Although Nepal’s remittance continues to decline and export is yet to improve, it is a matter of relief to see the improvement in the balance of payment situation in the last two months.
Nepal Rashtra Bank has announced that the balance of payments (BoP) situation returned to a surplus in the third month of this fiscal year after deficits in first two consecutive months of the current fiscal.
The overall BoP situation has improved along with the healthy capital and financial flows, especially of capital account transfer, foreign direct investment (FDI) and foreign loans that have contributed to the return of the overall balance of payments to a surplus position, says the first quarter Macroeconomic Report of Nepal Rastra Bank.
BoP returned to a surplus of Rs 4.27 billion after a deficit in the first two consecutive months of the ongoing fiscal. The country had BoP surplus of Rs 19.7 billion in the same period of the previous fiscal year. As per the central bank, the country has received capital transfer amounting to Rs 4.96 billion and FDI inflow of Rs 6.07 billion compared to capital transfer of Rs 2.41 billion and FDI inflow of Rs 5.02 billion in the corresponding period of the last fiscal year.
However, the huge imbalance of foreign trade caused a deficit in the current account. The current account registered a deficit of Rs 21.94 billion in the review period compared to a deficit of Rs 1.97 billion in the same period of the previous fiscal.
Country’s trade deficit widened to Rs 237.44 billion in the first quarter of this fiscal compared to Rs 201.75 billion of the same period of the previous fiscal year. In the review period, the country imported goods worth Rs 257.87 billion against exports of Rs 20.43 billion.
Remittance growth that was below one percent in the previous month has relatively improved in the third month of this fiscal. The country received remittance worth Rs 176.33 billion in the review period compared to Rs 171.8 billion in the same period of the previous fiscal. Remittance growth has however slowed down to 2.6 percent in the first quarter of this fiscal compared to 3.2 percent in the same period of last fiscal year.
The consumer price inflation has moderated to 3.1 percent in mid-October this year from 6.7 percent of the same period of the previous fiscal. Improved supply situation and lower inflation in India helped to tame inflation in the review period, as per the central bank report.
Although the improvement in the economic sector is positive, it is too early to say that Nepal’s overall economy including the BOP will remain in Nepal’s favor even after the elections.
Given the current data of Department of Foreign Employment and shrinking demand for labor in the Gulf countries, Nepal does not have a reliable situation now to sustain the current level of BOP.
Also reads IMF updated charts on recent economic developments, with data available through the end of November which have been posted on the webpage of the Office of the IMF’s Resident Representative in Nepal. Charts end November 2017.pdf