Nepal: The Nepalese government has suspended Central Bank Governor Maha Prasad Adhikari over differences with Finance Minister Janardhan Sharma and for failing to do enough to lift the country’s economy out of the doldrums.
According to the Kathmandu Post, Mr. Adhikari, the Governor of the Nepal Rastra Bank (NRB), was suspended on Friday after the government formed a panel led by former Supreme Court judge Purushottam Bhandari. On April 6, 2020, Mr. Adhikari was appointed as Nepal’s 17th governor by the previous regime, which was led by former Prime Minister K.P. Sharma Oli. This is only the second time a governor with a five-year term has been removed from office.
According to sources, disagreements between Mr. Adhikari and Mr. Sharma have arisen as a result of Nepal’s dwindling forex reserves and current economic situation. The NRB announced a ban on the import of vehicles and other luxury items last week, citing a liquidity crisis and dwindling foreign exchange reserves as reasons.
Nepal Forex Reserves
Kathmandu’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 $9.75 billion in February 2022 from $11.75 billion in mid-July 2021.
The 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. During last week’s Cabinet meeting, Mr. Adhikari’s performance was high on the agenda.
According to the Kathmandu Post, key coalition partners Maoist Centre chair Pushpa Kamal Dahal and CPN (Unified Socialist) chair Madhav Kumar Nepal expressed “serious concerns over the state of the economy and asked Prime Minister Sher Bahadur Deuba to take concrete steps” at that meeting.
Following Adhikari’s suspension, Deputy NRB Governor Nilam Dhungana Timilsina has been assigned the role of Acting Governor.