Amid declining forex, Nepal introduces measures to cut imports

Weeks after Nepal’s central bank introduced measures to cut imports, traders and importers have hiked the prices of goods, fueling an artificial shortage in the coming days

Dec 27, 2021
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Nepal’s central bank

Weeks after Nepal’s central bank introduced measures to cut imports, traders and importers have hiked the prices of goods, fueling an artificial shortage in the coming days. However, several consumer rights groups in the country objected to the recent hikes in prices. 

Last week, Nepal Rashtra Bank, the country’s central bank, put ten types of goods in the list requiring the 100 percent margin of open the letter of credit (LOC) for imports. The move came after the country continued the trend of declining foreign reserves. 

“This decision by the government is a bonanza for opportunist traders to create artificial shortages and raise prices disrupting the supply chain,” Madhav Timalsina, president of the Consumer Rights Investigation Forum, was quoted as saying by The Kathmandu Post. 

Among the items recently included in the list are alcoholic drinks, tobacco, silver, furniture, sugar and foods, footwear, and cosmetics. Furthermore, motorcycle, scooter, and automobile part importers are required to keep a 50 percent margin amount. 

The continued decline in foreign exchange reserves, mainly by the widening imports and a decline in remittances, forced the central bank to introduce import cut measures. In the first five months of the current fiscal year (FY 21-22), starting from 15 July, the imports bill crossed $ 7 billion, registering a whopping 60 percent increase. 

In mid-November, Nepal’s foreign exchange reserves reached $ 10.47 billion, down by almost 11 percent in comparison to mid-July. Now, with increased investment costs, the prices of these goods, including daily consumables, have increased.   

"The move to deter imports of motorbikes and scooters will ultimately hit consumers in the form of price increases," Subash Acharya, vice-president of Nepal Automobile Dealers Association, was quoted as saying by The Kathmandu Post. (SAM)

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