Following a decline in its foreign currency reserves, Nepal has imposed import restrictions on non-essential products such as vehicles, cosmetics, and gold.
It comes as the government’s debt has risen due to a drop in tourism expenditure and money returned home by Nepalis working overseas.
In the meantime, the governor of the country’s central bank was fired last week.
Nepal’s finance minister expressed amazement that the matter was being likened to the Sri Lankan crisis.
Foreign currency reserves plummeted by more than 16 per cent to 1.17 trillion Nepali rupees ($9.59 billion) in the seven months to the middle of February, according to the country’s central bank, Nepal Rastra Bank.
During the same time period, the amount of money transferred to Nepal by those working abroad dropped by nearly 5 per cent.
The central bank’s deputy spokesperson, Narayan Prasad Pokharel, told the media that the country’s foreign currency reserves were “under strain.”
“Something must be done to restrict the import of non-essential goods, without affecting the supply of essential goods,” Pokharel said.
Importers were allowed to bring in 50 “luxury goods” if they paid for them in full, according to him.
“This is not banning the imports but discouraging them,” Pokharel said.
Nepal’s government ousted central bank governor Maha Prasad Adhikari from his position last week without citing a reason.
Nepal’s government debt has soared to more over 43 per cent of its GDP, as officials increased spending to assist soften the economic impact of the pandemic, according to the country’s finance ministry.
Indicators of the country’s economic health were likewise described as “normal” by the ministry.
“However, due to some pressures in the external sector, some steps have already been taken to manage imports and increase foreign exchange reserve,” it said in a statement.
Finance Minister Janardan Sharma said earlier in the day that Nepal’s debt was smaller than that of other countries in the region and worldwide.
“I am surprised why people are comparing with Sri Lanka”, Sharma told reporters. The island nation is in the midst of its worst economic crisis since gaining independence from the United Kingdom in 1948.
According to Alex Holmes, an emerging markets economist at Capital Economics, the situation in Nepal appears to be “far better than in Sri Lanka.”
Nepal’s foreign currency reserves are more than double what is deemed a “comfortable minimum,” according to Holmes, and the country’s government debt is “not especially significant.”
“Of course, things will eventually regress if the current account deficit does not narrow,” he added. “But crisis does not appear imminent”.
Sri Lanka appointed a new central bank governor last week and nearly quadrupled its main interest rate to combat rising costs and shortages of vital products.
Demonstrators have marched to the streets of Colombo in recent weeks as homes and businesses have been battered by protracted power outages.
Sri Lankans are facing shortages and soaring prices as a result of the country’s sharp devaluation of its currency last month in preparation for bailout talks with the International Monetary Fund.
(Adapted from WionNews.com)