Professional Documents
Culture Documents
Make The Trend Analysis of The Balance of Trade
Make The Trend Analysis of The Balance of Trade
Make The Trend Analysis of The Balance of Trade
Make the trend analysis of the balance of trade(BoT) and balance of payment(BoP)
of at least 12 recent years. Analyze the result and suggest the appropriate measures to
correct the deficit balance of trade of Nepal.
Nepal recorded a trade deficit of RS 694257 million in 2017/18. The average trade
deficit of Nepal from 20006 to 2018 is Rs 457405 million. The highest trade deficit is
in the year of 2016/17 that is RS 895818 million. Nepal recorded the lowest trade
deficit in the year 2006/7 of Rs 135311.5 million.
In
ten million
Year 2006/7 2007/8 2008/9 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18
BoT -13531.15 -15599.2 -20932.1 -30351.5 -31967 -37314.13 -46130.45 -59541.27 -66349.67 -68162.18 -89581.8 -69425.7
BOP -590.43 -1224.93 -1465.09 -1724.49 -1962.88 -1058.22 -1769.9 -1971.16 -3235.02 -3059.74 -3968.53 -2904.58
*Source: economic survery, ministry of finance(2018)
The trend of balance of payment and balance of trade can be depicted through the
following graph
0
-10000
-20000
-30000
-40000
BoT
-50000
BOP
-60000
-70000
-80000
-90000
-100000
It is clear from the above graph that the line of balance of payment is horizontally
extending in twelve year that it is negative but It lies under the line of ten thousand
million not crossing it. But the line of balance of payment reveals that trade is heavily
imbalance and it is in increasing trend. Balance of trade of Nepal is continuously
deficit and this deficit is growing in every year from 2006 to 2018. It is clear that our
balance of trade is much worse than the balance of payment.
Nepal lack of infrastructure and geographic constraints have led to chronic trade
deficits. Nepal mainly exports agro-based items to the foreign country such as knotted
carpet, tea, coffee, and other agro-based raw material. In return Nepal import oil, gas,
gold iron, steel. automobile and electronic appliances and mobile phone. The import
of Nepal is higher than export caused the trade deficit.
To correct the deficit trade and balance of payment Nepal need to take the following
measures:
Lower price of product stimulate the export and people will consume more
domestic product.
Privatization means leaving the economy from the government control to market,
production is carried out by private sectors and NGOs. The one basic objective of
privatization is to make the industry competitive by transferring the ownership from
government to private sectors. It is the global phenomena that occurred in Nepal also
since the Panchayet system. In six year plan various public enterprises were privatized
some of them are Nepal Cheuri ghee plant, chandeshowri textile. After the restoration
of democracy in 1990 the concept of privatization is included in the constitution. In
the following year 1991 the bills was issued by the Girija Prasad Koirala government.
In the same year three public enterprises were privatized namely bhirkuti paper mills,
harishiddhi brick and tile factory, bashbari leather and shoes factory by indian
company at cheaper price.
The privatization helps to reduce the administrative and financial burden of the
government of Nepal. The positive impacts of privatizations are as follows
Disadvantage of privatization
Lifting of all the rules and control from government and free economic activities
from state control is called the liberalization. Not directives and order is issued to
the company and firms. Nepal has practiced the liberalization policy since the
restoration of democracy in 1990.It is direction of moving toward free market
economy.This normally include the reduction of direct control on both national
and international transaction. In such a case less requirements are made in terms
of license and permit.
Pros of globalization
1. Modernization of Nepalese economy: Nepal has shifted from the agro based
economy to the service based economy. The door of investment opportunity
emerge thus foreign investment increases in Nepal
2. Nepal has increases chance to increase market to international level by exports
3. Inflow of foreign direct investment
4. Consumer is benefited by reduced price and better quality
5. Access to global financial institution such IMF and world Bank
6. Access to international labor market for Nepalese worker
Cons of globalization