KATHMANDU, OCTOBER 20
The Nepali currency depreciated to a fresh all-time low vis-à-vis the US dollar today as the Indian currency continues to weaken against the dollar after the central bank of the United States hiked interest rates to control inflation, increasing the demand for the US currency.
A stronger US dollar has aggravated the economic woes for the country by adding pressures on inflation, foreign debt, and import bills, as per experts.
The Indian rupee fell to a record low of 82.7750 per dollar on Wednesday.
According to the foreign exchange rate of the Nepal Rastra Bank (NRB), a dollar was priced at Rs 133.14 today, compared to the exchange rate of 132.08 on Wednesday.
As per Pushkar Bajracharya, an economist, the US dollar being the world's reserve currency is likely to get stronger in the coming days due to an increased demand for the US currency. "A stronger dollar will affect the country's balance of payments, increase foreign debt and affect trade, directly affecting inflation which is already high due to the skyrocketing oil prices, the war between Russia and Ukraine, and the persistent liquidity crisis in the country," he said.
"Despite the recent restrictions imposed on imports of some non-essential items to control depleting foreign exchange reserves, the consumption rate of such commodities has not decreased.
The country will also witness an increase in the trade gap due to its import-dependent nature," he said.Bajracharya pointed out that the country could, nevertheless, benefit from a stronger dollar through an increase in remittance, tourism, and exports.
"Although a stronger dollar will also contribute positively to the country's revenue generated from exports, the chance of that happening is less likely due to our high dependence on imports," he added.
Traders are already facing the effects of increased costs due to a stronger US dollar.
According to Krishna Murari Karki, executive director at Yetichem Group, a family enterprise dealing exclusively in pharmaceutical and surgical items, the depreciation of the Nepali rupee against the US dollar has resulted in increased costs for the import of same products that used to cost relatively cheaper until a few months ago, increasing their investment. He also complained of a decrease in demand for quality medicines due to the increase in the product's prices, leading people to opt for cheaper medicines.
The Nepal Oil Corporation and gold traders have also blamed the appreciation of the US dollar for the fluctuations in prices of petroleum products and precious yellow metals.
"The depreciation of Nepali currency will impact our country's growth, entire economic activities, and fuel inflation for at least three months or more. There is a crucial need for proper management of imports in the country to avoid further implications for our economy," Bajracharya opined.
A version of this article appears in the print on October 21, 2022 of The Himalayan Times.
