The Nepal Rastra Bank (NRB) has requested importers of some luxury items to maintain a 100% cash margin while opening letter of credit (LC) accounts, with the goal of tightening the noose on such imports.
The country’s central bank has adopted the action in an effort to stem the flow of foreign currency outflows as pressure on the country’s foreign currency reserves grows. On Monday, the NRB revised the unified regulation, requiring importers to maintain a 100% cash margin on dozens of commodities that come under the 18 harmonic codes.
Sugar and confectionary importers, clove, mineral water, alcoholic beverage, vinegar, energy drinks, cigarette and tobacco products, perfume, cosmetics, wooden items, footwear, cement, ceramic items, marble, umbrella, gold, and silver importers will be required to maintain a 100 percent cash margin in their LC accounts under the new provision. This means that importers must keep money on hand as a bank guarantee equal to the cost of importing certain goods.
Similarly, the central bank has instructed automotive importers to keep 50 percent of their cost in margin. Previously, importers could only keep a cash margin of up to 15% on certain commodities when creating LC accounts for imports.
Nepal’s foreign exchange reserves fell 10.9 percent to US $ 10.47 billion in the first four months of the current fiscal year, owing to a large outflow of foreign currency and modest increase in the country’s foreign revenues. With this sum, the landlocked country can now support imports for only 7.9 months.