Nepal external sector performance continues to deteriorate, drawing concern from related stakeholders.<\/p>\n
Despite a steady economic growth rate over the last three years, some of Nepal\u2019s macroeconomic indicators show that all is not well with the country\u2019s external sector.<\/p>\n
According to Nepal Rastra Bank\u2019s (NRB) recent update, the country\u2019s Balance of Payments (BoP) has fallen by NPR 67.4 billion in FY 2018-19 compared to the surplus of NPR 960 million earned in FY 2017-18.<\/p>\n
Alarmingly, Nepal registered a BoP deficit throughout the last fiscal year owing to the increasing trade deficit, along with no earnings in terms of foreign currency.<\/p>\n
Nepal recorded a rise in merchandise imports by 13.9 percent to NPR 1,418.54 billion in 2018-19.<\/p>\n
On the other hand, the country\u2019s exports increased by a smaller margin of 19.4 percent from NPR 97.11 billion. This imbalance between imports and exports resulted in an increased trade deficit of NPR 1,321.43 billion during 2018-19.<\/p>\n
On account of this, the foreign exchange reserve (forex) fell to NPR 1,038.92 billion in mid-July, from NPR 1,102 in the same period during FY 2017-18.<\/p><\/blockquote>\n
However, Nepal portrayed a steady remittance growth in FY 2018-19, which increased by 16.5 percent to NPR 879.27 billion in comparison to 8.6 percent in 2017-18. But it is worth noting that there is a decline in the number of Nepali migrant workers in recent years, which is likely to result in a decline in the remittances earned over the years to come.<\/p>\n
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Economists question whether the government will be able to maintain the economic growth rate, which is largely based on consumption.<\/p>\n
They suggest that the government should create a favorable environment to attract private sector investment and foreign direct investment (FDI) to shift Nepal\u2019s remittance and consumption-based growth to an investment and productivity-driven one.<\/p>\n
Speaking about FDI, Nepal\u2019s FDI Inflow decreased to NPR 13.07 billion in 2018-19 from NPR 17.51 billion in 2017-18.<\/p><\/blockquote>\n
The private sector investment also took a hit due to shortage of funding in the banking sector. Interest rates of banks increased, making it increasingly difficult for business<\/a> firms to draw funds.<\/p>\n
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