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5th October 2010. Nepal has managed to dramatically bring down the balance of payment (BoP) deficit to Rs 2.62 billion, but a huge current account deficit continued to trouble the country on the back of a massive trade deficit that widened by more than Rs 100 billion in Fiscal Year 2009/10 alone.
 
The country´s exports declined by 9.7 percent to Rs 61.13 billion during the year as instability, insecurity and lack of initiative by the government to address labor and power outage problems took a toll on industrial output and drove away investment.
 
The annual macroeconomic report that Nepal Rastra Bank released Tuesday shows that exports to third countries declined by more than Rs 5.5 billion to 21 billion, while exports to India declined to Rs 40.11 billion from the Rs 41 billion achieved a year ago.
 
Mainly commodities like woolen carpet, readymade garments, pashmina, pulses and herbs failed to retain their markets during the year.
 
Imports on the other hand, expanded by more than a third and totaled Rs 378.80 billion in Fiscal Year 2009/10.
 
Of the total imports, import from India grew by more than Rs 50 billion to Rs 217 billion. Imports from the rest of the world also increased by more than Rs 38 billion to Rs 160 billion during the year.
 
The central bank said import of petroleum products, vehicles and spare parts, MS billet, gold, telecommunication equipment and steel rod and sheet, among others played a huge role to drive up the imports.
 
As a result, the total trade deficit in Fiscal Year 2009/10 jumped to Rs 317.67 billion, whereas it was Rs 216.77 billion a year earlier.
 
Likewise, Nepal received pension worth Rs 25.85 billion during the year. Although workers´ remittances grew at a lower rate of 10.5 percent, the country received a whopping Rs 231.73 billion from Nepalis employed abroad.
 
“Foreign direct investment too grew by Rs. 2.85 billion during the year,” reads the report, adding that the BoP deficit narrowed down sharply to Rs 2.62 billion in Fiscal Year 2009/10. Gross foreign exchange reserves dropped by 7 percent to Rs 266.57 billion in mid-July 2010, from Rs 286.54 billion of mid-July 2009.