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The eight-months long import restrictions have made quite an impact on the country's foreign trade. Official statistics show Nepal's imports declined by 20.68 percent and trade deficit by 19.15 percent in the first six months of the current fiscal year. While the import restrictions on vehicles, expensive mobile sets, and foreign liquors, helped the country to avert a looming forex reserves crisis, the government's revenue, which is import-centric, took a big beating in the first half of the current fiscal year. Nepal's imports have declined by 20.68 percent while exports slumped by 32.01 percent in the first six months of the current fiscal year. According to the latest foreign trade data released by the Department of Customs (DoC), the country's import bill stood at Rs 792.66 billion in the first half of FY 2022/23 compared to Rs 999.34 billion during the same period of FY 2021/22. Similarly, the export bill stood at Rs 80.80 billion in the review period compared to Rs 118.85 billion in the corresponding period of the last fiscal year. The country's overall foreign trade declined by 21.89 percent to Rs 873.47 billion in the first half of FY 2022/23. With the slowdown in economic activities and a contraction in the overall market demand as a persistently high inflation rate and a squeeze in liquidity in the financial put a dent in the pockets of consumers, the imports of high revenue-generating goods such as industrial raw materials, gold, mobile phones, vehicles, crude soyabean oil, and crude palm oil have declined in this fiscal. On the other hand, the import of agricultural products has increased due to the inability to increase the production of agricultural goods that can be produced domestically. It is not only the imports that have declined; the worrying fact is the country's exports have also decreased during this period. As per DoC data, Nepal's exports have declined by 32 percent to Rs 80.80 billion in the first half of the current fiscal year, particularly due to the dramatic decline in the exports of palm oil, soyabean oil, and sunflower oil to India. In the last 2-3 years, Nepal’s export figure has largely been dominated by two products—palm oil and soyabean oil, which are basically not produced in Nepal. The edible oils are brought in crude form, refined and packaged in Nepal-based refineries and exported to India. It is believed that many producers even import refined oils, repackage and label the products and export them to India which has no to little value addition as products made in Nepal. The ballooning of exports of edible oils led Nepal’s overall exports to touch the Rs 200 billion mark for the first time in history in FY 2021/22. The contribution of edible oils to the country's overall export was Rs 93.69 billion. Nepal export palm oil and soyabean oil worth Rs 89.18 billion in the last fiscal year which accounts for around 45 percent of Nepal’s total exports. However, the exports of edible oils have slumped massively in the first half of FY 2022/23. The exports of palm oil slumped to Rs 13.08 billion from Rs 31.97 billion. Likewise, exports of soyabean oil also dipped to Rs 8 billion in the first six months of this fiscal from Rs 34.26 billion in the same period last fiscal year. Despite the huge drop in the export of edible oils, official data suggest that there has not been a significant drop in other products which are exported on a large scale. The country’s exports of these products suffered after India lowered its customs tariff to help tame the rising inflation in October 2021. The largest South Asian economy lowered the import duty on crude varieties of palm oil, soybean oil, and sunflower oil to zero. However, after taking into account the 5 percent agri cess and 10 percent social welfare cess, the effective duty on crude forms of these three types of edible oil is at 5.5 percent. At the start of 2021, effective customs duty on palm, soybean and sunflower oils reached as high as 35.75 percent. With the Indian government removing the import duty on these edible oils, the duty differential advantage Nepali exporters had was gone. Nepal currently levies a one percent customs duty and a 13 percent VAT on the import of these three types of edible oil. The Indian government’s decision to abolish customs duty on raw soybean oil and palm oil has badly affected Nepal's exports. The producers are currently exporting the edible oils only one-fifth of what they used to export until India abolished the import duty. And, it seems India will not hike duty on the import of these products anytime soon. In late December last year, the Indian government extended the policy of keeping lower tariffs on vegetable oil till March 2024. These products also don’t qualify to get the export subsidies that the government announced through the budget for the current fiscal year. Foreign Trade (First Six Months)

The Nepal Stock Exchange (NEPSE) gained 4.62 points to close at 2,100.70 points on Monday. Similarly, the sensitive index surged by 1.89 points to close at 402. 15 points. A total of 3,922,216 unit shares of 259 companies were traded for Rs 1. 47 billion. Meanwhile, Adarsha Laghubitta Bittiya Sanstha Limited was the top gainer today, with its price surging by 10. 00 percent. Laxmi Bank Debenture was the top loser as its price fell by 9.58 percent. At the end of the day, total market capitalization stood at Rs 3. 03 trillion.

