Kathmandu: Nepal’s central bank has announced a ban on imports of vehicles and other luxury items, citing liquidity crunch and declining foreign exchange reserves, while the government has assured that the economy will not go into a tailspin like Sri Lanka’s. The country’s central bank Nepal Rastra Bank (NRB) issued this directive after a high-level meeting here last week which included officials of Nepal’s commercial banks.
We have been seeing signs that there may be some kind of crisis in the economy, mainly due to increased imports. Therefore, we have discussed stopping the import of items that are not urgently needed, NRB spokesperson Gunakhar Bhatta said. Since July 2021, Nepal has seen a decline in foreign exchange reserves due to rising imports, declining remittance flows and low income from tourism. and export. As of February 2022, the Himalayan country’s gross foreign exchange reserves had declined by 17 per cent to USD 9.75 billion from USD 11.75 billion in mid-July 2021, according to central bank data.
Foreign exchange reserves are now only enough to sustain imports of goods and services for 6.7 months, which is short of the central bank’s target of at least seven months. However, despite the high balance of payments deficit, Nepal’s Finance Minister Janardhan Sharma assured that the Himalayan nation is not moving towards Sri Lanka. Addressing the ‘National Conference on Economics and Finance’ organized by Nepal Rastra Bank (NRB) in Kathmandu on Friday, Sharma rubbished rumors that Nepal’s economy was on the verge of collapse like Sri Lanka.
Sharma said, “Instead of creating panic by comparing the economy of Nepal with Sri Lanka, we need to focus on improving it. The economy of Nepal is comparatively better in terms of production and revenue system and the country is not affected by one. Heavy foreign debt burden, he explained. Sharma, however, acknowledged that the country’s foreign exchange reserves were under pressure due to high imports of petroleum products, vehicles and luxury goods and the need to boost domestic production to curb imports. underlined.