Macroeconomic Performance and International Trade in the context of Nepal presented by Deependra B. Kshetry at The Efficiency Enhancement for the officials of The Ministry of Commerce and Supplies held at Godavari June 2011

Weak macro fundamentals Economic growth < 4 percent Inflation nearly two digits Current account deficit continues Balance of Payments deficit rising Foreign currency Reserve declining

Real Sector not vibrant Agricultural output declining (except current fiscal) Industrial activities affected by adverse investment climate Service sector also felt pinched due to liquidity crunch

Factors responsible for weak performance Less attention of policy makers on economic issues Presentation and Implementation of budget not in priority Political environment not conducive for economic activities Lacking good governance in the bureaucracy

Nepal in world Arena International Monetary fund – current account convertibility WTO SAFTA BIMSTEC

Modalities of Trade Letter of Credit Cash Basis - Tibet the autonomous Region of China - India TIFA, USA

Trade Features Trade Preferred to Manufacturing - Quick and Bulk Return - Relatively less risk Inconsistent Policy due to political uncertainty a bounty to trade Low manufacturing base, ground to expand trade

Trade Features – Contd…. Export mainly unprocessed and items based on imported raw materials eg. Cardamum, thread, zinc sheets, woolen carpets etc. No consistency in exported goods Carpets, ready made garments, Pashmina etc. Almost entire import for consumption barring few raw materials

Trade Features contd… Export to GDP ratio 5.2 percent Import to GDP ratio 32.0 percent Trade Deficit – a regular feature percent of GDP ( India Rs. 174b) Exceptions: Bangladesh b, Bhutan Rs b, Canada Rs. 0.22b, Germany Rs. 0.70b Export to Import Ratio 16.1

Normative Outlook for Trade Reaping the benefits of fast growing giant neighbours Identifying exportable items with backward linkages Branding of commodities (similar to Pashmina) and quality control Processing of Agro – forestry Products

Normative.... Contd… Chalk out pragmatic commercial policy Promotional activities through foreign missions abroad. Acknowledgement and reward to contributors in practice

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