Remittance, capital spending go down

Kathmandu, Jun 23

The COVID-19 pandemic has caused a serious impact on various economic sectors with remittance inflows, private sector credit, capital expenditure and foreign trade going down, and foreign exchange reserves and current account witnessing the surpluses.

The remittance inflows in mid-May to mid-June 2020 was Rs. 62 billion against Rs. 73.7 billion in the same period last year, according to the Nepal Rastra Bank’s report on the country’s macroeconomic status published on Tuesday.

 In April/May this year, the amount was Rs. 53.9 billion while it was Rs. 72.1 billion last year.

The government had imposed nationwide lockdown shutting down the business and movements to check the spread of the COVID-19 and save lives.

“Remittance inflows decreased by 6.1 per cent to Rs.680.84 billion in the 10 months of the current fiscal year against an increase of 19.6 per cent in the same period of the previous year,” said the central bank.

In the US Dollar terms, such inflows decreased by 7.4 per cent in the review period against an increase of 9.3 per cent last year.

Net transfer income decreased by 6.5 per cent to Rs.772.51 billion this year. Such income had increased by 19.4 per cent in the 10 months of the last fiscal.

Capital expenditure has nosedived to just Rs. 9.1 billion in April/May and Rs. 8.7 billion in March/April this year while it was Rs. 19.4 b illion and Rs. 19.2 billion in the respective months last year.

Government revenue slid to Rs. 16.1 billion in the tenth month of the current fiscal against the Rs. 59.1 billion last year.

Likewise, private sector credit mobilisation witnessed a negative growth by Rs. 13.3 billion in the 10^th month while Rs. 15.6 billion was mobilised in the same month last year. It has further gone down to -15.9 billion in May-June this year.

Exports sink

Another downturn has happened in export trade. The country that exported goods worth Rs. 8.7 billion and Rs. 9.3 billion in mid-April to mid-May and mid-May to mid-June respectively last year has exported goods of Rs. 3.9 billion and Rs. 3.3 billion this year.

Most of the industries, except the food, medicines and essential goods producing companies are shut with the advent of coronavirus and imposition of lockdown. Only about a quarter of industries were operating (only about 40-50 per cent of their capacity) in the first two months of the lockdown.

Since the lockdown was also imposed in most of the trading partner countries, the foreign trade witnessed a downward trend.

Likewise, imports were decreased by half in mid-April to mid-May this year compared to the same period last year. The country that imported goods worth Rs. 116.5 billion last year has imported goods of Rs. 58.3 billion in the 10^th month this year.

The year-on-year statistics show that in ten months of 2019/20, merchandise exports increased by 4.5 per cent to Rs.82.06 billion compared to an increase of 18.9 per cent a year ago.

Merchandise imports decreased by 13.0 per cent to Rs.1025.14 billion this year against an increase of 19.6 per cent in the same period of the previous year.

The decreased imports means the decrease in consumption of foods and other goods as well as contraction in capital formation sectors such infrastructure development and business establishments since most of the capital goods come from India and third countries.

 

Positive indicators

The trade deficit narrowed down by 14.2 per cent to Rs.943.07 billion in the ten months of 2019/20. Such deficit had expanded by 19.7 per cent in the same period of the previous year.

The export-import ratio increased to 8.0 per cent in the review period from 6.7 per cent in the corresponding period of the previous year.

Likewise, the current account that registered a deficit of Rs.105.74 billion in ten months of the current fiscal was Rs.221.77 billion in the same period of the previous year.

Balance of Payments (BOP) remained at a surplus of Rs.120.90 billion against a deficit of Rs.68.20 billion of the previous year.

Meanwhile, foreign direct investment (FDI) has increased in the 10 months of this fiscal. The total FDI stands at Rs.17.42 billion this year against Rs.9.47 billion of the last year.

Gross foreign exchange reserves increased by 18.9 percent to Rs.1235.25 billion in mid-May 2020 from Rs.1038.92 billion in mid-July 2019.

Similarly, of the total foreign exchange reserves, reserves held by NRB increased to Rs.1075.19 billion in mid-May 2020 from Rs.902.44 billion in mid-July 2019.

Published in The Rising Nepal daily on 24 June 2020.