Nepal bans import of luxurious items to save declining forex reserves

Nepal has formally banned the import of cars and other luxurious goods, including whisky and tobacco and have introduced two public holidays, citing a liquidity crunch and declining foreign exchange reserves, despite government assurances that the economy will not go into a tailspin like Sri Lanka.

Since July 2021, Nepal has seen a decline in forex reserves due to the surging imports, declining inflows of remittance and meagre earnings from tourism and exports.

By February 2022, the Himalayan country's gross forex reserves had decreased 17 per cent to USD 9.75 billion from USD 11.75 billion in mid-July 2021, according to central bank figures.

The ban has come into effect starting Tuesday and will last until mid-July 2022, the end of the current fiscal year. A notice to this effect had been published in the Nepal Gazette, Deputy Governor of Nepal Rastra Bank, the central bank of the country, Bam Bahadur Mishra, told PTI.

"Import of luxury goods such as cars, motorbikes above 250 CC, Colour TV above 32 inches, tobacco and whisky have been halted for the time being to save foreign currency depletion," he said.

Only emergency vehicles can be imported as per the new provision. The ban also includes items such as the import of toys, diamonds and playing cards, the official said.

Earlier in March, the central bank had instructed the commercial banks not to import gold exceeding 10 kg per day, half the quantity compared to the previous provision.

Deputy Governor Bam said that the government has foreign currency reserves that are sufficient to support less than seven month of imports. It is because of growing imports of mainly food items and petroleum products that Nepal is facing a foreign currency crunch.

The dwindling foreign currency reserve is partly because of the considerable decline in foreign tourists due to the pandemic and the decrease in the inflow of remittance in recent times. The rising prices for oil in the international market due to the Russia-Ukraine war have exerted extra pressure on the foreign currency reserves of the country.

The government has decided to introduce two public holidays - on Saturday and Sunday - every week, with effect from May 15. The decision has been taken in a bid to save consumption of petroleum products and thereby save foreign currency.

It has been decided to maintain office hours from 9:30 AM to 5:30 PM with effect from May 15 as a trial.

Public holidays will be given two days a week on Saturday and Sunday, stated the cabinet decision made on Wednesday. As per the existing practice, the government offices operate from 10 am to 5 pm in the summer six days a week, except for Friday when the office remains open only for five hours.

Speaking at a programme to observe the 67th anniversary of the Nepal Rastra Bank on Wednesday Governor of the bank Maha Prasad Adhikari said that the economic situation has already started improving with the significant reduction in COVID-19 cases in the country and added that the import ban will be lifted as soon as the foreign currency reserve shows improvements with business activities returning to normal.

Sri Lanka is facing its worst economic crisis since gaining independence from the UK in 1948. People have been protesting for weeks over lengthy power cuts and shortage of gas, food and other basic goods.