Acute forex crunch pushes Nepal to ban imports


GLOBAL VOICE


The Nepali government has imposed a complete ban on the import of some products till mid-July as the country’s foreign exchange reserves are depleting fast over rising imports.

In a notice published in Nepal Gazette, the government barred the entry of liquor and tobacco products except their raw materials, diamond, mobile sets priced over $ 600 dollars, colour TV sets larger than 32 inches, jeep, car and van except ambulances, motorcycles with capacity over 250CC, dolls, cards and snacks among others.

Earlier, Nepal’s central bank instructed commercial banks not to open letters of credit for luxury goods, including vehicles.

“A strict import control for the time being has been necessary to improve the external sector of the economy,” Prakash Kumar Shrestha, chief of the economic research department at Nepal Rastra Bank or the central bank, told Xinhua.

“The government’s decision to impose a complete ban on some of the products, which are among the top import items, is expected to help to improve the situation of the current account, balance of payment and foreign exchange reserves.” Dwindling forex reserves have sparked concerns over Nepal’s ability to pay for sustained growth in imports as remittances, the largest source of forex earnings for the country, have declined, while the contribution of exports, tourism revenues and foreign direct investments to forex reserves has been minimal.

The government notice said the import ban was enforced to safeguard the external financial position and balance of payments in order to forestall the imminent threat to the economy.

According to the data released by the central bank on April 12, the current account has registered a deficit of 3.88 billion dollars and the balance of payment remained at a deficit of 2.17 billion dollars as of mid-March in the current fiscal year that began in mid-July 2021.

Likewise, gross forex reserves decreased 18.5 per cent to 9.58 billion dollars in mid-March, from 11.75 billion dollars at the beginning of the current fiscal year.

The forex reserves are adequate to sustain the import of goods and services for 6.7 months only, below the central bank’s target of at least seven months.

Nepal is an import-dependent country, with imports accounting for over 90 percent of its foreign trade, according to the country’s Department of Customs.

As of mid-April, the imports have grown by nearly 32 percent to 1466.66 billion Nepali rupees (11.93 billion dollars), showed the department figures.


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