July 25: Nepal’s foreign trade declined by 16.58 percent in the last fiscal year compared to the previous year. Last year, imports decreased by Rs 308.71 billion and exports decreased by Rs 42.89 billion, the Department of Customs announced on Monday.

The total foreign trade, which exceeded Rs 2120.47 billion in the year 2021/22, decreased to Rs 1768.87 billion in FY 2022/23. Last year, imports decreased by 16.08 and exports by 21.44 percent.

The size of the foreign trade shrunk due to the government's policy of discouraging imports, which contributes more than 90 percent to the total foreign trade. The government had imposed a ban on the import of some luxury items for almost half of the last fiscal year due to the decrease in foreign exchange reserves.

Although the government had announced incentives for exports, there was a decline in items sent overseas from Nepal.

Exports from Nepal decreased mainly after India reduced the customs duty imposed on the import of raw materials required for making edible oil.

Nepali businessmen used to bring unrefined oil from abroad, process it and export it to India when India had imposed a 40 percent duty on the import of edible oil raw materials from countries other than the South Asian Free Trade Area (SAFTA).

While exporting edible oil from Nepal to India, only 5 percent duty was paid under the SAFTA facility. Later, after India reduced the duty on crude oil export to 2.5 percent, the export from Nepal was negatively affected.

Trade deficit with 132 countries

In the year 2021/22, the country traded with 170 countries of the world and had a trade deficit with 132 countries. There was profit in trade with 38 countries only. Experts say that the trade deficit is increasing due to the lack of domestic products for export.

Nepal’s trade deficit with India was the highest of all while it made profit in foreign trade with Denmark the most.

Former Governor of Nepal Rastra Bank Chiranjeevi Nepal says that the trade deficit will not reduce unless Nepal encourages domestic production.

"We don't have internal production at all. We have only been importing," says former governor Nepal. "To reduce the trade deficit, the government should designate special areas and promote domestic production."

He says that there is a practice of importing unnecessary goods in Nepal.

“Nepali nationals have been making good income through remittance. Therefore, there is a tendency to import unnecessary goods,'' he said.

According to him, the government should promote exports by encouraging the production of goods that have potential in the international market. If that is done, the trade deficit with the partner countries can be gradually reduced.