According to monthly economic report prepared by Nepal Rastra Bank (NRB) released on Wednesday, the BOP deficit was a whopping 185 percent higher than a surplus of Rs 25.68 billion recorded during same period. [break]
The rise in deficit in the current account -- BOP´s one of the two primary components that shows net amount a country has earned -- has emerged as an imminent threat to country´s monetary stability. The report showed that current account deficit has increased to Rs 30.76 billion from a surplus of Rs 20.3 billion recorded during same period last year.
Likewise, remittance inflows also recorded a slow growth of 13.6 percent against a strong 58.6 percent growth seen during the same period last year. However, pension receipts of Nepalis, who mainly served in foreign security forces, increased by 77.7 percent to Rs 15.6 billion.
The report pointed out the deadly combination of dwindling exports and swelling imports as the crux of the country´s economic problem. Country´s total exports further shrunk by 9.8 percent to Rs 35.8 billion whereas imports surged by 42.2 percent that fueled trade deficit by 59.9 percent. Exports to both India and third countries declined by 4.6 percent and 17.7 percent respectively during the period, the report stated.
- BOP deficit swells to Rs 21.8 billion
- Trade deficit widens by 59.9 percent
- Remittance growth slows 13.6 percent
- Salary index rises by 16.7 percent
- Foreign reserves shrinks by 13.5 percent
Nepal´s both overseas export pillars, readymade garments and woolen carpets, declined by 18.6 percent and 30.3 percent while imports from both India and third countries rose by 36.1 percent and 50 percent respectively.
As the result, Nepal´s total foreign currency reserves declined by 13.5 percent to Rs 242.2 billion and the amount according to NRB is sufficient to support imports of merchandise and services for 6.7 months.
The long-running mismatch between the growths of deposit mobilization and credit investment, which experts point out as major cause for tightening liquidity of banking system, continued even during the seventh month.
According to the report, the total deposit mobilization of commercial banks increased by 3.9 percent to Rs 571.3 billion whereas their total credit expanded by 13.3 percent during the same period. Despite sluggishness, loans and advances flow to private sector increased by 17.7 percent to Rs 509.1 billion by mid-February.
Similarly, the national salary wage rate index also rose by 16.7 percent over the period compared to 16.5 percent recorded during the same period last year. Of the major groups, education sector saw the highest salary increment of 22.4 percent followed by wages of agricultural labors that increased by 20.7 percent.
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