The country’s apex monetary institution is under scanner for its possible involvement in policy corruption due to its latest controversial move
KATHMANDU, Oct 31: In a controversial move, Nepal Rastra Bank (NRB)—the country’s apex monetary body—has called off its decision to lift the ban on the import of luxury vehicles in less than 24 hours.
Issuing a circular on Saturday, NRB announced to have withdrawn its own decision made on Friday. Moreover, what is interesting is the central bank has withdrawn its own decision by its meeting held on the weekend when in most cases any such decisions are rarely taken by the so-called country’s autonomous monetary institution.
Experts said the move has dragged the central bank itself into more suspicion on the ground that the high ranking officials of NRB could have been involved in policy corruption to benefit a handful of influential traders.
Revised interest rate corridor system introduced
It was just on Friday evening, NRB had lifted the ban on the import of luxury vehicles while being flexible to the import of expensive edibles at a time when the country is facing pressure to maintain adequacy in its foreign currency reserves.
NRB had lifted the ban on the import of vehicles worth more than USD 50,000. Similarly, it has assigned a quota for the import of peas, black pepper and betel nut by scrapping the complete restriction on the purchase of these products from abroad. It is likely to exert more pressure on the country’s foreign currency reserve which has already been dwindling with a fall in remittance and surging imports.
According to an NRB report, Nepal’s earning from remittance declined by 6.3 percent during the first two months of the current fiscal year. In two months since, the foreign exchange reserves decreased by Rs 93 billion to Rs 1306.95 billion (US $11.14 billion) in mid-September. This is sufficient for the import-based country to sustain the purchase of goods and services for just 7.8 months.
After the impacts of the COVID-19 in March 2019, the government had banned the import of luxury vehicles along with gold, dry fruits like dates, clove, small cardamom, peas and alcoholic beverages. The government took the step citing possible pressure on the foreign currency reserve that the country could sustain due to the lockdown and the impacts of coronavirus.
The records of the Department of Customs show that in fiscal year 2018/19, Nepal spent over Rs 50 billion on the import of high-end cars, expensive edibles, gold and alcohol when there was no restriction in place. The country spent Rs 6.14 billion on the import of luxury cars alone in the same fiscal year.
Showing the cause of declining foreign currency reserves, NRB last month heavily downsized the limit of foreign currencies to be carried out by individuals visiting the foreign countries. The central bank has been allowing banks to provide foreign currencies only up to US $ 200 in hard cash to their clients visiting abroad.
Surprisingly, this time the country’s apex monetary institution, instead of implementing restrictive measures, has adopted a policy that could boost the drain out of foreign currencies. And overnight, it has also been taken back.
Nara Bahadur Thapa, former executive director of NRB, said the foreign currency reserve has reached a limit where the policymakers are needed to remain alert and bring the policy accordingly. According to him, if the country does not have adequate foreign exchange reserves, it will affect the import of capital goods while it will also hamper the confidence of domestic and foreign investors.
NRB officials themselves had expressed their surprise at the central bank’s recent move to lift the ban. “While the government bodies need to take cautionary measures by curbing the import of conspicuous goods at this moment, it could have been disastrous for the country if the early decision was implemented just to benefit a few allied persons,” said an NRB official on condition of anonymity.
