Nepal can no longer afford to import non-essential goods using remittance money to pay for them
The government has done the right thing to extend the ban on imports of 'non-essential' goods till August 30 and not be swayed by traders who have been lobbying hard to lift the ban. In a notice issued on the Nepal Gazette on Sunday, the start of the new fiscal year, the Ministry of Industry, Commerce and Supplies has restricted the import of such items as packaged snacks, ready-made beverages, cigarette and tobacco products, diamonds, large colour television sets, vehicles, toys of all kinds and playing cards. Added to these non-essential items this time are motorcycles of more than 150 cc and high-end mobile phones worth more than $300. Earlier, traders were allowed to import motorcycles of upto 250 cc while the cap on mobiles was set at $600. The government on April 26 had banned the import of luxury goods in a bid to buttress the dwindling foreign exchange reserves. The government was forced to take austerity measures after oil prices doubled in the world market following Russia's invasion of Ukraine on February 24, putting heavy pressure on the country's scarce foreign exchange reserves.
Of course, the ban on luxury goods, especially the new restrictions on expensive mobiles and vehicles, has not gone down well with the traders, who feel the measures will greatly dent their business. Since the festival season of Dashain and Tihar in October accounts for more than half of all annual sales of vehicles and mobile sets, the traders see these continued restrictions as a big setback to their business. But government policy cannot be dictated by business interests alone. The latest macroeconomic update from the central bank has shown Nepal's foreign exchange reserves falling by 19.6 per cent from $11.75 billion in mid-July of 2021 to $9.45 billion in mid-June of this year over an 11-month period. This is just enough to cover merchandise and services imports of just 6.73 months. With exports stagnating at just about $1 billion, with the bulk of them accounting for cooking oil, Nepal can no longer afford to import non-essential goods using remittances sent by millions of workers toiling abroad to pay for them.
It is anyone's guess when the war in Ukraine will finally come to an end, and even when it does, the world economic situation is likely to some years before it returns to normalcy. Thus, it might be in the interest of the nation to tighten imports altogether, given the huge slump in foreign exchange reserves. Apart from restricting luxury imports, the government must introduce ways to cut down on fuel imports, which is depleting our hard-earned foreign exchange. The increase in fuel prices in the country has not had much of an impact on our energy import bills. And Nepal is likely to be importing a lot more food this year due to the unavailability of fertiliser during the paddy planting season and the poor monsoon rains in July. If Nepal must import goods, they should be through export earnings, not remittances. There is no other way out for the country now other than to grow our own food, export more by building our industrial base and keeping imports to a bare minimum if we are not to see an economic collapse similar to that of Sri Lanka.
Low rainfall
The government had expected a bumper rice harvest because of the early onset of this year's monsoon, which, according to weathermen, would bring more than average rainfall, especially in the western part of the country. However, contrary to what the Department of Hydrology and Meteorology had predicted, this year's rainfall has been erratic, and the farmers have not been able to plant paddy even in the third week of July. The paddy planted around the second or third week of June has also wilted due to excessive heat and inadequate rainfall in the entire Tarai region, which is the country's food basket. Most of the farmers in the Tarai region still rely on the monsoon rains to plant paddy, the main crop, which contributes around 20 per cent to the country's gross domestic product.
To add insult to injury, the farmers have not been able to receive urea and DAP fertilisers at the time of paddy plantation. Reports from various Tarai districts said only 50 per cent of the farmlands have been planted by mid-July, that too, on parched land without chemical fertilisers. If there is no more rainfall until next week, most of the fertile farmlands will remain uncultivated, resulting in an acute food crisis even in the Tarai region.
A version of this article appears in the print on July 19, 2022, of The Himalayan Times.
