August 25: Coronavirus pandemic has strengthened the external sector of economy despite affecting the country’s economy. Nepal’s Balance of Payment (BoP) surplus reached Rs 282 billion in the last fiscal year due to the decline in imports while the remittance did not decrease as estimated. A report published by the Nepal Rastra Bank on Monday which sheds light on the economic situation of the country in the last fiscal year showed that the Balance of Payment surplus has increased significantly.

Although the country’s exports were affected by the coronavirus pandemic, it also decreased the imports. Nepal’s imports decreased by 15.6 percent to Rs 1196 billion in the last fiscal year as compared to the previous year. The imports had increased by 13.9 percent in the fiscal year 2075/76.

Imports of crude palm oil, soybean, chemical fertilizers, edible oils, computers and its spare parts had increased whereas the imports of petroleum products, means of transportation and their spare parts, MS billets, gold, other machinery and their spare parts had declined in the last fiscal year.

Nepal’s exports improved by 0.6 percent during the review period. Nepal exported goods worth Rs 97.71 billion in the last fiscal year. Exports of palm oil, ayurvedic medicines, herbs, plastic utensils, fruits and other items increased while the exports of CGI sheets, wire, polyester yarn and threads, readymade garments, carpets have decreased in the recent times.

Contraction of Trade Deficit

The trade deficit shrunk by 16.8 percent to Rs 1099.9 billion in the fiscal year 2076/77. The deficit had increased by 13.5 percent in the previous year. The ratio of trade deficit to GDP is 29.2 percent. The ratio of export to import has become 8.2 percent in the year under review. This ratio was 6.8 percent in the previous year.

Improvement on Foreign Exchange Reserves

The foreign exchange reserves have improved by 35 percent amounting to Rs 141 billion. The current reserves will be enough to support the imports of 14.4 months’ worth of goods and 12.7 months’ worth of goods and services.

Similarly, the current account deficit has decreased from Rs 265.37 billion in the previous year to Rs 32.6 billion last year by 87.9 percent.

Remittance Income Did Not Decrease by Much

The remittance income has decreased by much less than it was estimated due to coronavirus. Remittance declined by 0.5 percent. The total remittance inflow was Rs 875.3 billion in the last fiscal year. Remittance decreased by 3.3 percent in terms of American dollars. Under normal circumstances, Nepal, in an average has an inflow of remittance of around Rs 73 billion per month.

Increased Inflation

The rate of inflation was 6.15 percent in the fiscal year 2076/77. According to the annual report published by Nepal Rastra Bank, the average rate of annual inflation on food and beverages has increased by 8.16 percent.  The inflation rate was limited to 3.9 percent in the fiscal year 2076/77. Similarly, the rate of inflation on non-food and services group has reached 4.61 percent. The group had an inflation rate of 5.86 percent in the previous year.

Gunakar Bhatts, spokesperson for Nepal Rastra Bank,  said that even though the overall annual inflation had increased, it declined to some extent till mid-July. However, he expressed that the lockdown since the past 4 months has caused a loss of business for everyone and has decreased the consumption capacity due to the lack of income.

Surplus on Balance of Services

Balance of Services are in surplus because of the decline in the visit of foreign countries for travel as well as for education in their universities. The net balance of services was in surplus of Rs 1.22 billion in the fiscal year 2076/77 when it was in deficit of Rs 15.23 billion in the previous year. Meanwhile, the travel expenditure account has decreased by 40.1 percent to Rs 53.14 billion.