Nepal’s trade deficit shows improvement at 15.45 pc decline in fiscal year 2022-23

KATHMANDU: Nepal’s trade deficit for the fiscal year 2022/23 has seen a significant improvement, declining by 15.45 percent to Rs 1.454 trillion. This decline can be attributed to the government’s proactive measures to control imports, prompted by concerns over depleting foreign currency reserves and a decrease in people’s income due to the recession.

The Department of Customs (DoC) records reveal that Nepal’s trade deficit in the previous fiscal year, 2021/22, had reached Rs 1.720 trillion. However, in the last fiscal year, it managed to reduce by Rs 266 billion, bringing relief to the country in terms of foreign currency outflow.

The decrease in the trade deficit is primarily a result of a noticeable reduction in the country’s import expenses. During the review period, Nepal’s total import of goods was valued at Rs 1.611 trillion, marking a decline of 16.08 percent.

This reduction in foreign spending is mainly attributed to the government’s imposition of a six-month ban on the import of luxury items during the last fiscal year.

In December 2022, the government lifted the 10-month long ban on luxury goods imports, and on January 19, Nepal Rastra Bank removed the requirement for importers to maintain up to a cent percent cash margin against their letters of credit (LCs) while importing goods.

The records from the DoC indicate that imports surged after the import restrictions were lifted. By mid-January 2022/23, the country’s import expenses had reached 792.66 billion. Over the six months following the complete removal of import restrictions, Nepal imported goods worth Rs 818.34 billion.

Notably, the import amount soared significantly in the latter months towards the end of the last fiscal year. As of mid-March of the review period, imports stood at Rs 1.058 trillion, which then increased to Rs 1.201 trillion by mid-April.

Subsequently, it further rose to Rs 1.480 trillion by mid-June. In the final month of the fiscal year 2022/23 alone, Nepal imported goods worth Rs 131 billion.

Conversely, along with the decline in imports, the country’s export earnings also suffered, experiencing a 21.44 percent decrease. Nepal earned a mere Rs 157.14 billion from its exports in the previous year.