, remittance inflow is rising significantly,” Keshav Acharya, an economist, says. “These two phenomena led to Capital Account surplus, Balance of Payment surplus as well as increased our foreign exchange reserves,” he adds.
According to NRB, trade imbalance of the country in the review period contracted 12.5 percent to Rs 393.07 billion due to significant falls in merchandise imports. Import of merchandise goods and commodities dropped 13.9 percent to Rs 435.8 billion in the review period, down by 13.9 percent, compared to a rise of 10.5 percent in the same period of the previous year. Similarly, merchandise exports also fell 24.9 percent to Rs 42.73 billion compared to a drop of 6.6 percent same period of the previous year.
While the trade imbalance declined due to a blockade imposed by India for nearly five months since mid-September, remittance inflow has been rising sharply. According to the data, workers’ remittances grew 15.2 percent to Rs 427.37 billion in the review period compared to a growth of 4 percent in the previous year.
The rise in remittances and slowdown in imports also propelled foreign exchange reserves of the country to a record high.
According to the data, Nepal’s foreign exchange reserves stood at Rs 1,006.68 billion in mid-March 2016. The reserves were Rs 824.06 billion in mid-July last year.
Economists say that such huge foreign exchange reserves and the BoP surplus position gives the country a leverage to spend more on development work. However, they also caution that a huge surplus and foreign exchange reserves also send a message that such a position was the result of low capital expenditure of the country.
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