Nepal’s trade deficit with key trade partners continues to go up

Kathmandu, Jan. 7:

Nepal has failed to diversify its international trade as well as lessen the trade deficit with its major trade partners.

The trade deficit with India, Germany, China and Bangladesh has been bearing the same fate since the last half decade with shrinking exports and swelling imports, except with the United States of America, according to the statistics of the Trade and Export Promotion Centre (TEPC).

Even though the country, a couple of years ago, had formulated the Nepal Trade Integration Strategy, which identified the goods with export potential and implemented promotion campaigns of ‘Made in Nepal’ goods in the international market, and put its efforts to diversify the international trade, following the border blockade in 2015/16, the results are not encouraging, rather inhibiting.

The trade deficit with the largest trade partner, India, has gone up to Rs. 586.24 billion with imports of Rs. 628.85 billion and exports of just Rs. 42.61 billion.

Although the size of Nepal-India trade went significantly down in 2015 due to the earthquake and border blockade, the export-import ratio and trade deficit remained almost the same. Nepal exported goods worth Rs. 46.31 billion and imported goods Rs. 412.91 billion, which put the export-import ratio at about 8.91 - almost equal to that in 2014 when the trade ratio was 8.78.

But the trade imbalance with China increased in 2015, despite the earthquake that destroyed the highway to Khasa on the Nepal-China border point, and created huge constraints in the trade between the two countries.

The trade deficit with China volleyed up to Rs. 132.06 billion in 2016 from Rs. 89.76 billion in 2014 and Rs. 92.06 in 2015. In the past three years, Nepal’s export to the northern neighbour has come down to Rs. 1.94 billion from Rs. 3.09 billion.

Nepal has been in trade surplus with the USA since 2011, but in 2016, the former witnessed a deficit of Rs. 750 million.

Experts say that Nepali private sector has been continuously failing to tap the market potentials in the USA and grab the opportunity of duty-free entry of more than six dozen goods.

Likewise, trade deficit with Germany and Bangladesh is also widening gradually.

According to businessmen, due to political instability, high production cost, labour shortage and high cost of trade have severely hampered Nepal’s international trade.

Experts said that the country needs to focus on certain products that have comparative as well as competitive advantage in the international market.

Nepal also needs to improve the trade infrastructure and ease the export process in order to facilitate the producers and exporters.

Nepal’s top import sources in 2016 were India, China, United Arab Emirates, Indonesia, Thailand, USA, Japan, Argentina, Malaysia and Vietnam, while India, USA, Germany, Turkey, United Kingdom, China, Bangladesh, France, Japan and Italy were the top export destinations.

Trade balance with major partners (Rs. in billions)

Country	2014		2015			2016
	Export	Import		Export	Import		Export	Import
India	57.91	508.58		46.31	412.91		42.61	628.85
USA	7.80	6.86		8.41	7.86		9.50	10.26
Germany	3.25	5.51		3.06	9.15		3.16	4.49
China	3.09	92.86		1.85	93.91		1.94	134.01
Bangladesh	1.85	2.36		0.70	2.39		1.38	5.01

Source: TEPC

Pubished in The Rising Nepal daily.