EDITORIAL
Traditionally, gold is considered the reserve fund for the central bank in issuing the country’s currency. Nowadays, after World War II, the central banks have also started to issue currency based on the foreign currency reserve – mostly based on the reserve of the US dollars and European currencies.
Nepal has not reviewed its exchange rate fixed with the Indian currency for over three decades. According to the government exchange rate, one unit of the Indian currency is equal to 1.60 units of the Nepali currency but in practice, according to the demand and supply theory, the Indian products strongly dominate the Nepali market. We need Indian currency to import the Indian goods and the central bank is purchasing Indian currency from Singapore by paying the US dollars for importing goods from India. This is the reality and the present government exchange rate between the Nepali and Indian currency is based on an artificial mechanism.
A serious threat is that sooner or later, the Indian government is making its currency fully convertible making it acceptable worldwide. Along with the emergence of India as an economically strong country, it must make its currency fully convertible in the global monetary market. The global monetary market is determined by the demand and supply theory. Contradictorily, the Nepal government has not done any homework on this part.
As stated above, the gold price determines the real price of a particular country’s currency. Presently, the gold price per tola has reached 110 thousand rupees in the market. In 2018, the gold price was 48 thousand rupees per tola. In five years, the gold price has increased by 100 per cent or say, it has become double. In other words, our currency has been devalued by 100 per cent in the past five years, which is alarming. This is also an indication that our economy is on the verge of collapse.
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