Remittance flow climbs up 43pc to Rs 143b

Nepal saw a huge 42.5 percent rise in workers' remittances in 2007/08, as more Nepalis went overseas to work amid shrinking employment opportunities at home.
According to Nepal Rastra Bank's (NRB) annual report, the country's migrant workforce sent back Rs 142.7 billion during the last fiscal year. As swelling remittances boosted consumption, Nepal's imports grew 16.1 percent in 2007/08, overtaking the figure for the previous year.
"In total, Nepal's imports grew by more than Rs 30 billion and touched Rs 226 billion in the last fiscal year," says the NRB report released Friday. Of the total imports, purchases from India expanded by 24.7 percent, while imports from other countries rose by 3.5 percent.

The country's exports, however, continued to flounder as a result of internal and external problems. Consequently, total exports inched up a mere 2.4 percent to Rs 60.78 billion.

Moreover, exports to India declined by 7.4 percent in 2007/08. Exports to other countries increased by 25.5 percent. Higher imports and slowed exports widened the country's trade deficit to Rs 165 billion. The trade deficit with India alone amounted to Rs 105.9 billion.

A downturn in sales and restrictions imposed by India resulted in the production of vegetable ghee and oil, plastic products, garments and domestic metal products falling during the year. "That dragged down the country's manufacturing production index by 1.4 percent in 2007/08, compared to a growth of 2.6 percent in the previous year," says the report. The report added that prices of consumable goods and services soared 12.1 percent in mid-July 2008 compared to mid-July 2007. The average annual consumer inflation remained at 7.7 percent.

Among major products, oil and ghee prices went up by 21 percent, grain and cereal by about 15 percent and pulses by 14 percent. The prices of rice and rice products rose by 14 percent. The annual average prices of non-food items and services increased by 5.1 percent in 2007/08. With the improved law and order situation in the country, Nepal received Rs 9.8 billion worth of foreign direct investment commitments in 2007/08. Increased remittances also expanded the gross foreign exchange reserves to Rs 212.6 billion in mid-July 2008. Between mid-July 2007 and 2008, the Nepali currency depreciated by 5.33 percent vis-à-vis the US dollar. A year before, it had appreciated by 14.26 percent, according to the report.

Moreover, in 2007/08, NRB purchased Indian currency worth Rs 70.6 billion by selling US$ 1.37 billion, as the Indian rupee ran short in the market due to a widening current account deficit with India and the higher amount of payments made to the Indian Oil Corporation.