Another neighbor of ours, Nepal has also come and stood at the mouth of the problem Sri Lanka is facing. Like Sri Lanka, there has been a shortage of foreign exchange reserves in Nepal. The situation is that Nepal's central bank has asked banks not to issue letters of credit for vehicles and non-essential goods. Most of these imports come from India.
Prakash Kumar Shrestha, head of the Economic Research Department of Nepal Rastra Bank said that instead of spending on luxuries, the monetary fund will have to be saved for the import of medicines. These instructions have been issued when other measures to reduce imports fail. However, Nepal central bank spokesman Gunakhar Bhatt denied the situation was like Sri Lanka.
Bhatt said- We have taken these steps as a precaution. Since the beginning of the financial year in July 2021, foreign exchange is depleting due to an increase in imports and decrease in outflows, a fall in tourism and export earnings. Nepalese working abroad sends an amount equal to 33% of GDP. From July to January 2022, there has been a 5% reduction in the repatriation of currency in the same period of the previous financial year. Due to this, the foreign exchange reserves decreased by 17% to $ 975 million in July 2021 from $ 117.5 million.
Record trade deficit: From $81 million to $207 million
Nepal's existing foreign reserves will allow imports for 6 months, while the central bank aims to keep foreign exchange for 7 months. Due to rising imports and declining foreign exchange, the trade deficit is at a record level of $ 207 million. It was $81 million in the same period last year.
The crisis increased due to the stoppage of tourism
Ashok Rana, CEO of Himalayan Bank said – Before Kovid, 5% contribution to the foreign exchange fund was from tourism. Now it's at a standstill. Economist Diliraj Khanal said – Most of the government revenue comes from a tax on imports. In such a situation, the policy of reducing imports cannot continue for long.
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