The Investment Board Nepal (IBN) has again called for an Expression of Interest (EoI) from interested firms to conduct a feasibility study for the development, operation, and management of the Electric Bus Rapid Transit (eBRT) in Ring Road of Kathmandu valley. According to IBN, the objective of the proposed feasibility study is to examine the technical, economic, financial, social, and environmental viability of the proposed eBRT system. The notice reads that any single firm or a joint-venture company can apply at the IBN office. The selected firm will have to complete the feasibility study of the eBRT project in 18 months from the date of signing a contract. The firm will have to carry out a feasibility study for the BRT corridor along Kathmandu Ring Road, including the service and operations plan, physical and operational design of the BRT system, traffic engineering improvements, application of ITS technologies, and fare collection mechanisms. Similarly, it has to estimate the scale of environmental benefit while adopting an electric BRT System as well as evaluate the PPP investment modality about the feasibility of the BRT System and recommend the appropriate modality that makes the project attractive and feasible to the investors. The board had earlier issued EoI to study the feasibility of eBRT on November 6, 2022. The deadline for applying for the EoI was December 12, 2022. And, 13 companies from Nepal and abroad submitted proposals. However, it was canceled after the procurement process was found to be inconsistent at the evaluation stage. A senior official of the IBN said that the new EoI was called, canceling the earlier one. The IBN has planned to construct the project under the public-private partnership model. The pre-feasibility study has estimated a cost of USD 153 million (Rs 20.11 billion) to build the infrastructure that will be built under the build-operate-own-transfer (BOOT) model. The government has planned to allocate a lane of Ring Road street for the operation of electric buses. The private sector company will construct modern bus-stop and terminals and smart ticketing, among others. Under the plan, an average of 75 electric buses will be operated on the ring road.

The federal government has urged both provincial and local governments to cut their planned spending by 20 percent in a number of areas while discouraging the implementation of development projects that have not been awarded yet to contractors. The federal government sent letters to the sub-national government after the Finance Ministry itself announced cutting the federal government's planned expenses under similar headings last week. Citing the resource crunch with the federal government caused by a decline in revenue, the central government has asked the provincial and local governments to control their spending as well. In a letter sent to the local governments on Friday, the Ministry of Federal Affairs and General Administration asked the local governments to cut their spending in the areas of fuel spending for officer bearers, allowances, procurement of machinery, repair, and maintenance of vehicles, miscellaneous and office materials, notice publication and newspaper subscriptions, staff training, skill development, and awareness training and for organizing various workshops and seminars, monitoring and expenses activities, consultancy, furniture, and structural improvement of built building, among others. The ministry has asked them to cut spending on these headings by 20 percent and adjust accordingly in the Line Ministry Budget Information System(LMBIS), an integrated financial management information system, through which budgets and programs are submitted to the federal government and get approval. According to the letter, if the procurement has already been ordered, the deduction in spending will not be applied. The local governments have been told to suspend new procurements even for the programs that have been included in the budget and programs of the local governments. If the procurement process has not begun to implement any project, the federal government has told the local government to take the approval of the federal government’s finance ministry. As per the letter, the local governments have been told not to create new job vacancies, or new liabilities to make payments within this fiscal year and not to provide any financial assistance except in exceptional cases. Not only the local governments but provincial governments have also been sent similar letters. The federal government said it has been essential to cut expenses under certain headings and suspend implementation of certain projects because of reduced revenue collection. According to the Financial Comptroller General Office, the government’s revenue collection as of February 4, stood at Rs 485 billion, a sharp drop from Rs 581 billion during the same period last fiscal year. "Besides reduced revenue, the previous government’s decision to increase compulsory liabilities by increasing the salary of public officials and lowering the eligibility age to get an elderly allowance to 68 years from 70 years also contributed to the resource crunch," said a finance ministry official. The federal government’s treasury is currently negative by Rs 90 billion. Citing these factors, the federal government called for a reduction of expenses by local and provincial governments too. As both provincial and local governments are heavily reliant on fiscal transfer and revenue sharing from the central government, they are bound to reduce these costs. The central government had promised a fiscal transfer of Rs 129.46 billion for seven provincial governments and Rs 300.37 billion for 554 local governments when the budget for the current fiscal year was presented in May 2022. Sub-national governments receive fiscal transfers in four headings—equalization grants, conditional grants, complementary grants, and special grants. The provinces and local governments are supposed to get an additional Rs 163 billion through a revenue-sharing mechanism as well. “In fact, resources available for the provincial and local governments have already shrunk due to reduced revenue collection,” said an official at FCGO. Various revenues that fall under the concurrent jurisdictions of federal and sub-national governments, should be shared among the different layers of the government. For example, the value-added tax is shared under the formula that the central government receives 70 percent of total VAT collection while provincial and local governments receive 15 percent each, according to the Intergovernmental Fiscal Arrangement Act-2017. Also, the provinces and local units each get 25 percent of the royalties from natural resources such as mountaineering, forestry, electricity generation, mining, and so forth. An official of the Finance Ministry said harsh measures were required to be taken because the central government’s treasury turned negative resources could not be generated as targeted. “We have been making fiscal transfers to the provincial and local governments as per the schedule. So, a lot of resources have been parked in the treasury of sub-national governments. But the central government does not have resources to spend at the moment,” the official said.