Insight into Nepal’s Balance of Payments (BoP) for the ten months of FY 2018-19 reveals that the country’s external sector has dipped further, projecting a deficit of NPR 68.2 billion.
According to Nepal Rastra Bank’s Current Macroeconomic and Financial Situation report, Nepal’s BoP deficit during the same period last year was NPR 18.93 billion.
BoP is a record of all international trade and financial transactions made by a country’s residents.
Nepal has been experiencing a BoP imbalance since the last fiscal year, mainly due to the rise in the current account deficit and poor financial inflows.
According to NRB, Nepal’s current account showed a deficit of NPR 221.4 billion as compared with NPR 192.05 billion during 10 months of FY 2017-18.
Likewise, Nepal received NPR 9.47 billion from Foreign Direct Investment (FDI) during the first ten months of the current fiscal year, down from NPR 14.15 billion Year-on-Year.
On the other hand, the NRB report projected an increase of 20 percent in Nepal’s remittance inflow, touching NPR 725 billion.
However, the increased remittance inflow failed to reduce the increasing trade deficit. NRB data shows the trade deficit increased 19.7 percent to NPR 1,099.6 billion in ten months of FY 2018-19.
Similarly, foreign exchange reserves dropped to USD 9.42 billion in mid-May 2018-19, down USD 10.08 billion in mid-July 2019-20.
However, NRB officials assured that the depletion is not a matter of concern as the international reserves continue to be at a suitable level and can cover another eight months of trade.