BoP deficit at Rs 22.1 billion, exports six times over than the imports, inflation at double digit

If one goes by the central bank-published current macroeconomic situation based on nine months' of the current fiscal year, nothing seems right with the country's economy.
The inflation still stands at double digit, Balance of Payment (BoP) has recorded a deficit of Rs 22.10 billion, exports have plunged and imports have gone up pushing the trade deficit up to double compared with the same period last year, and the gross foreign exchange reserves continue to declined.
Though, the government expenses has gone up, revenue mobilisation has shown poor growth in comparison to the same period last fiscal year.
The year on year (y-o-y) inflation -- as measured by the consumer price index -- moderated to 10.8 per cent in mid-April 2010 compared to 11.9 per cent increase in the same period last year, the NRB said attributing the rise in the prices of spices, pulses, grains and cereal products.
The total government spending has also increased by 30.9 per cent to Rs 140.09 billion compared with an increase of 18.5 per cent in the same period last year. "The high growth in recurrent as well as capital expenditure accounted for such an increase in the government expenditure," the NRB attributed the rise to rise in recurrent expenditure that has increased by 28.5 per cent to Rs 90.94 billion.
Nepal's merchandise exports declined by 10.4 per cent to Rs 45.67 billion in contrast to a growth of 20.3 per cent in the same period last year. Exports to India dropped by 6.6 per cent against a growth of 10.5 per cent and exports to other countries plummeted by 16.5 per cent against a growth of 40.7 per cent in the same period last year. "However, merchandise imports soared by 22.6 per cent compared to a growth of 18.2 per cent in the same month last year," said the NRB report. Imports from India grew by 37.1 per cent compared with a growth of 11.5 per cent and imports from other countries grew by 46.9 per cent compared with a growth of 49.6 per cent in the same period last year.
Total trade deficit expanded by 58.9 per cent to Rs 238.47 billion against the rise by 27 per cent in the same period last year. Trade deficit with India rose by 53.8 per cent compared with a growth of 12 per cent in the same period of last year, whereas trade deficit with other countries expanded by 65.1 per cent compared to a growth of 52.3 per cent in the same period last year.
The gross foreign exchange reserves also dropped by 15.8 per cent to Rs 235.75 billion from a level of Rs 279.99 billion at mid-July 2009 as against a growth of 29.8 per cent in the same period last year.
Similarly, the liquid assets of the commercial banks stood at Rs 170.7 billion as at mid-April 2010, revealed the report. "Of the components of liquid assets, liquid fund declined by 7.8 per cent. Another component of liquid assets, commercial bank' investments in government securities has also declined by 11.6 per cent (Rs 8.3 billion)."
Due to the higher credit disbursement relative to the deposit mobilisation, the credit-deposit (CD) ratio increased to 89.1 per cent in mid-April from 81.2 per cent in mid-July 2009. Similarly, the liquidity-deposit ratio declined to 29.6 per cent in mid-April from 34.2 per cent in mid-July 2009.
The NRB has, however, injected net liquidity amounting to Rs 90.1 billion. Similarly, the central bank injected net liquidity amounting to Rs 68.9 billion through net purchase of $923.4 million from commercial banks. A net liquidity of Rs 108 billion was injected through the net purchase of $1.4 billion in the same period last year.