NRB 56th anniversary: BoP deficit improves by the inch
There seems to be no light at the end of the tunnel for reversing the current balance of payment (BoP) deficit standing at as high as Rs 11.30 billion as of the eighth month of the current fiscal year.
The BoP refers to the dollar difference of the amount of exports and imports including all financial exports and imports. A negative BoP means that more money is flowing out of the country than coming in.
Although the BoP situation was on the way to improvement until the sixth month of the current fiscal year, the situation aggravated in the seventh and eight months. The shortfall was at Rs 12.57 billion as of the seventh month and the situation improved slightly in the eight month, according to Nepal Rastra Bank (NRB). The situation was worse in the eight month of the last fiscal year— at Rs 19.12 billion.
NRB Governor Yubaraj Khatiwada said despite some improvement in the trade deficit, service trade and transfer income (remittance and pension) and BoP situation is yet to improve.
The country’s export grew by 6.6 percent in the first eight months of the current fiscal year, while import grew by a meagre 1.4
percent. Nepal’s income from export is can sustain only 16.9 percent of imports.
The monetary policy of the current fiscal year targets to keep the BoP surplus at Rs 9 billion and the central bank did not change this projection even during the mid-term review of the policy that revised inflation upward.
The International Monetary Fund (IMF) has already provided loans worth $42.5 million under its rapid credit facility (RCF) to Nepal to improve the BoP situation. RCF is IMF’s flexible financial assistance for low-income countries facing an urgent BoP need. The government has also sought IMF aid under the extended credit facility in which Nepal should pay marginal interest. It is a long-term loan.
Presenting the economic picture of country, Governor Khatiwada said the foreign exchange reserve also the declined by 4.4 percent to Rs 257 billion as of the eighth month. “The reserve is sufficient to fund import for 7.1 months,” he said.
Inflation stood at as high as 10.7 percent in the eighth month, according to NRB. Inflation was at 10.2 percent in the seventh month.
Posted on: 2011-04-28 08:30
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