KATHMANDU, APRIL 27

The government's decision to ban import of luxury items for the remainder of the current fiscal year that ends in mid-July was 'necessary' to shore up the country's fast depleting foreign exchange reserves, the central bank officials said today.

'We are facing a foreign currency crunch on the back of soaring imports of food and petroleum products,' said Nepal Rastra Bank's Deputy Governor Bam Bahadur Mishra.

'While the central bank had endorsed flexible policies to negate the effects of the COVID pandemic, we had to introduce more stringent policies to ease the growing pressure on our forex reserves.'

Mishra said so while addressing a programme organised here today to celebrate the 67th anniversary of the central bank.

Meanwhile, NRB Governor Maha Prasad Adhikari said that the credit disbursed by the banking sector had mostly been used for imports, which had exerted pressure on the country's balance of payments and the forex reserves since the beginning of the current fiscal year. 'Our current forex reserves are sufficient to cover prospective merchandise imports of just around seven months,' he said.

Nevertheless, economic activities are gradually increasing in Nepal due to waning effects of the coronavirus due to rising vaccination rates in the country, he said, adding, 'The rates of industrial capacity utilisation and hotel occupancy are on the rise, suggesting that the economy is heading towards revival.'

Stating that last year was the year of economic recovery, Governor Adhikari said every sector of the economy is heading towards resurrection as the rising vaccination rates and the dominant Omicron variant of the coronavirus is not causing severe health complications.

'The capacity of industries and hotel occupancy due to the rise of tourists are increasing which indicates that the country's economy is heading towards resurrection,' said Adhikari.

However, former NRB governor Tilak Rawal said that the country's economy is in crisis due to external factors and appealed to every stakeholder to work jointly to tackle the crisis.

'Rather than the fault of one individual, I think our economy has taken a hit time and again due to external factors, such as the trade war between China and the United States, the COVID pandemic and the recent Ukraine-Russia war,' said Rawal.

Pointing out that the country's trade deficit has exceeded the annual budget and that the inflation was spiralling out of control, he stressed on the need for all concerned to coordinate to tackle it together.

NRB's Deputy Governor Mishra had also informed that the central bank is currently studying the feasibility of introducing digital currency.

A version of this article appears in the print on April 28, 2022, of The Himalayan Times.