Dollar depreciation to boost consumption

KATHMANDU: Depreciation of the US dollar against Nepali currency in recent months will boost consumption as imports will be relatively cheaper.

The dollar has depreciated by around six per cent in the last one year — the exchange rate stood at Rs 110.28 per dollar on February 26 last year, which is at Rs 103.50 as of Wednesday.

Normally, import of goods rises in the last quarter of the fiscal as traders stock up due to probable rise in customs duty and other taxes on import of merchandise through fiscal budget. Consumption increases when imported goods are cheaper.

However, exports may decline as the importing countries have to pay more in dollar terms for the same item they were importing from Nepal, according to economists. “This will also discourage foreign and domestic investment because imports will be cheaper than domestic production if the trend continues.”