Nepal has been forced to increase imports due to low domestic productivity stemming from labour problems and failure to promote import substitution industrialisation.

As per the figures of the Trade and Export Promotion Center (TEPC) for the first 11 months of this fiscal year, the country has been spending Rs13.3 on imports for every rupee of export earnings.

The TEPC’s statistics shows that the ratio of the country’s imports to its exports stands at 1:13.3. The ratios in the fiscal years 2015-16 and 2014-15 were 1:11 and 1:8.9 respectively. This means that Nepal is forced to divert a huge chunk of its foreign exchange reserves earned from other sources such as remittance and tourism to pay for imported goods.

The widening gap between imports and exports is revealed by surging import expenses and sluggish export earnings.

During the review period, the country’s export earnings inched up 5.8 percent to Rs67.35 billion while the import bill leapt 28.1 percent to Rs893.09 billion. As a result, Nepal’s trade deficit over the period swelled by 30.3 percent.

Anup Bahadur Malla, former chairman of the Export Promotion Committee of the Federation of Nepalese Chambers of Commerce and Industry, said lack of government focus on boosting domestic production had resulted in the current situation.

He added that soaring costs of raw materials in the international market had also pushed up the country’s import bills. “The actual gap between import and export values should be greater than what is shown in the official data as there is under-invoicing of imported goods,” he said.

Former commerce secretary Purushottam Ojha blamed the government’s inability to implement trade and industrial policies effectively for the yawning gap between imports and exports. “Despite the introduction of trade and industrial policies, the government has failed to implement them effectively to boost production sectors,” he said.

Petroleum products, iron and steel, machinery and parts and transport vehicles and parts account for 40 percent of the total import expenses. Nepal spent Rs112.02 billion on buying petroleum products, making them the country’s largest import.

Similarly, the country spent Rs93.65 billion on iron and steel, Rs74.62 on machinery and parts and Rs73.72 billion on transport vehicles and parts.

Meanwhile, the country witnessed a nominal rise in earnings from 10 exportable goods in the list of 27 major export items. Export earnings from woolen carpet, the largest export item, dropped 8.3 percent to Rs6.72 billion. Likewise, major export products such as readymade garments and cardamom recorded low export figures.

Woolen Carpet 6.7