KATHMANDU, March 6: In a bid to check the outflow of foreign currencies through reduction in expenses on luxury items, Nepal Rastra Bank (NRB) has reduced the gold import quota.
Revising its unified directive on Sunday, NRB has now allowed banks to import only up to 10 kg of gold a day, down from 20 kg per day. The central bank has taken the move citing declining foreign currency reserves amid a whopping increase in imports.
Nepal imported gold worth Rs 23.25 billion in the first six months of the current fiscal year, which was almost double the amount of Rs 12.21 billion spent on gold import during the same period in the last fiscal year. With the heavy outflow of foreign currencies due to soaring imports, the country’s BoP remained in a deficit of Rs 241.23 billion against a surplus of Rs 124.92 billion during the review period.
As of mid-January this year, the country has foreign currency reserves of US $ 9.89 billion, a straight fall from USD 11.75 billion in mid-July 2021. The existing amount is sufficient to fund the merchandise and services import for only 6.6 months, according to NRB.
Currently, the government has suspected the use of illegal channels for the declining remittance inflows, which is the main source of foreign currency earnings for the country. Traders in this regard have been suspected of making illegal import of gold by the money earned abroad.
A few months ago, the government seized a notable quantity of gold bullion that was imported illegally by individual travelers. The law allows people coming from abroad to bring only up to 50 grams of gold jewelry without paying customs duty.
Previous to this, the government, after enforcing a lockdown for the first time in March 2020, had reduced the daily quota of gold import to 10 kg from 20 kg. The government made the move arguing that the imports of expensive items could have a negative impact on the foreign exchange reserves.
After the country started feeling the heat of falling foreign currency reserves, NRB introduced the quota system for bullion imports in 2009. Over the period, the central bank was flexible to raise the limit to up to 30 kg a day when there was high demand for the precious yellow metal during wedding season or festivals.