Foreign Trade Falls

Nepal's economy is going through a challenging situation even after COVID-19 crisis. It is needless to mention that the pandemic had dealt a severe blow to global economy, and Nepal's economy was not an exception. With a weak industrial base, the country can produce only limited products, with soybean oil and palm oil being the major exportable items. The country adds value to these products and exports them to India after having imported raw materials from different countries. Following COVID-19 pandemic, the Russia-Ukraine war has hit the world economy in one way or the other. Almost 10 months have passed since the war began. And it has been quite problematic for many countries globally, including Nepal, to import the raw materials. Consequently, Nepal's export trade has suffered a setback. Raw soybean oil comes from Bangladesh, Argentina, the United Arab Emirates and the United States of America (USA) while the country imports raw palm oil from Indonesia, India, Malaysia, the Philippines and Thailand.

As per the latest statistics released by the Department of Customs, the exports have dropped this year by about one-third as compared to the size of the last year's trade bringing it down to Rs. 54.7 billion from Rs. 82.1 billion. It is apparent that soybean oil is the single largest product that caused the exports to decline because the imports of unprocessed stuffs fell from Rs. 26.4 billion last year to just Rs. 5.3 billion this year. The export of palm oil has also decreased by around Rs. 10 billion. This portrays a gloomy picture of the nation's export trade. In addition, Nepal's priority products such as tea and large cardamom have also witnessed a decline in their export. Amidst such a situation, the trade of felt products witnessed a marginal rise this year. 

Meanwhile, the imports have dropped by about 18 per cent in the first four months of the current fiscal year (2022/23) against the increase of 61.5 per cent during the same period of the last fiscal year. Nepal imported goods worth Rs. 532.7 billion from mid-July to mid-November this year compared to the imports that amounted to Rs. 650.3 billion last year. The country saw an increase in imports by more than 61 per cent in the last fiscal year as against the imports worth Rs. 402.5 billion in 2020/21. Last year the export also went up by 104.3 per cent. But it failed to make much difference considering a small scale of exports.The country's trade deficit fell by 15.88 per cent in the first four months of the current fiscal year. It is a positive signal. However, the imports/exports ratio rose to 9.73 from 7.92 of last year. 

The share of exports to total trade decreased by about 17 per cent this year while it had risen by 23.5 per cent last year. But imports share increased by 2.13 per cent. This indicates that the country imports goods worth Rs. 90.68 per cent while exports goods accounts for Rs. 9.32 per cent. It is notable that the government and the Nepal Rastra Bank (NRB) embraced measures to reduce imports in view of depleting foreign exchange reserve. The government has also continued to put a ban on the import of different luxury items such as vehicles and liquor to maintain the foreign currency reserve. The government needs to take stock of the current economic scenario seriously and step up measures accordingly in order to boost national economy.