The economic damage caused by the COVID-19 pandemic, especially in Nepal, is largely driven by a fall in demand, meaning that there are no consumers to purchase the goods and services available in the global economy. This fall in demand is the reason for this huge drop in trade deficit that the nation witnessed during this financial year.
According to the Customs Department, the trade deficit during the review period stood at NPR 1.01 trillion after the imports dipped by 15.31%. There is no demand for the imported items and even if there is, due to the ongoing pandemic, those demands cannot be fulfilled.
The deficit might have reduced the production of the nation, which means that the drop in the trade deficit might not be that beneficial. For any country to reduce the trade deficit, it is necessary to export more which Nepal is failing at. The domestic supplies and that from imports both will suffer and will have an impact on availability and cost increment.A study reveals that Nepal’s manufacturing industries mostly rely on raw materials from China, India and Singapore. The knock-on effects for Nepal are significant as the supply of raw materials has reduced drastically.
Nepal has a sense of relief only when these foreign countries started to ease the lockdown and continue with their economic activities.
According to a local media outlet, Spokesperson of the Central Bank, Gunakar Bhatta said, “Major reasons behind the surge in remittance after mid-April may be relaxations in lockdowns in the host countries, and some may also have sent home money that they had failed to during the lockdown.”
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