Friday, 9 June, 2023

Balancing The Trade

In recent decades, Nepal has become more dependent on a wide variety of imported items including food, clothes and petroleum fuels. This has had very negative impact on trade balance which plays a crucial role to maintain the health of the national economy. Nepal is also lagging behind in terms of making its own productions to attain economic self-reliance, substitute the volume of import and enhance export. The result is that the country’s trade deficit has further widened. According to data provided by the Department of Customs, the country’s trade deficit has increased by 46.64 per cent in the first six months of the current fiscal year. This raises Nepal’s latest trade deficit amount to Rs. 880.49 billion. In the same period of the previous fiscal year, this amount had stood at Rs. 600.44 billion. Such a widening of the trade deficit has come at a time when economic activities have been hit hard by the COVID-19 pandemic.

Present situation of economic difficulties calls for efforts towards recovery which cannot be done without massive injection of cash capital in production sectors. This is a worrisome indicator that we are squandering hefty amounts of hard earned money into importing goods that make us further dependent on imports rather than attaining self-reliance. This must serve as a notice to the economic planners and policy makers, and in a positive development, the central bank of the nation has recently taken some control measures that aim to check the import flow of the items that do not fall on the list of necessities for general people. It is always reasonable to discourage the import of luxury items that are unproductive, and tend to drain cash capital from domestic investments.

It is a positive sign that Nepal’s export trade increased by 95.48 per cent to Rs. 118.85 billion in the first six months of the current fiscal year. In the same period of the previous fiscal year, the amount stood at Rs. 60.79 billion. Despite this increase in export percentagewise, the amount we earn by exporting our items is immensely lower compared to the amount we spend to import goods. The money that goes out from the country to import various items amounts to Rs. 999.34 billion though the import increase rate in the review period, the first six months of the current fiscal year, was only 51.13 per cent. In Nepal’s total foreign trade, the share of import stands at whopping 89.37 per cent. This points to the precipitous situation of trade imbalance that is not in our favour.

The rate of increase in export in percentage terms is encouraging; what we need to do is to diversify our exportable items that fetch good prices. The focus should be to explore our export market and identify items that are in demand in the international market. Then, the money we spend to import unproductive luxury items should be invested to produce those items that we can export. Even if we cannot produce exportable items, we can still invest in productions that make us self-reliant and help substitute imports. A huge potential is there to invest in hydropower generation which can make us self-reliant in energy and save billions being spent to import petroleum products. There is also possibility of exporting surplus electricity. This can turn the trade balance in our favour.