No action until forex depletes: NRB

KATHMANDU: Despite the highest balance of payments (BoP) deficit after fiscal 2010-11, the central bank has said that it will not take any immediate corrective measures.

In the past, the Ministry of Finance and Nepal Rastra Bank (NRB) had taken some steps to curb the import of luxurious goods.

In fiscal 2009-10, the Parliament had endorsed the MoF’s proposal to amend the financial act to raise the tariff on the import of gold. Likewise, the central bank had also raised the loan to value (LTV) ratio to 50 per cent in automobile financing. However, NRB will not take any immediate action till the forex reserves depletes considerably.

“We will not take any knee-jerk reaction based on the current scenario,” said Nara Bahadur Thapa, executive director of NRB. “But if the foreign exchange reserves deplete considerably and is insufficient to cover the merchandise and services imports of eight months, then the central bank will take some action to curb imports.”

The foreign exchange holdings of the banking sector worth $10.58 billion is sufficient to cover the prospective merchandise imports of 12.8 months, and merchandise and services imports of 11 months, as per NRB report.