Kathmandu, Sept. 2: The country’s current account deficit increased to Rs. 265.37 in fiscal year 2018/19 from Rs. 247.57 billion the previous year.

In the US Dollar terms, the current account deficit marginally narrowed down to 2.35 billion in the review year from 2.37 billion a year ago, according to a macroeconomic and financial report of Nepal Rastra Bank (NRB) published on Sunday.

The current account includes the trade of goods and services as well as capital transfers.

 "The current account reflects the strength of the country's economy.  Rising current account deficit poses threats to country’s economy," said economist Dr. Chandramani Adhikari.

Balance of Payments (BOP) remained at a deficit of Rs. 67.40 billion in the review year compared to a surplus of Rs. 960 million the previous year.

 In the US Dollar terms, the overall BOP recorded a deficit of $ 591 million in the review year compared to a deficit of $ 1.1 million the previous year.

According to the NRB report, the balance of payment of the country saw an improvement in mid-July compared to mid-June.

The balance of payment had recorded a deficit of Rs. 90.83 billion in mid-June.

Capital transfer and net foreign direct investment (FDI) amounted to Rs. 15.46 billion and Rs.13.07 billion respectively in 2018/19.

In 2017/18, capital transfer and FDI stood at Rs. 17.72 billion and Rs. 17.51 billion respectively.

Despite the increment in the remittance inflow, the BOP deficit increased the last fiscal year.

Remittance inflows increased by 16.5 per cent to Rs. 879.27 billion in the review year compared to an increase of 8.6 per cent the previous year.

 In the US Dollar terms, such inflows increased 7.8 per cent in the review year compared to 10.2 per cent in the corresponding period the previous year.

Net service income remained at a deficit of Rs.16.52 billion in the review year against a surplus of Rs.2.27 billion a year ago.

Dr. Adhikari said that service income was in deficit which also fueled the BoP deficit.

He stressed on the need for paying attention to increase the export trade and promote tourism and other sectors to earn foreign currency to improve the BoP position.

The sharp reduction in the foreign currency reserve is also affecting in the national economy, he said, adding that the government should focus on attracting more foreign investment to accelerate the economy as well improve the foreign currency reserve.

Total trade deficit of the country widened by 13.5 per cent to Rs.1321.43 billion in 2018/19, the report said. This deficit is 38.1 per cent of the GDP.

The export-import ratio increased marginally to 6.8 per cent in the review year from 6.5 per cent in the corresponding period of the previous year.

Meanwhile, the gross foreign exchange reserves decreased to Rs.1, 038.92 billion as of mid-July 2019 from Rs.1,102.59 billion the previous year.

In the US Dollar terms, the gross foreign exchange reserves remained 9.50 billion as of mid-July 2019 from 10.08 billion the previous year.

The foreign exchange holdings of the banking sector is sufficient to cover the prospective merchandise imports for 8.9 months, and merchandise and services imports for 7.8 months, the NRB said.