Trade deficit shrinks 9%to Rs 414 billion in four months

Published On: November 30, 2019 09:20 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Nov 30: Trade deficit of the country shrunk by 8.9% in the first four months of the current fiscal year – FY2019/20 to Rs 414.02 billion compared to the corresponding period of the previous fiscal year.

According to the Department of Customs’ data released on Friday, the total trade deficit narrowed by Rs 40.46 billion in the first four months of the current fiscal year from Rs 454.48 billion in the corresponding period of the FY2018/19. The trade deficit fell in the review period owing to low imports and growth in the country’s exports.

While total imports of merchandise goods went down by 6.92% to Rs 450.3 billion, exports surged 23.9% to Rs 36.28 billion, data shows. The decline in imports coupled by a surge in exports has also brought down import to export ratio to 12.4 in mid-November 2019 from 16.5 in the same period a year ago. This means that Nepal imported goods worth Rs 12.4 in the first four months of the current fiscal year for the export of good worth one rupee.

The data offers a fresh respite to the government which has long been struggling to improve the trade imbalance that the country has been facing. 

Experts say that the government’s recent measures to reduce deficits along with weakness that some sectors, like construction, are said to have witnessed in recent months led to a decline in imports. The sudden spike in exports, however, is largely driven by palm oil, a commodity that has been first imported apparently to transport to India. The data shows that palm oil accounts for nearly one-fourth of the total export figure. 

Not only have imports fallen, the total foreign trade of the country has also went down in the review period. The export growth was not adequate to offset the decline in imports. According to the department, the total foreign trade decreased by 5.16% to Rs 486.58 billion.

The drop in foreign trade, particularly imports, however, also spells trouble for the government which is struggling to raise revenue which is a predominant source of financing for its expenditures. 

The import duty collected at custom offices accounts for nearly 40% of the total revenue that the government mobilizes. According to the department, it collected Rs 46.15 billion in imports duty, down by Rs 47.47 billion in the corresponding period in the last fiscal year.

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