KATHMANDU, NOVEMBER 26
In a nod to Nepal's burgeoning trade deficit, the Nepal Rastra Bank through its first quarter review of the Monetary Policy of 2021-22 has adopted numerous measures to shore up the country's depleting foreign exchange reserves.
Among the measures introduced through the review as announced during a virtual event held today, the central bank has introduced a provision whereby cash deposit has been made mandatory to open LC for imports.
Earlier, an importer was able to open the LC by keeping as collateral the relevant documents of the company such as updated registration certificate, income tax registration certificate, along with the various forms provided by Nepal Rastra Bank, among others.
The recently unveiled Department of Customs data showed that Nepal incurred a trade deficit of Rs 568.17 billion in the first four months (mid-July to mid-November) of this fiscal year, a surge of 56.83 per cent compared to the corresponding period of the previous fiscal.
Nepal's export stood at Rs 82.12 billion in the review period, while the country imported goods worth a whopping Rs 650.29 billion.
The latest macroeconomic data of the central bank also revealed that Nepal's total foreign exchange reserve in mid-October had dwindled to $10.98 billion from $12.55 billion in mid-October of 2020.
The NRB, nonetheless, has projected gradual recovery of COVID-battered economy with the decline in the number of people testing positive to the coronavirus, increased availability of the anti-COVID vaccines, more number of people opting for foreign employment, increase in tourist arrivals and as the country has now started exporting electricity.
Meanwhile, the NRB has made no changes to the policy rates such as the statutory liquidity ratio (SLR) and cash reserve ratio (CRR).
Similarly, the 90 per cent cap on credit-deposit (CD) ratio has also been left unchanged.
The central bank has also introduced a provision whereby commercial banks can issue collateral for loans in foreign currency for commercial agriculture, manufacturing industries, tourism and projects.
A version of this article appears in the print on November 27, 2021, of The Himalayan Times.
