As the supply of gold and silver has stagnated with the decision of the commercial banks last week not to issue any letters of credit (LCs) for the import of non-essential commodities, the three related federations have collectively drawn the attention of the government requesting to make alternative arrangements for the supply of precious metals.

In a joint statement issued today by the three federations - comprising Federation of Nepal Gold and Silver Dealers' Association (FeNeGoSiDA), Federation of Nepal Gold, Silver, Gem and Jewellery Association (FNGSGJA), and Federation of Handicraft Associations of Nepal (FHAN) - have urged the government to make alternative supply arrangements to prevent a situation that could imperil the livelihoods of 20,000 traders and millions of jewellery makers.

President of FeNeGoSiDA Manikaratna Shakya said mobilising internal resources and exploring other alternatives could ensure supply of the precious metals in the market without further depleting the foreign exchange reserves.

FNGSGJA President Sureshman Shrestha said all the concerned parties - including the traders and consumers -should look for supply alternatives in a convenient way.

The three umbrella organisations working in the gold and silver sector have agreed to move forward for the solution of the problem by setting up a joint mechanism, said Arjun Rasaili, senior vice- president of FeNeGoSiDA.

The Nepal Bankers' Association (NBA), the umbrella organisation of commercial banks, on April 10 decided not to issue LCs for the import of luxury goods, including gold and silver.

The association's decision followed the direction of the Nepal Rastra Bank in a bid to control the country's depleting foreign exchange reserves.

As per the latest macroeconomic update unveiled by the NRB, of the total foreign exchange reserves, reserves held by NRB decreased 18.2 per cent to Rs 1,018.05 billion in mid-March 2022 from Rs 1,244.63 billion in mid-July 2021. Reserves held by banks and financial institutions (except NRB) decreased 0.9 per cent to Rs 152.95 billion in mid-March 2022 from Rs 154.39 billion in mid-July2021.

Based on the imports of eight months of 2021-22, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 7.4 months, and merchandise and services imports of 6.7 months.

A version of this article appears in the print on April 18, 2022, of The Himalayan Times