Trade deficit at Nu 24B in just nine months time

Economy: In just nine months this year, the country has imported goods worth more than Nu 48.6 billion (B) and exported goods valued at Nu 24.7B, resulting in a trade deficit of about Nu 24B.

Trade deficit is an economic measure of a negative balance of trade, meaning imports exceeds its exports.

As per the quarterly provisional trade statistics published by finance ministry, the country’s trade balance for first quarter was Nu 9.96B in the red, Nu 12.2B deficit in the second quarter and another deficit of Nu 1.77B in the third quarter. Totaling the quarterly provisional balance of trade, the trade balance comes close to Nu 24B in the red.

The narrow trade deficit in the third quarter is because the country has exported electricity worth Nu 6.8B, compared to Nu 2.2B in the second quarter and Nu 345 million (M) in the first quarter. The electricity generation increases with the onset of monsoon and the third quarter of the year falls between July and September.

While import and the export figures, excluding electricity, more or less remained constant. The last quarter of the year is supposed to be the lean season for electricity production. Energy demand during these seasons is met through imports. So, the trade balance for the year is further bound to widen.

India, by virtue of being the largest trading partner accounts for more than Nu 18.7B of the overall trade deficit with the country, constituting about 80 percent. The country has, until September 30 this year, imported goods worth more than Nu 42.2B from India and exported goods equivalent to Nu 23.5B to India.

Had it not been for electricity, trade deficit with India could stretch to the tune of Nu 28B, resulting in an overall trade deficit of more than Nu 33B in just nine months.

In addition, the economy is also running at a deficit of Nu 6.6B with countries other than India. Bhutan’s export to third countries until September was valued at Nu 2.2B and import value at Nu 8.15B.

In just nine months the country has imported vehicles valued at Nu 4.6B from India alone and another Nu 862M worth of vehicles from the third countries.

Figures from the Road Safety and Transport Authority revealed that there were 82,522 vehicles in the country as of September 30 this year. To fuel these many vehicles, the country imported motor fuel worth over Nu 5.3B between January and September (in three quarters).

While the country is striving to achieve self-sufficiency in rice production, rice is listed in the top-ten import commodity. Within the three quarters of the year, value of rice import stood at Nu 1.13B.

Ferrous products obtained by direct reduction of iron ore was also listed as top-ten import, valued at more than Nu 1.5B.

The provisional trade statistics also reveal that more than Nu 929M was spent on import of dumpers designed for off-highway use until September this year.

A trade deficit represents an outflow of domestic currency to foreign markets. But in case of Bhutan, its domestic currency is not a freely exchangeable and thus results in foreign currency outflow.

Trade deficit with India indicates the country earned half the INR that was spent because the import value was twice as much as the export value.

Tshering Dorji

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