Tuesday 16th August 2022

Forex reserves rise by $170 million within a month.


Published on : 12 July, 2022 2:49 pm

Kathmandu: According to the most recent macroeconomic update released by the Nepal Rastra Bank (NRB) today, a slight improvement in remittance inflow and import restrictions on some non-essential goods appear to have supported the country’s foreign exchange reserves, which increased by $170 million in the one-month period between mid-May and mid-June.

According to the central bank, the country’s gross foreign exchange was $9.45 billion in mid-June as opposed to $9.28 billion in mid-May. However, the foreign exchange reserves have fallen 19.6% from $11.75 billion in mid-July 2021 over the first 11 months of current fiscal.

The amount of goods exported during the first 11 months of the current fiscal year increased by 53.3% to Rs 185.84 billion, compared to a rise of 37.8% during the same time the year before. However, because imports rose at the same time as exports, the trade deficit did not decrease.

Compared to the 11 months of the previous fiscal year, when imports increased by 25.7%, they increased by 27.5% to Rs 1,763.22 billion.

While the export-import ratio increased from 8.8% to 10.5% in the review period from the equivalent time the previous year, the overall trade imbalance increased to Rs 1,577.38 billion, or 24.6% of total trade.

The ratio of capital goods to total exports remained minimal at 0.02 percent during the review period, according to the Broad Economic Categories (BEC), accounting for 47.4 percent and 52.6% of total exports, respectively.

The percentage of intermediate, capital, and final consumer items in total exports during the same period last year was 29.7%, 0.4%, and 69.9%, respectively.

In terms of imports, final consumer products accounted for 37.4% of total imports, capital goods 10.2%, and intermediate goods 52.4% during the study period.

In the same time period the year before, these ratios were respectively 53.5%, 11.8%, and 34.7%.

As a result, the current account deficit increased to Rs 595.73 billion during the review period from Rs 298.11 billion during the same period the year prior.

Similarly, the balance of payments (BoP) remained in deficit throughout the review period, amounting to Rs 269.81 billion, up from Rs 15.15 billion during the same time last year.

Based on the 11 months of imports in the current fiscal year, the banking sector’s foreign exchange reserves are enough to fund the anticipated imports of goods for 7.53 months and services for only 6.73 months.

Remittance inflows, which had been declining since the start of the current fiscal year, however, showed a minor improvement, rising by 3.8% to Rs 904.18 billion in the review period compared to a gain of 12.6% in the same time of the previous year.

Apart from the increase in remittances, the most recent macroeconomic report, according to economist Dilli Raj Acharya, reveals negative economic indications.

The country’s current account, balance of payments, and foreign exchange reserves are under pressure from Nepal’s expanding trade deficit, which is a result of high prices and a strong dollar, according to Acharya.

Therefore, implementing measures to promote economic stability should be the main emphasis of monetary policy for the upcoming fiscal year.

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