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Nepali rupee to further devaluated

By Our Reporter
This July, the Nepali Rupee reached an all time high of 110.37 last Friday against US dollars.  The value of US dollars set a record low of 69.16 in October of 2010. Continuous depreciation of Indian rupee vis-à-vis the US dollar has been blamed for dragging the Nepali rupee to an all-time low. By the time this story was prepared value of one US dollar was fixed at Rs. 110.24.
As Nepali currency is pegged with the Indian currency at 1.6:1, the falling value of the Indian currency has a direct impact on Nepali currency.
According to Nepal Rastra Bank, the value of Nepali rupee has been gradually sliding against the US dollars since April.
Although the increasing prices of crude oil in the global market is blamed for the depreciating Indian currency, the gloomy picture of the banking sector in India as revealed in a bi-annual report of the Reserve Bank of India had led to the current deprecation.
Bad effect of the weakening Nepali currency against the dollar could be noticed in every sector as Nepal’s is an import-based economy.  However, the increasing value of dollars could bring cheers for the exporters and the migrant workers, but the consumers as well as importers will be affected as the prices of everything they import and consume will go up.
Naturally, a weaker currency makes import costlier causing high inflation in the economy. Likewise, the country will lose out while repaying interests principals of foreign loans, which need to be paid in US dollars. However, the government will earn more revenues from the increasing prices of imported items. But as Nepal is now launching reconstruction drive, the raw materials required for building houses will become dearer thereby making the construction works costlier. Anyway, depreciation of Nepali currency against US cannot do any good for the national economy as well as majority people of Nepal.

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