After Sri Lanka, Nepal’s foreign exchange reserves are also running out. In view of the crisis, Nepal’s central bank has advised all banks in the country not to issue letters of credit for vehicles and other non-essential items.

Prakash Kumar Shrestha, head of the economic research department at Nepal Rastra Bank, said foreign exchange would have to be saved for importing important items like medicines instead of luxury items. The present situation of Nepal is similar to that of Sri Lanka due to the depleting foreign exchange reserves. Therefore, the bank has pointed to this after all measures to reduce imports have failed.

Since the start of the new financial year in July 2021, Nepal has exhausted foreign exchange reserve quotas due to rising imports, declining remittances, declining tourism revenue and exports. Foreign exchange reserves stood at ₹11.11.75 billion in July 2021, down 17% to ₹59.75 billion. Funds can be imported for about six months, while the central bank aims to maintain foreign exchange reserves for seven to eight months.

Moreover, the trade deficit in Nepal has reached 2.07 billion, as against 81.81 crore in the same period last year. According to Ashok Rana, CEO of Himalayan Bank, this directive from the Central Bank of Nepal will help us in reducing oil consumption. Nepal is the largest importer of vehicles and spare parts. Nepal has spent 75.95 billion Nepalese rupees (6262 crores) in the first eight months of the current financial year.