Nepal's trade deficit shrinks by 17.9% in first eight months of FY 2022/23

KATHMANDU, April 12: Merchandise exports in Nepal decreased by 29.1 percent to Rs.104.80 billion in the first eight months of Fiscal Year 2022/23. This is a significant drop from the 82.9 percent increase recorded during the same period the previous year, according to a recent report on the country's macroeconomic situation released by Nepal Rastra Bank (NRB).

The report revealed that exports to India and China fell by 37.5 percent and 4.9 percent respectively, while exports to other countries increased by 6.0 percent. Notably, exports of zinc sheet, cardamom, particle board, woolen carpets, and tea increased, while exports of soybean oil, palm oil, oil cakes, textiles, silverware, and jewelry decreased.

Meanwhile, merchandise imports also decreased by 19.1 percent to Rs.1058.39 billion during the same period, compared to a 38.6 percent increase the previous year. Imports from India, China, and other countries declined by 17.6 percent, 21.7 percent, and 21.4 percent respectively. The report also highlighted that imports of transport equipment & parts, medicine, M.S. billet, crude soybean oil, telecommunication equipment and parts, among others, decreased, while imports of petroleum products, chemical fertilizer, sponge iron, gold, and other stationeries increased.

The total trade deficit decreased by 17.9 percent to Rs.953.59 billion in the first eight months of 2022/23, down from an increase of 34.5 percent during the same period the previous year. The export-import ratio decreased to 9.9 percent from 11.3 percent in the corresponding period of the previous year.

Looking at the composition of foreign trade, the report noted that intermediate and final consumption goods accounted for 54.5 percent and 45.0 percent of total exports, respectively, while the ratio of capital goods remained negligible at 0.5 percent. In the same period of the previous year, the ratio of intermediate, capital, and final consumption goods was 47.3 percent, 0.02 percent, and 52.7 percent of total exports, respectively.

On the import side, the share of intermediate goods remained at 53.3 percent, capital goods at 8.5 percent, and final consumption goods at 38.2 percent in the review period. In the same period the previous year, the ratios were 53.5 percent, 10.7 percent, and 35.7 percent, respectively.

The y-o-y unit value export price index, based on customs data, increased 4.1 percent, while the import price index increased 6.0 percent in the eighth month of 2022/23. The terms of trade (ToT) index decreased by 1.7 percent compared to a decrease of 2.2 percent the previous year.

In terms of net services income, Nepal's deficit remained at Rs.49.08 billion in the review period, compared to a deficit of Rs.66.25 billion in the same period the previous year. The report highlighted that travel income increased 98.6 percent to Rs.37.12 billion in the review period, up from Rs.18.70 billion in the same period the previous year. However, travel payments also increased by 50.7 percent to Rs.76.12 billion, including Rs.54.70 billion for education, up from Rs.50.50 billion and Rs.30.38 billion, respectively, in the same period the previous year.