balance of payments (BoP) deficit increases again

KATHMANDU, FEB 24 -

Despite relative improvement in foreign trade, Nepal’s balance of payments (BoP) recorded a deficit of Rs 4.43 billion in the first half of the fiscal year. The BoP surged by more than a billion rupees in the sixth month (mid-December to mid-January).

After reaching Rs 6.88 in the third month of the current fiscal year, the BoP deficit declined in the following two months.

“Delays in reimbursement of counterpart funds by donors are one of the reasons behind the surge in the BoP deficit,” said a senior Nepal Rastra Bank official. “This has happened due to a slowdown in the government’s development spending funded by donors.” NRB had aimed to decrease the BoP deficit every successive month

NRB’s half-yearly macro-economic situation report shows there has been a drop in imports, thanks to a substantial decrease in gold imports. As per the NRB report, imports declined by 1.6 percent to Rs 185.83 billion in the first half of 2010-11. Excluding the import of gold, imports of other products showed an increase of 18.7 percent. Such imports had grown by 40.2 percent to Rs 188.81 billion in the same period last year.

There has been an improvement in the country’s export sector. NRB said exports rose 5.9 percent to Rs 32.63 billion during the review period. Exports had declined by 11.1 percent during the same period last year. According to NRB, exports to India and third countries surged by 9.7 percent and 0.5 percent respectively during the period under review.

The liquidity crunch is likely to stay for some more time as the NRB report shows a widened gap between deposits and lending of commercial banks in the last six months. The first half of the current fiscal year saw deposits increasing by only Rs 3.78 billion against an increment in lending of Rs 45.93 billion.

This huge gap between deposits and lending, according to bankers, is due to a slowdown in government spending and enforcement of anti-money laundering policies. “The government hasn’t been able to expedite development expenditure,” said NRB spokesman Bhaskar Mani Gyawali. “Once government spending picks up pace, there will be an improvement in it.”

According to the NRB report, inter-bank transactions of commercial banks reached Rs 201.68 billion during the first six months compared to Rs 150.90 billion last year. “This is due to a squeeze in liquidity,” said Sashin Joshi, CEO of NIC Bank. “With deposit mobilisation remaining slow, banks had no alternative but to go for inter-bank transactions to provide funds.”

Remittance inflow growth remained at 11.5 percent in the first half of the fiscal year. Nepal received remittance worth Rs 118.45 billion during this period.
BoP Deficit

Month Amount (in Rs billion)

Sixth month 4.43

Fifth month 3.35

Fourth month 5.03

Third month 6.88

Second month 4.36

First month 0.31



Posted on: 2011-02-24 08:55
http://www.ekantipur.com/2011/02/24/business/bop-deficit-increases-again/330053.html