NRB mulling raising gold import quota

KATHMANDU, APR 22 -

Nepal Rastra Bank is considering increasing gold imports from the current 15 kg daily to 20 kg in view of the rising demand during the wedding season. The auspicious period for nuptial ceremonies began in mid-April.

The central bank pointed out that the increase in the import quota had not been prompted by the recent gold rush triggered by a fall in prices. The price of the yellow metal has plunged to Rs 43,295 per 10 gm on Sunday from Rs 47,840 a week ago. Domestic prices took a dive after gold hit historic lows in the international market.

“We are currently holding discussions on increasing the gold import quota during this wedding season,” said a senior NRB official. “If demand remains high for making bridal jewellery, we can hike the quota by 5 kg per day.”

In the past too, the central bank had jacked up the quota to 20 kg during the wedding season which was later brought back to the usual level of 15 kg daily.

Although bullion merchants have long been demanding a massive hike in the quota citing heightened demand of 40 kg daily, the central bank has not been convinced by their claims. “The central bank has a policy of allowing gold imports to make jewellery and for religious purposes but not for investment,” said NRB spokesperson Bhaskarmani Gnawali. “Our economy cannot afford unchecked imports of the yellow metal.”

Meanwhile, Ramesh Maharjan, president of the Nepal Gold, Silver, Gem and Jewellery Federation, said that there would not be a scarcity of gold in the market if the central bank increased the daily quota by 5-10 kg. “Although the usual daily requirement is 30 kg, demand has jumped to 35-40 kg due to the wedding season,” he said.

NRB began imposing a quantitative restriction on gold imports in 2010 after massive imports caused a huge balance of payments (BoP) deficit. A BoP deficit reduces the country’s capacity to import essential goods and services due to reduced foreign exchange reserves. Nepal imported gold worth Rs 41.63 billion in fiscal 2009-10.

Despite the quota, gold was the country’s third largest import as of the first eight months of the fiscal year. Shipments of the yellow metal during the period were worth Rs 17.14 billion, according to NRB.

Source: The Kathmandu Post