Nepal’s trade deficit rose by 10.52 percent in the first five months of the current fiscal year, standing at Rs 649.68 billion, up from the Rs 587.82 billion registered in the same period last year. This can be attributed mainly to the increased costs of imports, especially petroleum products, crude edible oils, and smartphones, which show an upswing of 15.83 percent, increasing to Rs 766.18 billion, even as the total export value, despite an appreciable 58.17 percent growth, reached Rs 116.50 billion. However, the total trade value reached Rs 882.69 billion, an improvement of 20.07 percent over last year's value. The main imports include diesel, petrol, cooking gas, raw material for iron rods, crude edible oils, gold, and mobile phones, apart from which the top exports include soybean oil, large cardamom, readymade garments, plywood, and woolen carpets. Customs duty, apart from registering an enhancement of 6.68 percent, reached an amount of Rs 197.59 billion, mainly driven by imports of diesel and petrol. Additionally, the import duties contributed 47.62 percent to the total government receipts of Rs 414.90 billion.
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This trade deficit is an indication of the weaknesses inherent within the economy of Nepal. This is due to the fact that the country has large imports of fuel, essential raw materials, and consumer items, as compared to the small output produced for export. This applies even when the export output increases, as evidenced in the production of soybean oil, large cardamoms, or carpets. This output still remains small to compensate for the impact of imports, as the country’s geography makes transportation costly due to being surrounded by mountains. So, what is affecting the Nepali economy? Mainly, our consumption habits are an area of concern. People are buying more stuff—things like electronics, fossil fuel, expensive phones and other fancy items. Because of this, Nepal has been importing more, including luxurious and fancy stuff. The problem is, Nepal isn't making enough of its own products as industries here are not strong to make enough products to address domestic demands. Nepal is thus forced to spend foreign reserves on imports. Second, Nepal has to rely on other countries even for several commodities, as well as loans, and grants. To shrink the trade gap, Nepal needs to make some smart strategies and policy changes while setting up more industries.
One of the ways to close the trade gap is that the government must support businesses to grow while resources need to be spent on bettering the road and transport infrastructure, internet, and other fundamental things that all businesses need. This can help businesses sell their products and reduce the country's need to get items from other places. Right now, Nepal mostly sells edible oil, spices and carpets. Nepal needs to grow on that, selling other major products the world wants. This would get more foreign reserves coming in. The country can also get better by producing its own energy and electronics instead of importing them. Also, more renewable energy like solar power can cut down how much it spends on fuel. If Nepal doesn't get these things done, it’ll keep buying more from other countries than it sells, which will just keep hurting the economy. Basically, the latest figures we see about Nepal's economy are important, as they show the real challenges Nepal faces. If the nation focuses on becoming self-reliant by producing its own goods, it must support the businesses that can compete internationally, and handle imports and exports wisely. By adopting these measures, it can manage its trade deficit, which will help make the economy more stable in the long run.
