16th October, 2014: The remittance growth rate has fallen drastically in the first month of the current fiscal year, raising suspicion that formal banking channel may be losing its efficiency, which is propelling Nepalis working abroad to depend on informal means to send home the money.Â Remittance income went up by marginal 0.8 per cent to Rs 42.19 billion in the first month of the current fiscal, as against a growth of 23.8 per cent recorded in the same period of the last fiscal, shows the latest Macroeconomic Report of Nepal Rastra Bank. This caused current account surplus as well surplus in balance of payments (BoP) to take a dip.
One of the reasons for surge in remittance income in the last fiscal was depreciation in the value of Nepali currency. In August 2012, per dollar could be fetched for Rs 89.05 on average, while in August 2013 the average value dipped to Rs 96.61. In August this month, the average value of every dollar further fell to Rs 97.31, but remittance income could not rise accordingly.
Worse, remittance income increased by mere 0.1 per cent in dollar terms, as against a hike of 14.1 per cent recorded in same period last fiscal.Â NRB has not mentioned what caused the drop in the growth rate. A senior official only said one should not reach any conclusion by referring to the data of single month.
However, Chairman of the Foreign Exchange Dealersâ€™ Association of Nepal, Arun Parajuli, had last week told The Himalayan Times that â€˜more money may be flowing into the country via informal channelsâ€™.Â â€œWe have grounds to make this claim as the number of people leaving the country for employment purpose has not fallen,â€ he had said.Â Because of moderate growth in remittance income, current account surplus shrunk to Rs 1.01 billion in the first month of the current fiscal, as against Rs 7.46 billion registered in the same period last fiscal.Â As the current account surplus narrowed, BoP surplus also dipped to Rs 2.77 billion in the review period, as against Rs 16.08 billion recorded in the same period last fiscal.
Current account and BoP surplus also narrowed because of the widening trade deficit of the country.Â Trade deficit expanded by 16.6 per cent in the first month of the current fiscal year to Rs 51.63 billion. In the same period last fiscal, trade deficit had widened by 11.3 per cent to Rs 44.29 billion.Â The countryâ€™s trade deficit widened further in the one-month period this fiscal as exports of merchandise goods fell, while imports surged.Â NRB data show that exports had dropped by 11.5 per cent to Rs 6.72 billion in the first month of the current fiscal.
Exports to India, for instance, fell by 15.4 per cent to Rs 4.05 billion in the review period in contrast to a hike of 15.1 per cent recorded in the same period last year. Exports to India declined due to lower dispatch in consignments of zinc sheet, cardamom, textiles and copper wire rod, among others, shows the NRB report.
Similarly, exports to China dropped by 56.7 per cent to Rs 87.8 million in the one-month period due to decline in the exports of herbs, aluminium, copper and brass utensils, pashmina and incense sticks, among others. Likewise, exports to other countries fell marginally by 0.8 per cent to Rs 2.58 billion in the review period. In the same period last fiscal, exports to other countries had dropped by 7.7 per cent.
While the countryâ€™s exports dropped, imports of merchandise goods surged by 12.5 per cent to Rs 58.35 billion in the one-month period. Of the total money spent by the country in importing goods, Rs 10.64 billion, or 18.23 per cent, went into purchasing petroleum products, of which fuel worth Rs 10.52 billion was bought from India.
The country has been using most of the remittance income to finance imports.
Source : Financial Nepal.com