Nepal Rastra Bank To Tighten The Screws On Vehicle Imports

As per several reports, Nepal Rastra Bank (NRB) has directed commercial banks to impose a temporary ban on the issuance of Letter of Credit (LC) for the import of vehicles and other luxury goods sighting foreign currency outflows as the main reason. The NRB on Monday summoned the CEOs of all commercial banks to discuss the same.Vehicles and their spare parts account for the largest share of Nepal's total imports after petroleum products. According to the data provided by Trade and Export Promotion Center, vehicles and parts worth Rs 75.95 Billion were imported in the first seven months of the current fiscal year. This is an increment of 20.9 percent compared to the corresponding period of the previous year. Vehicles worth Rs. 62.83 billion were imported in the first eight months of the last fiscal year. Similarly, the annual import of vehicles in that year was equivalent to Rs. 97.37 billion.

Earlier the government had imposed quantitative restrictions on imports of certain commodities by maintaining a 100 percent cash margin when opening LCs, however, a total of Rs 138.73 billion worth of goods were imported till March, a staggering increment of 38.64 percent when compared to the corresponding period of the previous fiscal year.

Contrary to the policy of discouragement, the NRB has started adopting a policy of tightening imports as imports are increasing. Despite this, foreign exchange reserves are still declining. Experts point out the decline in remittance, lack of significant improvement in foreign investment, high imports, and changing geopolitical situation as the major causes.