July 26: Nepal’s trade deficit increased by 23 percent during the last fiscal year despite measures taken by the government to restrict imports.

According to the Department of Customs, Nepal’s trade deficit has climbed to Rs 1720 billion.

As per the data released by the Department of Customs on Monday, Nepal imported goods worth more than Rs 1,920.44 billion from different countries during the review year.

The government had taken measures to restrict imports since last winter after excessive imports resulted in a decline in foreign exchange reserves.

Nepal Rastra Bank (NRB) introduced a provision on December 20, 2021 requiring 50 percent cash margin for the import of goods and products under 20 different harmonic codes. Almost a month and a half later, the central bank increased the number of goods requiring cash margin for LC before they could be imported into the country. In March, the central bank officials informally instructed the CEOs of commercial banks not to open LCs for importing personal vehicles and luxury goods.

As such measures failed to discourage imports, the Ministry of Industry, Commerce and Supplies issued a notice in the Nepal Gazette on April 26 banning the imports of 10 items including two wheelers above 250 cc, private vehicles, playing cards, readymade liquor among others. The ban on import of those ten items has been extended until August 30.

The country’s exports also increased significantly during the last fiscal year. However, it too failed to reduce the trade deficit because the size of exports was negligible compared to the size of imports.

Nepal’s exports increased last year by 41.74 percent compared to the  pervious fiscal year. The total exports during the review year stood at Rs 203 billion.

A large amount of Nepali currency went out of the country in a period of one year for the import of petroleum products. The cost of purchasing fuel has increased due to price hike and increase in consumption.    
Data released by the Department of Customs shows that Nepal imported petroleum products worth Rs 320.32 billion from India in the last fiscal year (FY 2021/22).    
The largest amount has been spent on importing diesel in the review year. Nepal spent over Rs 168.23 billion in diesel import in the last fiscal year.    
Similarly, Rs 71.38 billion was spent on importing petrol, Rs 65.55 billion on import of cooking gas (LPG) and Rs 15.15 billion on import of aviation fuel in the review period.    

Looking at the data of the last five years, imports seems to have doubled during this period.

Nepal had imported goods worth Rs 984 billion in the fiscal year 2016/17, which increased to Rs 1920 during the last fiscal year.