Kathmandu, Apr 27 (EFE).- Nepal on Wednesday imposed a ban on the import of 10 goods it considers luxury, in a bid to stop the country’s foreign exchange reserves from further depleting amid a deteriorating economic situation.
The government issued a formal notice in the Nepal Gazette which would remain in place until the end of the current fiscal year, ending mid-July 2022.
According to the notice, the import of all kinds of liquor (excluding raw materials), ready-made cigarettes and tobacco products, and snacks such as Lay’s potato chips and Kurkure have been banned.
The government has also banned the import of diamonds, excluding those used as industrial raw materials. The government has also banned the import of mobile sets that are worth more than $600 and color televisions over 32 inches.
Imports of jeeps, cars, and vans – except ambulances and hearses – have also been prohibited, along with motorcycles above 250cc, all kinds of toys, and playing cards.
“The decision to ban imports ahead of the election may backfire,” Bishwambher Pyakuryal, an economist, told EFE. “The decision was appropriate but it came late.”
Nepal has been struggling with rising inflation which has been on the rise since the start of the Russian invasion of Ukraine.
The country’s inflation averaged 7.14 percent in March, which is the highest in the last 67 months.
According to Nepal’s central bank, the balance of payment deficit has been ballooning, foreign remittances have been decreasing, imports have been rising and foreign exchange reserves declining.
Nepal Rastra Bank, or the central bank, during the eight months of 2021-22, noted that imports increased 38.6 percent to Rs1.3 trillion (around $11 billion) compared to an increase of 2.1 percent a year ago.
Nepal’s current account was at a deficit of Rs462.93 billion in the review period compared to a deficit of Rs151.42 billion during the same period last year.
The balance of payments had a deficit of Rs258.64 billion during these eight months against a surplus of Rs68.01 billion during the same period of the previous year.
The country’s gross foreign exchange reserves decreased 16.3 percent to Rs1.17 trillion in mid-March this year from Rs1.39 trillion in mid-July 2021.
Ram Prasad Gyawali, professor of economics at the Tribhuvan University, told EFE that Nepal was headed towards an economic crisis but the situation was not critical yet.
According to a recent World Bank report titled “South Asia Economic Focus Reshaping Norms: A New Way Forward,” higher commodity prices in Nepal are spurred by the war in Ukraine.
Transportation prices, construction costs, and other consumer prices are rising which will dampen overall demand, the report said.
This may shave Nepal’s economic growth by an estimated 0.2 and 0.6 percentage points in the fiscal years 2021-22 and 2022-23, respectively from previous projections, the World Bank said.
The World Bank has also revised Nepal’s growth projection in the wake of the war in Ukraine, which has impacted the prices of commodities across the world.
Nepal’s economy is now expected to grow by 3.7 percent in the current fiscal year, against the government target of 7 percent. EFE