NRB discourages import of non-essential goods amid falling forex reserves

This undated image shows the building of Nepal Rastra Bank in Kathmandu. Photo courtesy: NRB

KATHMANDU: Nepal Rastra Bank (NRB) is moving to reverse a fast-depleting foreign exchange reserve by discouraging the import of non-essential goods and helping enterprises to borrow from abroad.

In a quarterly review of the monetary policy 2021-22 released on Friday, Nepal Rastra Bank said that it would make it mandatory for importers to deposit a certain cash margin at banks to open a letter of credit for the import of certain goods.

“The central bank will now itself fix the cash margin to be deposited,” NRB spokesperson Dev Kumar Dhakal said. “Currently the banks are free to decide on the matter based on the creditworthiness of their borrowers.”

The country’s gross forex reserves decreased by 6.5% to $10.98 billion in mid-October from $11.75 billion at the beginning of the current 2021-22 fiscal year in mid-July, which are adequate for sustaining the import of goods and services for 7.8 months, just above the target of seven months, according to NRB.

The central bank attributed declining forex reserves for three consecutive months to surging imports and a constant fall in the inflow of remittances, the biggest source of foreign exchanges for the South Asian country.

NRB Spokesperson Dhakal said the import of goods not essential to the country’s economic improvement is discouraged. “We are doing homework on the products to be included in the list,” he added.

While the government had hiked up the import duty on silver last month, the NRB is seeking to discourage the import of silver by not supplying foreign exchanges more than 35,000 US dollars, as its inflow has surged dramatically along with gold in recent months.

Besides, the central bank has paved the way for commercial banks to help Nepali enterprises engaged in farming, manufacturing, infrastructure and tourism to borrow from abroad.

“The key objective of these measures is to discourage the outflow of foreign exchanges and encourage their inflow into the country,” Dhakal said.

Source: RSS/Xinhua

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