Kathmandu Post

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NRB report on macro-economy: BoP posts record surplus

KATHMANDU, JAN 01 -
The country’s Balance of Payments (BoP) has recorded the highest-ever surplus of Rs 46.31 billion as of the first four months of the current fiscal year. The country started keeping BoP records in 1974-75.

The acceleration in the growth of remittance along with the improvement in the service account helped maintain a comfortable BoP situation, according to the Nepal Rastra Bank (NRB).

After remaining in deficit for two years, the country’s BoP turned surplus in the second last month of the last fiscal year and continued to grow since. In the same period last year, the BoP had recorded a deficit of Rs 5.72 billion. Nepal was compelled borrow $42.5 million from the International Monetary Fund under its rapid credit facility to address BoP deficit one-and-a-half years ago.

“The improved BoP figure is certainly a positive indicator for the national economy as it suggests strong external sector,” said Bhaskarmani Gnawali, spokesperson for NRB.

Over the review period, remittance inflow grew by 34.2 percent to Rs 103.20 billion compared to a 13.6 percent growth in the same period a year ago. Under the service account, income from tourism rose by 33.4 percent, against a decline of 14.7 percent in last year’s corresponding period. NRB officials said the Nepal Tourism Year contributed largely in generating a substantial income from tourism.

Besides increased remittance and tourism income, reduced expenditure by Nepali students for abroad study is another factor that ensured a better BoP situation. The expenditure decreased by 10 percent in the four months compared to the same period last year.

The country’s foreign exchange reserves also surged notably over the period. The forex reserves increased by 25.9 percent to Rs. 342.74 billion as of mid-November 2011—the highest-ever figure, according to Ganwali. The figure was at Rs 272.15 billion as of mid-July 2011. The devaluation of the Nepali currency against the US dollar also fuelled forex reserves growth.

The domestic currency depreciated by 12.13 percent against the dollar over the review period, according to the central bank. After several years, the country’s foreign exchange reserves was able to finance merchandise imports for 10.3 months and merchandise and service imports for 9.1 months, according to NRB.

Despite an immense trade deficit of Rs 107.53 billion as of the fourth month, exports, of late, are performing relatively well. Merchandise exports rose by 10.7 percent to Rs 23.69 billion, against 7.7 percent growth in the same period last year, while imports also grew by 11.8 percent to Rs 135.49 billion.

Inflation came down to 8.5 percent in the fourth month of the current fiscal from 8.9 percent as of third month. However, non-food items were the major components to fuel inflation unlike earlier years when food items caused price rise. The price index of food items stood at 8.4 percent and non-food items at 8.5 percent.

The price index of non-food items surpassed that of food items after a long time, according to Gnawali. “One of the main reasons for the rise in non-food items’ prices is the devaluation of the Nepali rupee against the US dollar,” he said.

As a result of the strong dollar, goods imported from third countries have become expensive. As the dollar further appreciated in the fifth month, non-food items’ prices are likely to go up further.

Posted on: 2012-01-02 09:45

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