Kathmandu, October 24, 2022 – There are worries about the balance of payments (BoP), as the country’s foreign exchange reserve is under pressure. According to Nepal Rastra Bank, the improvement in the BoP over the last quarter is largely due to an increase in remittance inflow compared to the same period last year as well as a narrowing of the trade deficit. Remittance inflow, on which Nepal’s economy largely depends, grew by 19.8 per cent. Merchandise imports were down by 13 per cent, while merchandise exports plunged by 34.9 per cent. Despite some improvement in the BoP, the deficit is still high.
Imports have slumped compared to last year because the government has prohibited the import of certain non-essential luxury goods. Despite pressure from the business community, the prohibition will continue till mid-December. Nepal’s ever-growing trade deficit over the years is worrisome, although it is a 9.4 per cent decrease compared to the corresponding period last year.
Reliance on remittance to shore up Nepal’s forex reserve does not seem to be in the interest of the country. Countries like Laos, Cambodia, and Mongolia export goods worth billions of dollars annually. Critics say that it is not necessary for Nepal to lag behind.