Measures that can jack up exports, attract FDI and bring in more tourists are a must to keep the foreign currency reserves from depleting
Spiralling import bills, decelerating remittance and lukewarm foreign direct investment have resulted in depletion of foreign currency reserves in the country. According to the Nepal Rastra Bank, the country’s foreign currency reserve position till mid-April was sufficient to cover imports for a little less than 10 months. One of the major sources of foreign currency income is remittance, which has played a crucial role in keeping the country’s economy afloat. Remittance in nine months of the current fiscal, however, has retarded to 5.6 per cent compared to 6.3 per cent in the corresponding period of the previous fiscal. Even then, continued reliance on remittance is in no way a sustainable solution. Though the central bank says a strong US dollar vis-à-vis Nepali currency and stagnant remittance growth could pose a threat, it, however, has stopped short of describing the situation as “alarming”. Nonetheless, precautionary measures must be adopted to maintain the country’s foreign currency stockpile.
Lack of sustainable sources of foreign currency income has been a cause for concern for years. There are only a handful of items — such as handicraft items, tea, coffee, ginger and readymade garments — that we currently export to earn foreign currency. Tourism is yet another major sector which contributes to the country’s foreign exchange reserves, but unfortunately, we spend more money than we earn from this sector. And skyrocketing import bills — money spent to import iron, steel and cement, automobiles and spare parts and petroleum products which consume more than half of foreign currency — are doing enough to dent the central bank reserve. Then there are other sectors like clothes, pharmaceutical products, electronic appliances and food which contribute to our capital outflows. Trade deficit in nine months of this fiscal stands at Rs 816.55 billion as the country imported goods worth Rs 876.29 billion.
In light of the possible increase in import duties in the upcoming budget, imports are likely to go up. Besides that, increased construction and reconstruction activities also are likely to spike import bills. To maintain the deficit and keep the foreign currency reserves strong, the government must adopt some measures that could keep imports in check. Sustainable sources of foreign currency income must be explored and promoted. Unless there is an increase in foreign investment in infrastructure, energy, agriculture and services, which will also create more employment opportunities, and control in rampant imports of consumption items, the foreign currency reserves will continue to feel the pressure. A glaring gap of Rs 151.73 billion — Rs 664.82 billion in foreign exchange income and trade deficit of Rs 816.55 billion — does not paint a rosy picture. Nepal’s economy has for many years borne the brunt of political instability, which not only distracted foreign investment and international tourists but also resulted in stalling of growth of exports. With stability in place, the government now must focus on taking immediate measures that can jack up exports, attract foreign investment and bring in more international tourists to keep the foreign exchange reserves from depleting.
Restoring the glory
The Bagmati Cleanup Campaign completed its fifth year on Saturday. Organisers who initiated this mega campaign have so far collected as much as 20,000 tonnes of garbage from the holy river from different places. The face of the river seems to have changed for better compared to five years ago. The condition of the river, however, remains to be far from satisfactory. Hundreds of volunteers take part in the cleanup campaign every Saturday. The efforts put up by the people are highly commendable.
Heavy concentration of population, haphazard settlement of squatters on the river banks; emptying solid waste and other household garbage directly into the river and lacklustre approach of the concerned municipalities are the major causes that have made the river dirtiest. Launching the cleanup campaign is inadequate. The sources of pollution must be addressed first. Other tributaries of the Bagmati should also be cleaned up, making it mandatory that all households have septic tanks to control solid waste. Separate drainage system on both sides of all rivers in the Valley should be built to restore sanctity of all water bodies.
A version of this article appears in print on May 21, 2018 of The Himalayan Times.