Global inflation straining Nepal’s forex reserves | Daily News

Global inflation straining Nepal’s forex reserves

Surging imports have contributed to a significant depletion in foreign exchange reserves and ballooning of the balance of payment deficit, raising concerns if the country would be able to import essential goods for long.

Though the quantity of goods itself rose sharply in the current fiscal year, rising prices of goods in the international market also contributed to a surge in the country’s import bill, according to economists. Fuel and commodity prices have surged internationally in the wake of the Russia-Ukraine war.

As a net importing country with imports constituting over 90 percent of international trade, Nepal’s import bill has continued to surge.

“Since the beginning of the current fiscal year, rising prices started to put pressure on import bills by 20 percentage points,” Manik Lal Shrestha, former division head, statistics division, at the International Monetary Fund (IMF), said at an interaction on the country’s economy organised by the Society of Economic Journalists Nepal in Kathmandu. Presenting his paper, he compared the import data from the perspective of quantity and value of imports from July to March this fiscal year, suggesting a clear link between price rises of goods internationally and rising import bill of Nepal. “This also affected the foreign exchange reserves,” he said.

Nepal’s foreign exchange reserves have been under strain since the beginning of the current fiscal year. As of the first eight months of the current fiscal year, the country’s foreign exchange reserves dropped by 16.3 % to Rs1,171 billion in mid-March 2022 from Rs1,399.03 billion in mid-July 2021, according to the central bank.

The available reserves are sufficient to sustain imports of goods and services for just 6.7 months against the central bank’s policy of maintaining the reserves to sustain imports for at least seven months. During the first nine months of the current fiscal year (mid-July 2021-mid-April 2022), Nepal’s total import bill stood at Rs1466.66 billion with a rise of 31.97 % year-on-year. (Kathmandu Post)



Add new comment