Nepal’s BOP in surplus even as world reels from economic downturn

Published On: June 17, 2020 02:20 PM NPT By: Republica | @RepublicaNepal

Narrowed trade deficit, improvement in foreign direct investment leads to a BOP surplus of Rs 120.9 billion in first 10 months of current FY 2019/20

KATHMANDU, June 16: The country’s Balance of Payments (BOP) remained at a surplus in the first 10 months of the current fiscal year 2019/20 even as the world was reeling from economic downturn due to the Covid-19.

According to the Current Macroeconomic and Financial Situation Report released by the Nepal Rastra Bank (NRB), the BOP remained at a surplus of Rs 120.9 billion compared to a deficit of Rs 68.2 billion during the same period in the last fiscal year.

The BOP is a statement of all transactions made by a country with the rest of the world, which depicts the external sector position of the country.

In US Dollar terms, the overall BOP recorded a surplus of $ 1.01 billion in the review period compared to a deficit of $ 600.2 million in the same period last year.

Narrowed down trade deficit with fall in import expense and a rise in export earnings along with an improvement in inflows of foreign direct investment during the period have been attributed to an improvement of external sector condition of the country.

The improved BOP has given a cushion to the country that is largely dependent on imported goods. Foreign currency reserves went up 18.9 percent to Rs 1,235.25 billion as of mid-May. The reserve stood at Rs 1,038.92 billion in mid-July 2019. The foreign currency reserve with the country is sufficient to finance goods and services imports of 10.8 months, according to the NRB’s report.

The current account, however, registered a deficit of Rs 105.74 billion in the review period. Trade balance and remittance are among the main components of the current account balance. As per the report, remittance inflows declined 6.1 percent to Rs 680.84 billion. In the same period last year, there was an increase in earnings from remittance by 19.6 percent. Having a small export basket, the country earned Rs 82.06 billion from exports compared to Rs 1,025.14 billion in imports.

In the review period, the country welcomed foreign direct investment of Rs 17.42 billion, up from Rs 9.47 billion last year.