BoP in surplus for first time in 2 years
For the first time in two years, Nepal’s balance of payments (BoP) recorded a surplus. According to Nepal Rastra Bank (NRB)’s latest macro-economic report, the country maintained a BoP surplus of Rs 249.1 million in the first 11 months of the last fiscal year.
Reimbursement of foreign grants and rise in inflow of pensions and resources for international non-government organisations pushed the BoP in comfort zone. “BoP recorded a surplus mainly due to reimbursement of foreign grants,” said Maha Prasad Adhikary, deputy governor of NRB.
As of the 11 months, grants went up by Rs 1.24 billion, workers’ remittance by Rs 21.1 billion, while pension inflow surged by Rs 1.49 billion. However, NRB’s target of a BoP surplus of Rs 9 billion is unlikely not be achieved in 2010-11. NRB says the country will witness a BoP surplus of more than Rs 1 billion when figures of the 12th month arrive.
BoP refers to Nepal’s monetary balance between the amount that goes out of the country and the amount that comes in. According to the NRB report, deceleration in the growth of the trade deficit coupled with an improvement in the service account, which led to a decline in the current account deficit, contributed to a marginal level of BOP surplus.
In the first 11 months of 2010-11, the country’s trade deficit went up by only 5.7 percent against 47.8 percent in the same period of 2009-10. Likewise, the service account deficit dropped 44.4 percent to Rs 8.58 billion during the 11 months from Rs 15.44 billon of the previous year. The service account is the balance of income and expenditure in the travel sector including tourists’ arrivals and government spending on consultancy and other services and expenditure for education abroad and travels.
Due to the protracted BoP deficit, the International Monetary Fund had provided $42 million to Nepal to ease the deficit in 2010. The new monetary policy for the current fiscal year has aimed at maintaining a BoP surplus of Rs 5 billion.
Not only BoP, the country also saw some progress in inflation. The NRB statistics show inflation eased to 8.8 percent in the 11 months. After the central bank reduced the pie of food and beverages in overall inflation, price could not rise at a double digit rate in most of the months of the last fiscal year, according to a senior NRB official.
Since last fiscal year, NRB reduced the contribution of food and beverages in total inflation to 47 percent from earlier 53 percent. For the next fiscal year, NRB has projected inflation at 7 percent.
As of the first 11 months of the last fiscal year, food and beverage group witnessed a rise in prices of 14.3 percent compared to 4.3 percent of non-food items.
Posted on: 2011-07-29 09:43
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