Nepal Rastra Bank (NRB) is moving to reverse a fast-depleting foreign exchange reserve by discouraging the import of non-essential goods and helping enterprises to borrow from abroad.
In a quarterly review of the monetary policy 2021-22 released on Friday, NRB said that it would make it mandatory for importers to deposit a certain cash margin at banks to open a letter of credit for the import of certain goods.
"The central bank will now itself fix the cash margin to be deposited," the central bank spokesman Dev Kumar Dhakal told Xinhua on Saturday. "Currently the banks are free to decide on the matter based on the creditworthiness of their borrowers."
Nepal's gross forex reserves decreased by 6.5 percent to 10.98 billion U.S. dollars in mid-October from 11.75 billion dollars at the beginning of the current 2021-22 fiscal year in mid-July, which are adequate for sustaining the import of goods and services for 7.8 months, just above the target of seven months, according to the central bank.
The central bank attributed declining forex reserves for three consecutive months to surging imports and a constant fall in the inflow of remittances, the biggest source of foreign exchanges for the South Asian country.
Dhakal said the import of goods not essential to the country's economic improvement is discouraged. "We're doing homework on the products to be included in the list," he added.
While the government had hiked up the import duty on silver last month, the central bank is seeking to discourage the import of silver by not supplying foreign exchanges more than 35,000 U.S. dollars, as its inflow has surged dramatically along with gold in recent months.
Besides, the central bank has paved the way for commercial banks to help Nepali enterprises engaged in farming, manufacturing, infrastructure and tourism to borrow from abroad.
"The key objective of these measures is to discourage the outflow of foreign exchanges and encourage their inflow into the country," Dhakal said.