In light of dwindling foreign exchange reserves, falling remittances and rising imports, the government has started to tighten rules to limit the outflow of foreign currency.
The Immigration Department has reduces the minimum exchange rate the amount Nepalese citizens traveling abroad must take with them from $ 500 to $ 1,000. But the minimum amount for those – both workers and tourists – traveling to Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates, Malaysia, Thailand and countries in Asia South was further reduced to $ 250.
“Previously, Nepalese traveling abroad had to show [to immigration officials at the airport] they had at least $ 1,000 with them, ”said Jhanka Nath Dhakal, spokesperson for the Immigration Department. “Now the amount has been reduced in accordance with the request of Nepal Rastra Bank. “
Although the central bank allows Nepalese citizens traveling abroad to purchase a maximum of $ 1,500 from banks, most Nepalese generally buy foreign currency below the maximum limit.
Central bank officials said they recommended that the government lower the minimum foreign exchange threshold for Nepalese travelers after detecting increasing currency misuse.
“Even migrant workers have been sent to work abroad on tourist visas because tourists are allowed to carry more US dollars,” a central bank official said on condition of anonymity because he was not allowed to talk to the media. “Some unscrupulous recruiting agents do this because migrant workers with work visas cannot carry more than $ 200, while tourists can carry more.”
According to the official, such a trend has created suspicion whether migrant workers are used to siphon foreign currency as well as import gold.
Nepal’s gold market started fiscal year 2021-22 importing 3.17 billion rupees of gold in the first month [mid-July to mid-August], which is over 900 times what they imported in the same period last year.
Imports of the yellow metal had almost stopped after Nepal declared a lockdown in March 2020 to prevent the spread of the coronavirus.
During the period from mid-July to mid-August, the first month of fiscal year 2020-21, gold imports fell to a historic monthly low of 3.47 million rupees.
The import of gold had put pressure on foreign exchange reserves.
Nepal’s foreign exchange reserves fell 3.2 percent to 1,353.82 billion rupees in a month from mid-July to mid-August as the country’s imports increased and remittances have falled.
The influx of remittances, the largest source of foreign exchange reserves, fell 18.1 percent to 75.96 billion rupees during the reporting period, compared to an increase of 23 percent during the review period. from the same period of the previous fiscal year.
Imports peaked at 150.73 billion rupees in a single month, putting pressure on foreign exchange reserves.
In addition to lowering the minimum threshold for foreign currency exchange, the Immigration Department has also made it clear that it will only grant immigration clearance if foreign currency has been purchased from commercial banks. Previously, travelers were also allowed to purchase foreign currency from private sector development banks and foreign exchange companies.
“From now on, any Nepalese going abroad wishing to buy foreign currency must go to the banks in person and also show the source of their income,” Dhakal said.
Central bank officials have expressed concern about a possible decline in foreign exchange reserves.
“There are also proposals to reduce the maximum limit of foreign currency that Nepalese going abroad are allowed to buy from banks,” the official said. “Our assessment is that the current decline in foreign exchange reserves is a temporary phenomenon. But we are closely monitoring developments.
In addition to the new rules set by the Immigration Department, the Ministry of Industry, Trade and Supply has suspended the issuance of licenses to traders for the importation of betel nuts, peas, pepper and dates dried during exercise. Businesses and businesses are allowed to import these products in limited quantities after the government sets a quota on imports.
In March 2020, the government banned the import of these items to save currency, fearing a drop in remittance income amid the Covid-19 pandemic.
After a marginal 0.5 percent down in 2019-20, Nepalese migrant workers sent home 961.05 billion rupees in the last fiscal year 2020-21, ending in mid-July, a record money transfer to Nepal since the Nepalese started looking for work overseas more than two decades ago. The amount has increased by 10% year over year.
In March of this year, the government allowed import of these articles until mid-July by setting quantitative limits for each article. The quota for peas was set at 1,225,290 tonnes, 227,270 tonnes for betel nut, 41,995 tonnes for dried dates and 140,082 tonnes for peppercorns.
But in the current fiscal year, neither import licenses have been issued nor the quota set for items. And last week, the Commerce, Supply and Consumer Protection Department wrote to the central bank not to provide traders with any foreign currency for importing these items.
Sending a notice on Sunday [October 3], the central bank, at the request of the department, asked commercial banks not to provide any foreign currency for the import of these items.
“Since the government did not issue import licenses for these items nor set import quotas, we, at the request of the Ministry of Commerce, wrote to the banks not to issue foreign currency for the ‘importing these items,’ said Dev Kumar Dhakal, spokesperson for the central bank. “It is a sensible decision in the context of the depletion of foreign exchange reserves. “
But a senior Commerce Ministry official said there was no connection between the fact that they had not set any quotas for the items and the country’s currency situation.
“We have not set the quotas because we have not received import requests from companies,” said Narayan Prasad Regmi, spokesman for the Ministry of Commerce. “We will determine the quota once we receive the requests to import the items.”