Nepal Forex Reserves: Nepal bans luxury imports as foreign exchange reserves dwindle

Nepal Forex Reserves: Despite government assurances that the economy will not go into a tailspin like Sri Lanka’s, Nepal’s central bank has announced a ban on the import of vehicles and other luxury items, citing a liquidity crunch and declining foreign exchange reserves. Following a high-level meeting of officials from Nepal’s commercial banks last week, the country’s central bank, the Nepal Rastra Bank (NRB), issued this directive.

“We’ve been seeing signs that the economy could be in trouble, owing to rising imports.” As a result, we’ve discussed halting imports of items that aren’t urgently required,” NRB spokesman Gunakhar Bhatta said.

Nepal Forex reserves declining

Nepal’s forex reserves have been declining since July 2021, owing to rising imports, declining remittance inflows, and meager tourism and export earnings. According to central bank figures, the Himalayan country’s gross forex reserves had decreased 17 percent to USD 9.75 billion in February 2022 from USD 11.75 billion in mid-July 2021.

The Nepal forex reserves are now only sufficient to cover imports for 6.7 months, falling short of the central bank’s target of at least seven months. Despite the high balance of payment deficit, Nepal’s Finance Minister Janardhan Sharma assured that the Himalayan country will not follow Sri Lanka’s path.

Sharma, speaking at the Nepal Rastra Bank’s (NRB) National Conference on Economics and Finance in Kathmandu on Friday, dispelled rumors that Nepal’s economy was on the verge of collapsing like Sri Lanka’s.

“Rather than instilling fear by equating Nepal’s economy with that of Sri Lanka, we should concentrate on improving it,” Mr. Sharma said. According to him, Nepal’s economy is in a better position in terms of production and revenue, and the country is not burdened by a large foreign debt burden. 

Mr. Sharma, on the other hand, acknowledged that the Nepal Forex reserves were being strained by high imports of petroleum products, vehicles, and luxury items, and emphasized the importance of promoting domestic production to reduce imports. 

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