KATHMANDU, Nov 7: Nepal Rastra Bank (NRB) has reduced the maximum amount of foreign currency that a Nepali national can buy while going abroad.
According to a circular issued to commercial and development banks authorized to sell foreign currency, the central bank reduced the limit of foreign exchange to US $1,500 per passport for Nepali nationals going abroad. This means a Nepali bound for a foreign country (other than India) mainly for vacation or personal purposes will get foreign exchange up to the limit of $1,500. The limit was $2,500 earlier. The restriction on the purchase of foreign currency comes at a time when the foreign currency flight is rising, putting pressure on the foreign exchange reserves of the country. The central bank also introduced other measures on Tuesday aimed at easing the growing pressure on the balance of payments position as well as forex reserves. “The rule is introduced to discourage the growing outflow of foreign currency on account of outbound tourism,” said Bhisma Raj Dhungana, chief of the forex department at NRB. In the last fiscal year of 2017/18, Nepalis spent a total of Rs 79.6 billion in travel, 40 percent up from the amount two years ago, according to NRB. The country earned a total of Rs 177.47 billion in the same fiscal year from foreign travelers coming to Nepal.
NRB also reduced the limit on payments through Telegraphic Transfer to $30,000 from the earlier limit of $40,000. The payment for an estimated one fourth of the country's imports is through TT.
Similarly, to facilitate foreign currency borrowing by commercial banks, the central bank raised the limit on loans for Nepal's commercial banks from foreign banks to 50 percent of core capital, up from 25 percent. “The limit is being increased as banks say they have not found possible lenders abroad partly due to low amount of borrowings,” he added.
These moves by the central bank come in the wake of the appreciation of the US dollar in recent months. The stronger dollar means pressure on foreign exchange reserves for a country which relies on imports for everything. From the beginning of this year, the US dollar has gone up nearly 15 percent. With the rise of the US dollar, the foreign exchange reserves have also declined in dollar terms.
According to NRB data, gross foreign exchange reserves declined to USD 9.75 billion as at mid-September 2018 from USD 10.08 billion as at mid-July 2018.
The dollar traded at Rs 117.3 on Tuesday, up from Rs 102.5 on January 1.