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NepalBALANCE OF PAYMENTS, NEPAL
The balance of payments in the 1980s improved, despite
a
continued trade deficit. This improvement was achieved
through
foreign loans and assistance. Nonetheless, foreign debt
was
increasing. Foreign debt and the balance of payments were
intrinsically linked, and an improvement in one area was
at the
expense of the other. Between 1986 and 1990, the debt
service ratio
increased from an average of under 7 percent to about 12
percent.
In 1989 the debt service ratio skyrocketed to 17 percent.
This
increase was the result of the acquisition of two
commercial
aircraft and a decline in exports caused by trade and
transit
difficulties. According to World Bank figures, by mid-1989
official
foreign debt outstanding and disbursed was approximately
US$1.3
billion. There also was a deficit in the balance of
payments of
convertible Indian currency.
The Structural Adjustment Program addressed the trade
deficit
and sought to increase the speed of economic development.
Although
exports increased in FY 1988 by 34 percent over the
previous year,
Nepal still imported much more than it exported. In FY
1988,
exports were US$187 million (up from US$139 million the
previous
year), but imports were US$630 million, up from US$507 the
previous
year. Nonetheless, more efficient use of foreign aid,
increased
earnings from exports, tourism, and other services
improved the
balance of payments situation and increased the
international
reserves through FY 1989. Foreign exchange reserves also
had
increased, mostly because of loans from the World Bank and
the
International Monetary Fund
(IMF--see Glossary) for the
Structural
Adjustment Program, as well as loans from the Asian
Development
Bank. Both Kuwait and Saudi Arabia had made loans that
alleviated
the balance of trade deficit. The trade and transit
problems with
India that began in March 1989, however, erased those
gains and
resulted in tremendous financial hardships.
Data as of September 1991
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