Impacts of Sliding Rupee

KATHMANDU, SEP 06 -

With the Nepali currency in a free-fall, the government has started consultations on the impact of the rupee ’s slide on the economy and its benefits.

The Prime Minister’s Office on Thursday held an “internal consultation” on the matter, inviting officials from ministries and the Nepal Rastra Bank (NRB). Governor Yubaraj Khati-wada and Finance Secretary Shanta Raj Subedi made presentations on the impact of the dollar’s appreciation and measures to be taken.

“As the depreciation of the domestic currency is an ideal situation for boosting exports, there has been a consensus on identifying exports which could be increased,” said a participant of the meeting. “Then, incentives will be provided to boost exports of such goods.”

The participant said they also agreed on closely observing the status of imports, while discouraging imports of luxury goods. “Despite the visible impact of the rupee ’s slide on the economy, the meeting agreed not to revise the rupee ’s peg with the Indian unit,” an NRB official said.

The central bank has also advised the government not to revise the Nepali rupee ’s peg with the Indian currency, terming the rupee ’s depreciation a short-term phenomenon.

Prime Minister’s Office Secretary Krishna Hari Baskota, however, said the meeting was “just an internal discussion”. “The government has not decided on any measures to be taken to minimise the impact of the strong US dollar,” he said.

With the dollar getting stronger, the country’s import bill is expected to surge, while foreign loan servicing will rise. Nepalis are also facing an increasing price of everyday items, particularly clothes and electronics.

The budget for the current fiscal year allocated Rs 18.57 billion for the repayment of foreign loans. The amount was allocated based on the exchange rate of Rs 90 per dollar. But with the dollar going over Rs 100, Nepal has to manage an additional Rs 4.2 billion for foreign loan servicing. Based on Thursday’s exchange rate, Nepal will have to pay Rs 22.59 billion, according to the Finance Ministry. The exchange rate on Thursday was Rs 107.83 per US dollar. The US dollar has risen by Rs 11 over the last month.

Source: The Kathmandu Post