Foreign exchange reserves on decline


October 27, 2021


Foreign exchange reserves on decline

Image for Representation.

KATHMANDU: The alarming decline in the foreign reserves is likely to cause nuisances in the payments of loans, interests and imports in the country.

As of mid-July 2020, Nepal had foreign reserves of USD 11.65 billion. The COVID-19 induced decline in imports and surprising increase in the remittance had increased the foreign reserves by 2 billion dollars.

The decline in imports and increase in foreign reserves had an impact on the balance of payments as well. In mid-July 2020, the balance of payments surplus was Rs. 282 billion.

The foreign reserves in mid-July 2020 were able to support one year import of goods and services. High balance of payments savings and foreign reserves made money in the banking system excessive.

As of mid-July 2021, the foreign reserves stood at 11.75 billion US dollars. The balance of payment was in surplus of 1.23 billion. The foreign reserves of mid-July 2021 were in a position to support the import of goods and services for 10 months.

Due to the lockdown issued by curb the coronavirus pandemic, the foreign reserves were sufficient due to non-import. However, with the removal of the lockdown, the import has skyrocketed again exposing the increased risk of emptying foreign reserves.

As of mid-August, foreign reserves stood at 11.14 billion dollars. It can support import of goods and services for only 7-8 months. Even the balance of payments is in deficit of Rs 83 billion till August.

NRB has also tightened the dollar exchange rate due to high imports. At present, it is not easy to exchange dollars for cash. NRB has now unofficially instructed the banks not to exchange more than 200 dollars in cash.