Nepal bans import of luxury items to save foreign currency

Nepal has officially banned the import of cars and other luxury goods, including whiskey and tobacco, and introduced two public holidays, citing cash shortages and dwindling foreign exchange reserves, despite assurances from the government that the economy will not go into freefall like Sri Lanka.

Since July 2021, Nepal has seen declining foreign exchange reserves due to rising imports, falling remittances, and meager tourism and export earnings.

By February 2022, the Himalayan country’s gross foreign exchange reserves had shrunk by 17% to $9.75 billion, from $11.75 billion in mid-July 2021, according to central bank figures.

The ban took effect from Tuesday and will last until mid-July 2022, the end of the current fiscal year. A notice to that effect had been published in the Nepal Gazette, Deputy Governor of Nepal Rastra Bank, the country’s central bank, Bam Bahadur Mishra, told PTI.

“The import of luxury goods such as cars, motorcycles over 250 cc, color television sets over 32 inches, tobacco and whiskey have been halted for the time being to avoid currency depletion”, did he declare.

Only emergency vehicles can be imported under the new provision. The ban also includes items such as importing toys, diamonds and playing cards, the official said.

Earlier in March, the central bank ordered commercial banks not to import gold exceeding 10 kg per day, half the amount from the previous provision.

Deputy Governor Bam said the government has sufficient foreign exchange reserves to support less than seven months of imports. It is because of the increase in imports of foodstuffs and petroleum products that Nepal is facing a shortage of foreign exchange.

The decline in foreign exchange reserves is partly due to the considerable drop in the number of foreign tourists due to the pandemic and the decrease in remittances in recent times. Rising oil prices on the international market due to the Russian-Ukrainian war put additional pressure on the country’s foreign currency reserves.

The government has decided to introduce two public holidays – Saturday and Sunday – every week, starting May 15. The decision was made in order to save the consumption of petroleum products and thereby save foreign currency.

It has been decided to maintain office hours from 9:30 a.m. to 5:30 p.m. from May 15 on a trial basis.

“Public holidays will be given two days a week on Saturday and Sunday,” said the cabinet decision taken on Wednesday. In line with current practice, government offices operate from 10 a.m. to 5 p.m. in the summer six days a week, except Fridays when the office stays open for only five hours.

Speaking during a program to celebrate Nepal Rastra Bank’s 67th anniversary on Wednesday, the bank’s governor, Maha Prasad Adhikari, said the economic situation had already started to improve with the significant reduction in cases of COVID-19 in the country and added that the import ban will be lifted as soon as the foreign exchange reserve shows improvements with business activities returning to normal.

Sri Lanka is facing its worst economic crisis since its independence from the United Kingdom in 1948. People have been protesting for weeks over long power cuts and shortages of gas, food and other basics.

Image: AP

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