Reliance on remittance to shore up Nepal's forex reserve can never be in our interest
The balance of payments (BoP) may have improved in the second month of the current fiscal year (ending mid-September), but there is little solace from it as the country's foreign exchange reserve is still under pressure. According to Nepal Rastra Bank, the improvement in the BoP is largely due to an increase in remittance inflow compared to the same period last year as well as a narrowing of the trade deficit. Remittance inflow, on which Nepal's economy largely depends, grew by 19.8 per cent to Rs 187.04 billion as against a decrease of 5.8 per cent during the same period the previous year. Merchandise imports were also down by 13 per cent to Rs 273.60 billion during the review period as against an increase of 75.9 per cent a year ago. However, the country's already meagre merchandise exports also plunged by 34.9 per cent to Rs 26.68 billion, although the same period the previous year had seen an increase of 115.4 per cent.
Despite the improvement seen in the BoP situation in the second month of the current fiscal year, the deficit is, however, still a high of Rs 23.68 billion, although much better than the Rs 94.80 billion seen in the same period the previous year. Imports have slumped compared to last year because the government has prohibited the import of certain non-essential goods, or luxury goods. In the wake of the dwindling forex reserve, the government on April 26 had prohibited the import of 10 types of non-essential goods that included automobiles, snacks, mobiles worth more than $600 and motorcycles above 250 cc.
However, on August 30, the government relaxed the import ban on such items as large TV sets, cards, diamonds and Lays potato chips. But the import ban continues on automobiles and liquors and extends to even mobile phones costing more than $300 and motorcycles above 150 cc as the amount of forex reserve is still not comfortable. Despite pressure from the business community, the prohibition will continue till mid-December, by when the new government formed after the November 20 federal elections will decide what further step to take.
Based on the imports of the two months of 2022- 23, Nepal has enough forex reserve to cover merchandise imports of nine months, and merchandise and services imports of 7.7 months. The gross forex reserve has fallen by 2 per cent to $9.35 billion in mid-September from $9.42 billion in the first month of the current fiscal year that ended in mid-August and $9.54 billion at the start of this fiscal, in mid-July this year. Nepal's ever-growing trade deficit over the years is worrisome, which has seen a deficit of Rs 244.92 billion in the first two months of 2022-23 already, although it is a 9.4 per cent decrease compared to the corresponding period last year, when it had seen a 70.8 per cent increase. Reliance on remittance to shore up Nepal's forex reserve can never be in the interest of the country, as we are witness to the precarious situation during the COVID-19 pandemic.
No government has made any effort to boost Nepal's exports, with refined cooking oil forming the bulk. If countries like Laos, Cambodia and Mongolia can export goods worth $6-9 billion annually, there is no reason why we should lag behind.
Tihar festival
Tihar, or the festival of lights, began from yesterday, and it will continue for the next five days. During this period, Hindus worship the crow, the envoy of Yama, the God of Death, dog and cow. Laxmi Pooja, or worshipping the Goddess of Wealth, is another important day when people décorate their pooja room and make offerings of cash and fruits. The last day of the festival is observed with the offering of the tika to the brothers by their sisters, marking the close bond between the two. People also illuminate their houses, offices and their surroundings with oil-fed lamps.
Deusi and Bhailo are other features of this festival during which youths visit every home collecting cash either for some social work or merely for fun.
However, the dark side of the festival is the massive bang of fire-crackers that not only create disturbances in the neighbourhood but also cause air and noise pollution. Newborn babies and elderly people find it difficult to cope with the massive explosion of fire-crackers. Although the police have banned their use and also seized large quantities of them, youths tend to relish them to have some fun. Careless use of fire-crackers can cause severe injury to the eyes while also setting fire to homes.
A version of this article appears in the print on October 24, 2022 of The Himalayan Times.
