To increase foreign currency reserve, the government must focus on setting up export-oriented industries

Nepal’s foreign currency reserve is depleting over the months this fiscal due to huge imports of goods, low export, slackness in remittances and foreign direct investment (FDI).

The foreign currency reserve depleted to the tune of Rs 32.23 billion in the first seven months, according to Nepal Rastra Bank (NRB). The country had foreign currency reserve of Rs 1,079.43 billion at the start of the fiscal.

The size has dropped to Rs 1,049.20 by mid-February. However, NRB officials said the foreign currency reserve is sufficient to cover the imports of goods and services for 9.8 months. Unless the government comes up with mitigating measures, the foreign currency reserve may continue to drop in the months to come.

It should be a cause for concern for a country like Nepal which does not have any sustainable sources of foreign currency earning, except for the incomes from tourism and export of handicrafts items, tea, coffee, ginger and readymade garments. One of the major sources of foreign currency earning is remittance which is also in downward trend.

Remittance inflow grew by merely 1.7 per cent to Rs 401.35 billion in the first seven months compared to 5.2 per cent growth in same period last fiscal.

If foreign exchange reserve continues to drop, the government will have to reduce imports which will have negative impact on revenue collection. The government can raise customs tariffs on luxury goods. But it will be risky as the country has expressed commitments with multilateral organisations to not raise the customs tariff on the goods they produce.

Still, the central bank can raise the loan-to-value ratio to discourage the import of luxury goods, such as automobiles. Nepal mainly imports construction materials such as iron, steel and cement; automobiles and spare parts; petroleum products – which consumes more than half of foreign currency – clothes, pharmaceutical products, electronic appliances and food, mainly from India.

Trade deficit has already reached Rs 613 billion during the first seven months of the fiscal whereas the country exported goods worth only Rs 48 billion to during the same period.

The NRB has said profit repatriation by telecommunication service provider, Ncell, is one of the causes for the depletion of foreign currency reserve.

Foreign investors in Ncell had repatriated Rs 40 billion out of the profit of Rs 72 billion between fiscal year 2012/13 and 2015/16. In order to reduce the trade deficit and to increase foreign currency reserve, the government must focus on setting up export-oriented industries offering various incentives to the investors.

FDI in physical infrastructure, energy, agriculture and services can help boost our economy generating employment opportunities within the country.

But the government has not been able to attract FDI even after holding the Nepal Investment Summit in 2017. Various countries had pledged to invest in Nepal to the tune of US$ 13.74 billion during the summit. But it failed to achieve its goals.

The government also should take immediate measures to discourage informal channel like hundi to send in remittances that have helped keep our economy afloat. Migrant workers should also be well-informed about the benefits of using the formal channels.

Ailing hospital

Health services at Bheri Zonal Hospital in Nepalgunj, Banke have been affected due to lack of medical equipment essential for service delivery.

Bheri Hospital is the only health facility that provides treatment for heart related diseases in the western region. According to reports, most of the available equipment at the hospital have become dysfunctional and are in need of urgent repair.

An echocardiogram machine has been gathering dust for the last seven months.

Similarly, a TMT machine has also gone kaput.

Hospital officials admit that health services have been affected but “not as badly as reported”. But patients argue that they have been forced to pay hefty prices at private health facilities for different tests.

According to Dr Bir Bahadur Chand, medical superintendent, technicians were called in to repair the equipment but they could not. Such lackadaisical approach can have profound consequences on the patients.

People with serious health problems need immediate attention, diagnosis and curative measures.

People cannot be deprived of their right to health because of bureaucratic red tape.

Measures must be taking to resuscitate the ailing hospital.