KATHMANDU, Oct 23: Nepal´s Balance of Payment (BoP) position worsened in the first two months of the current fiscal year, recording a deficit of Rs 10.5 billion.

According to the ´Current Macroeconomic Situation of Nepal´ report issued by the Nepal Rastra Bank (NRB) on Wednesday, BoP logged a heavy deficit as the current account registered a deficit of Rs 9.98 billion in the review period.

Balance of payments refers to an accounting record of all monetary transactions between a country and the rest of the world which include payments for the country´s exports and imports of goods, services, financial capital, and financial transfers.

The deficit in BoP and current account in the review period is a sharp contrast to a surplus in the corresponding period of the last fiscal year 2013. BoP had recorded a surplus of Rs 33 billion in the corresponding period of last fiscal year against the backdrop of current account surplus of Rs 18.35 billion.

According to economists, BoP deficit is a matter of concern for the country. "BoP measures the overall economy of the country. Despite surging import, Nepal had been enjoying BoP surplus so far due to rise in remittance flow. BoP deficit means something is wrong," former NRB Governor Deependra Bahadur Kshetry told Republica. "I do not see any reason for the drop in remittance flow because the dollar has not depreciated much in comparison to the domestic currency, nor the flow of migrant workers has come down.

The depreciation of US currency could result in the slowdown in remittance flow as the workers postpone their plan of sending money home, expecting that the price of dollar would go up.

Kshetry also said that the country should not make remittance the mainstay of the economy. "BoP surplus situation can be achieved in a sustainable manner by increasing industrial productions and expanding service sector, among others," he added.

According to the report, migrant workers´ remittances decreased by 1.1 percent to US$ 871 million in the review period, compared to an increase by 19.6 percent in the same period of the previous year.

Meanwhile, country´s trade deficit continued to widen in the first two months of current fiscal year 2014/15 amid steep rise in imports and sluggish exports. Trade deficit jumped by 25.2 percent to reach Rs 111.93 billion as at mid-September (Bhadra end). Trade deficit had increased by 16.6 percent in the same period of last year.

Nepal faced trade deficit of Rs 73.34 billion with India in the review period. Such deficit stood at Rs 14.34 billion and Rs 24.25 billion with China and ´other countries´, respectively.

Nepal´s trade deficit with India, China and ´other countries´ stood at Rs 59.48 billion, Rs 10.16 billion and Rs 19.74 billion, respectively, in the corresponding period of 2013/14.

According to the report, rise in trade deficit was due to decline in export to import ratio. Export to import ratio declined to 11.4 percent in the review period. Such ration was at 14.5 percent in the same period of 2013/14.

Similarly, the gross foreign exchange reserves decreased by a marginal 0.7 percent to Rs 660.8 billion in mid-September from Rs. 665.41 billion recorded in mid-July 2014. Such reserves had increased by 9.6 percent to Rs 584.61 billion in the same period of last year.

Source: Republica