Kathmandu, July 24: Nepal’s annual foreign trade surpassed Rs2 trillion for the second time, matching the national budget. This surge stems largely from a staggering rise in edible oil exports—products the country doesn't produce in large volumes but has been re-exporting at record levels. Refined soybean, sunflower, and palm oil exports shot up over 1,500 percent compared to the previous fiscal year.

This trade boom has shifted Nepal’s trade landscape, with Argentina becoming the third-largest trade partner, overtaking the US due to massive imports of crude edible oil. The lifting of India’s ban on key food items also fueled imports. Total imports rose 13.25 percent to Rs1.80 trillion, while exports soared by 81.8 percent to Rs277 billion. Edible oils alone accounted for nearly half of total exports—Rs121.53 billion out of Rs277.03 billion—most of it re-exported to India.

To support this trade, Nepal imported 958,901 tonnes of crude oils worth Rs144.79 billion and collected Rs9.29 billion in duties. Experts say traders are leveraging SAFTA’s zero-tariff provision, with the government turning a blind eye, prioritizing revenue generation to offset the fiscal deficit. Reports suggest large Indian firms are behind this trend, raising concerns over tariff evasion.

Trade experts like Rabi Shankar Sainju warn of macroeconomic risks: Nepal buys crude oil in dollars but exports in Indian rupees, exposing it to currency volatility. Economist Chandramani Adhikari calls the export boom “artificial,” driven by re-exports that offer little to industrial growth. With just 35% of industries operating, manufacturing’s share in GDP has shrunk from 9% to about 5%.

Adhikari criticized weak policymaking, lacking research, coordination, and tech investment, leading to disconnects among fiscal, export, and monetary policies. He argued the government ignores structural economic problems while fixating on issues like political cooling-off periods.

Nepal's edible oil trade spiked after India hiked duties on such imports last year, creating a temporary profit window for Nepali refiners. But a recent Indian policy change—cutting crude oil duties to 10 percent—has begun eroding Nepal’s competitive edge. Experts say this could shrink Nepal’s edible oil exports sharply.

Despite this, India remained Nepal’s largest trade partner (exports: Rs224.68 billion, imports: Rs1.07 trillion). China followed, with Rs341.10 billion in imports and Rs2.63 billion in exports. Argentina rose to third, driven by Rs99.30 billion in crude oil imports, while exports to Argentina were negligible. The US fell to fourth place.

Nepal’s main imports included petroleum, crude oils, machinery, vehicles, cereals, and pharmaceuticals. Top exports were edible oils, garments, iron/steel products, spices, carpets, tea, and processed foods.

People’s News Monitoring Service