An import explosion in the past few months has drained foreign exchange reserves to dangerously low levels. Threatening to precipitate an economic disaster with most indicators showing warning signs.
They say that a huge amount of money invested in the unproductive sector. Resulting in a trading boom and a gaping trade deficit.
According to a research report entitled “Remittances, Banking Credit to Private Sector, and Nepal’s Trade Deficits” unveiled by the Confederation of Banks and Financial Institutions, Nepal, on Thursday, 20 percent of the loans issued by banks have gone to fund trading, which particularly represents wholesale and retail services.
Loans to the agriculture sector stood at 7.8 percent. Around 15 percent of the credit issue has gone into production. Credit mobilization in production has been declining every year, which, experts say, is a cause for concern.
“Remittance is good, but it is hurting the country’s competitiveness as all skilled and semi-skilled people are going abroad,” the report said. “The money they send back to the country is not utilized in the productive sector either.”
Import Explosion
An example of runaway import explosion provided by the ever increasing shipments of edible oils entering the country.
Imports explosion of edible oils (soybean, palm and sunflower) soared to Rs113.87 billion in the first 11 months of the current fiscal year ending mid-July.
As per Customs Department statistics, Nepal’s total import bill ballooned to Rs1.76 trillion in the first 11 months of the current fiscal year. The figure represents a staggering year-on-year jump of 27.5 percent.
Edible oil import explosion in the whole of the fiscal year 2018-19 valued at Rs37.12 billion. The report has recommended appropriate policies to ensure that remittances properly channeled into the economically productive sector or enhance exports by developing compulsory savings and investment provisions.
