Nepal's trade deficit in the first quarter amounted to Rs307 billion, down 12.02 percent year-on-year.

According to the latest Foreign Trade Statistics published by the Department of Customs, export earnings between mid-July and mid-October totalled Rs27.16 billion, up 14.41 percent year-on-year. During the same period, Nepal imported goods worth Rs334.9 billion, recording a year-on-year drop of 10.34 percent.

This is the third straight month imports have fallen and export earnings have swelled. The overall trade volume fell to Rs362.11 billion from Rs397.33 in the corresponding period last year, indicating slowed consumer spending amid the festival season.

Trade analysts attributed the decrease in the trade deficit to the impact of the government’s policy to reduce imports, a decline in trade, a rise in palm oil exports and a prolonged monsoon.

“The country has been witnessing a gradual decline in imports after the government jacked up import duties on luxurious goods including vehicles and imposed restrictions on some products,” said economist Gyanendra Adhikari.

The government has doubled the excise duty on imported automobiles through the budget statement for fiscal 2018-19. The down payment on auto loans has also been jacked up to 50 percent of the value of the vehicle.

“The data paints a rosy picture of a rise in exports, but the figures have risen mainly because traders have been importing crude palm oil and refining it for export to India. The seasonal export of cardamom has also pushed up the numbers ,” said Adhikari.

As per the Customs Department, Nepal exported palm oil worth Rs5.7 billion in the first three months of this fiscal year compared to shipments valued at Rs374 million in the corresponding period last year. Cardamom shipments during the quarter increased to Rs707 million from Rs687 million in the previous year.

The country has seen a slump in the export of other major commodities including ginger, woollen carpets and textile floor coverings, shawls, scarves, and iron wire and non-alloy steel.

According to Adhikari, imports shrank because of a fall in the trade volume caused by high interest rates on overdraft loans and a prolonged monsoon that halted development projects, leading to reduced gasoline imports.

Imports of fat and milk-based oils have decreased drastically because of import restrictions, and fuel imports have fallen by Rs7.52 billion from the same period last year.

Officials insisted the drop in the trade deficit was more a result of government policy to slash imports than a fall in the trade volume and weak consumer spending.

“The government's policy to discourage the import of luxury goods, promote domestic production and exports has resulted in a decline in the trade deficit,’ said Uttar Kumar Khatri, spokesperson for the Ministry of Finance. “However, we cannot say at this point that consumer spending has weakened, leading to a slump in the overall trade volume.”

According to Khatri, the Finance Ministry is coordinating with customs officials to determine the reasons for the fall in imports and exports of major commodities.

In 2018, the government endorsed a national work plan that proposed to impose higher import duty on luxury goods and raise the country's production base. It hiked the cash incentive given to exporters to 5 percent from 3 percent of the value of the product last December.