By Our Reporter
Nepal’s foreign currency reserves have declined massively over the past few months thanks to the increasing import.
As the country heavily depends on imports to meet the everyday needs of its people and has no production to export, it is natural to witness the decline in the foreign currency reserves.
Foreign exchange reserves decreased by 16.2 per cent from Rs. 1,399.03 billion to Rs. 1,171 billion during the first eight months of the current fiscal year.
The reserves will be sufficient to import goods and services for 6.7 months.
According to the Ministry, remittance inflows decreased by 4.9 per cent to Rs. 631.19 billion during the first eight months of the current fiscal year.
But Finance Minister Janardhan Sharma said that the inflow of remittance has seen positive growth in the month of Falgun with the dispatch of Rs. 91 billion.
With a sharp rise in the price of petroleum products in the international market, Nepal’s balance of payments is upset, he said in a press meet organized on Monday.
The Finance Minister said that the situation of foreign currency reserves would increase in the coming days as there is a positive sign in remittance inflows while the import of unnecessary goods has been tightened.
With the sharp declines in the reserves, the government has slashed imports of many things, including vehicles.
However, Finance Sharma has clarified that the country’s economy is moving in the right direction despite the COVID-19 pandemic and the recent Russia-Ukraine war.
“Macroeconomic indicators of the economy have remained modest. However, due to some pressure on the external sector, few policy measures have been taken to control the import and boost foreign exchange reserves,” he said while releasing the indicators of the economy on Monday.
He said that false propaganda is being spread that the country is heading towards an economic crisis.
“The general public and the business community should not be discouraged, the issue of economic situation should not be politicised. There is no need to say that the economy is in big trouble,” he said.
He said that the Finance Ministry has been cautious about the economy and adopting appropriate measures and also a proposal has been submitted to the Council of Ministers to make various decisions to resolve the crisis. e impact on economic growth,” he said.
He, however, said that there will be pressure on inflation due to price hikes of petroleum products in the international market.
“Due to the recent rise in the price of crude oil in the international market, which has a direct impact on the overall price level in Nepal, additional measures need to be taken to keep consumer inflation within the desired range,” he said.
Meanwhile, Nepal Rastra Bank in its Current Macroeconomic and Financial Situation report released on Tuesday said that gross foreign exchange reserves decreased by 16.3 per cent to Rs. 1171 billion in mid-March 2022 from Rs. 1399.03 billion in mid-July 2021. In the US dollar terms, the gross foreign exchange reserves decreased by 18.5 per cent to 9.58 billion in mid-March 2022 from 11.75 billion in mid-July 2021.
The central bank said that based on the imports for eight months of 2021/22, the foreign exchange reserves of the banking sector are sufficient to cover the prospective merchandise imports of 7.4 months, and merchandise and services imports of 6.7 months.
Similarly, deposits at Banks and Financial Institutions (BFIs) increased by 4.1 per cent in the review period compared to an increase of 11.0 per cent in the corresponding period of the previous year.
Two-day weekly off being mulled over
With the rising prices and consumption of petroleum products and the deteriorating economic condition of the country, the Government is now working on a two-day weekly holiday to reduce consumption of the petroleum products.
The government has already floated the idea of reducing the consumption of fuel by 20 per cent, and adding a holiday is the best option to meet this target. When there is a reduction in the working days, the fuel consumption will naturally decline as the government vehicles remain off the road on holidays.
Finance Minister Janadradan Sharma also hinted at this during his press meet on Monday. However, it is not sure when the government will implement the two-day weekly off. Earlier, in 2000, the government had started giving a two-day off on Saturday and Sunday, but it was withdrawn citing that service delivery was affected.
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