KATHMANDU, Dec 1: The value of the US dollar has reached an all-time high against the Nepali Rupee.
According to Nepal Rastra Bank, on Friday, the selling price of one US dollar reached Rs 133.74, while the buying price remained at Rs 133.14.
An increase in the value of the US dollar raises concern about the weakening of the Nepali currency.
When the value of the US dollar increases, there is an internal benefit in the remittance sector. When the value of the dollar increases, the value of the currencies of the Gulf countries also increases. As a result, remittances fetch more value in Nepal.
Even though there is a benefit internally, it also poses challenges to Nepal's foreign exchange market. The nation heavily reliant on imports faces a disadvantage due to the weakening of its currency.
Since Nepal's trade deficit with other countries is large, if the value of the dollar increases, the loss to Nepal increases. Foreign goods worth Rs 140 billion are imported into Nepal every month, while goods worth Rs 13 billion are exported from Nepal. Since there is such a large trade deficit, when the value of the US dollar increases, a lot of foreign currency has to be spent for imported goods, and the domestic prices of those goods also increase.
The most imported petroleum products, vehicles and industrial raw materials also become more expensive. Importing the same quantity requires spending a lot of foreign currency.
As the price of petroleum products also increases due to the rising value of the dollar, the overall transportation cost rises. Similarly, the domestic products that depend on foreign raw materials become expensive. In general, if the dollar is expensive, it will adversely impact the foreign exchange reserves and contribute to a potential rise in inflation in the country.