BOP Surplus Stumbles As Trade Deficit Widens

Balance of payment (BOP) hit the rock bottom in the fiscal year 2020/21. The Nepal Rastra Bank (NRB) report of the current macroeconomic and financial situation of 2020/21 recorded that (BOP) remained at a surplus of Rs. 1.23 billion dwindling from the previous fiscal year (FY) when the BOP surplus was Rs. 282.41 billion.

The BOP dynamics in Nepal are mainly influenced by the persistent current account deficit which in turn is caused by magnificent imports remittance income, capita transfer, and net foreign direct investment.

The data of the report published recently implied that despite the emboldening exports, huge imports dented the BOP surplus of the FY 2020/21. The current account deficit widened to Rs. 333.67 billion in the FY 2020/21 up from Rs. 33.67 a year earlier, according to the report.

Despite breaking its preceding records, the exports rose impressively by 44.43 per cent in the FY 2020/21 amounting to Rs. 141.12 billion.

Reduction in the income obtained from foreign tourists also substantially hurt the BOP surplus. Income from foreign tourism dwindled by 88 per cent to Rs. 7.27 billion in the review year of 2020/21 from the previous Rs. 60.89 billion.

The Executive Director of the NRB Dr. Prakash Kumar Shrestha said that the main reason behind downsized BOP surplus in the FY 2020/21 is the unprecedented increase in imports. He further observed although the Foreign Direct Investment increased, its impact on the BOP surplus remained quite marginal.

Meanwhile, capital transfer, FDI inflow, and remittance ameliorated the impact of huge imports on the BOP surplus. Capital transfer increased by 7.4 per cent to Rs. 15.26 billion from the previous year’s Rs. 14.21 billion and the rise in FDI to Rs. 19.51 billion inching up 0.2 per cent from the previous review period of Rs. 19.48 billion. Remittance inflow went up by 9.8 per cent to Rs. 961.05 billion up from Rs. 875.03 billion in the review period of 2019/20.

Source : TRN,