BIJAY DAMASE

KATHMANDU: Due to the slowdown in the country's economy, foreign trade has continuously declined over the last two years. According to data released by the Department of Customs on Monday, both imports and exports decreased in FY 2023/24 compared to the previous year.

In FY 2023/24, goods worth Rs 1592.98 billion were imported, a decrease of 1.16 percent from the previous year. Exports amounted to Rs 152 billion, which is 3.03 percent less than the previous year.

In FY 2022/23, imports were Rs 1611.73 billion, already showing a 16 percent decline from the previous year. Exports that year totaled Rs 157 billion, a decrease of 21.44 percent compared to the prior year.

Typically, a decrease in imports in one year is followed by an increase in the next. However, this year, imports have declined for two consecutive years, alongside a drop in exports. Although both imports and exports have decreased, the significant share of imports in foreign trade means the reduction in imports has had a notable impact on the trade balance. There was a marginal improvement in the foreign trade deficit last year.

During this period, total foreign trade decreased by 1.33 percent, according to the Department of Customs. The highest amount of goods, worth Rs 150 billion, was imported in the month of Jestha (mid-May to mid-June) last year, followed by imports worth about Rs 149 billion in Ashoj (mid-September to mid-October), and Rs 137 billion in Asar (mid-June to mid-July). Director of the Department of Customs Punya Bikram Khadka attributed the overall decrease in imports to lower international prices and reduced domestic demand.

Fluctuations in foreign trade disrupt the structure of the economy. The National Statistics Office reported negative growth rates in trade, manufacturing, construction, mining, and mineral sectors in the third quarter of last year (mid-January to mid-April). The trade and construction sectors, in particular, faced significant challenges. Among the 18 sectors measuring the economy, the business sector, which is second only to agriculture, contributes around 14 percent. It is estimated that the business sector experienced a 2.7 percent decline in the third quarter of last year. Similarly, the construction sector, which contributes 5 percent to the economy, saw an 11 percent decline.

Hemraj Regmi, Deputy Chief Statistics Officer of the National Statistics Office, emphasized the need to improve certain aspects of trade, given its importance in measuring economic growth in Nepal. "Decreasing imports of vegetables, fruits, fish, and meat strengthens the domestic economy," he said. "However, it is concerning to see a decline in the import of construction materials like bulldozers and trucks, as these items are crucial for capital creation."

Regmi noted that a decrease in the import of petrol and petrol-powered vehicles, due to increased electricity production, should be viewed positively.

Trade Deficit with Most Countries

In FY 2023/24, Nepal engaged in foreign trade with 170 countries but maintained a trade surplus with only 35. Nepal experienced the largest trade deficits with neighboring countries to the south and north. The trade deficit with India amounted to Rs 893 billion, while the deficit with China was Rs 296 billion. Among countries with trade surpluses, Nepal registered a surplus of Rs 466 million with Afghanistan and Rs 767,000 with Antigua and Barbuda. Other notable surpluses included Rs 2.5 million with Aruba, Rs 1.5 million with the Bahamas, and Rs 10 million with Bermuda. However, trade profits with other countries were minimal.

Last year's total trade deficit stood at Rs 1440 billion, with goods worth Rs 157 billion exported from Nepal.

A Surge in Electric Vehicle Imports

FY 2023/24 witnessed a significant increase in electric vehicle (EV) imports. A total of 11,701 private electric cars and jeeps were imported, nearly three times the 4,050 electric vehicles imported in the previous year. Most electric cars imported had capacities between 50 and 100 kW, with 6,885 cars in this category. Additionally, 4,571 cars with capacities up to 50 kW, 217 units with capacities between 101 and 200 kW, 27 units with capacities between 201 and 300 kW, and one unit above 300 kW were imported.

Most electric vehicles were imported from China, accounting for 8,065 units, or about 69 percent of the total electric four-wheeler imports. The value of electric four-wheelers imported in FY 2023/24 was Rs 29.48 billion, generating Rs 13.28 billion in tax revenue.

Environmentalist Madhukar Upadhyay attribute the surge in EV imports to changes in tax rates. He supports the continued tax exemptions for electric vehicles to reduce environmental pollution. Some economists argue for higher taxes on private electric vehicles and greater emphasis on public transportation.