Nepal Rushes To Save Forex, Fears Loom of Sri Lanka Like Economic Crisis

Since July 2021, Nepal is running low on foreign currency reserves needed to import medicines, oil products, cars and a range of other items. By February 2022, the Himalayan nation’s gross forex reserves had decreased 17 per cent to USD 9.75 billion from USD 11.75 billion in mid-July 2021, according to central bank figures.

Kathmandu: Time doesn’t seem to be in favour of India’s neighbours. While Sri Lanka struggles to deal with the ongoing economic and political crisis, a buzz of an impending financial crunch in Nepal has raised fears of uncertainty in the region again. In the latest move to conserve its dwindling supply of foreign exchange, Nepal has banned imports of cars, alcohol, tobacco and other luxury items and shortened its work week

A notice published in the government gazette on Wednesday said only emergency vehicles can be imported. No imports of any type of alcohol or tobacco products, large-engine motorcycles and mobile phones costing over $600 dollars will be allowed. The latest ban, in effect until the end of the fiscal year in mid-July, also forbids imports of toys, playing cards and diamonds.

Since July 2021, Nepal is running low on foreign currency reserves needed to import medicines, oil products, cars and a range of other items. By February 2022, the Himalayan nation’s gross forex reserves had decreased 17 per cent to USD 9.75 billion from USD 11.75 billion in mid-July 2021, according to central bank figures.

Without such drastic measures, the foreign currency reserves needed to import almost everything will run out in seven months if things don’t improve, an official of the country’s central bank said recently, according to Associated Press.

Nepal’s main sources of foreign currency are tourism, remittances from overseas workers and foreign aid. Hundreds of thousands of foreign tourists usually visit the Himalayan country every year, but the number of visitors plunged during the coronavirus pandemic.

Rising prices for oil have added to pressure on Nepal’s foreign reserves. So to conserve fuel, Information Minister Gyanendra Karki announced Wednesday that the government would reduce the work week from five and a half days to five.

However the crisis is already easing, he said, as tourists resume visits and more Nepalese go overseas to work, sending their earnings home.

(With Associated Press Inputs)