‘Demand for IC soars as trade deficit balloons’

KATHMANDU, FEB 18 -

Demand for Indian currency (IC) rose sharply during the first six months of the current fiscal year due to Nepal’s swelling trade deficit with the southern neighbour, Nepal Rastra Bank (NRB) said.

The central bank’s statistics for the first half of the fiscal show that the country’s trade deficit with India ballooned to Rs 213.87 billion from Rs 190.95 billion during the same period last year. In the first half of the current fiscal year, exports to India dropped 8.1 percent to Rs 27.16 billion while imports soared 9.3 percent to Rs 241.04 billion.

India is Nepal’s largest trading partner and it accounts for 65 percent of the total trade.

The central bank said in its mid-term review of the monetary policy that it had taken two measures to ease the IC shortage—one, allowing payment in US dollars for a greater number of Indian imports and two, directly purchasing IC from the Reserve Bank of India by selling US dollars.

According to NRB, Nepali traders are now permitted to import 161 Indian products for which they can pay in dollars. Under this heading, Nepal imported goods worth Rs 40.65 billion, up 12.4 percent up compared to the same period last year. Under the second alternative, NRB purchased IC worth IRs 106.93 billion from the Indian central bank by exchanging $1.74 billion. It had bought IRs 1.44 billion by exchanging $89.41 billion during the same period last year.

Source: The Kathmandu Post