The government has begun tightening measures to limit the outflow of foreign money in light of declining foreign exchange reserves, shrinking remittances, and rising imports.
The Department of Immigration has cut the minimum amount of foreign currency that Nepali citizens travelling overseas must carry from $1,000 to $500. However, the minimal amount required for workers and tourists visiting Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, Malaysia, Thailand, and other South Asian countries has been cut to $250.
“Previously, Nepalis travelling abroad had to prove [immigration officials at the airport] that they had at least $1,000 with them,” said Jhanka Nath Dhakal, a Department of Immigration representative. “The amount has now been decreased in accordance with the Nepal Rastra Bank’s request.”
Although the central bank enables Nepali individuals travelling overseas to purchase up to $1,500 in foreign currency from banks, most Nepalis purchase less than this amount.
After noticing an increase in foreign exchange misuse, central bank officials advised that the government lower the minimum foreign currency threshold for Nepali travellers.
‘Even migrant workers have been sent to work abroad on tourist visas because visitors can carry more US dollars,’ said a central bank employee who spoke on the condition of anonymity because he was not authorised to speak to the media. “Some unscrupulous recruitment brokers do this since migrant workers on work visas are only allowed to bring $200 with them, whereas tourists are allowed to bring more.”
According to the source, such a pattern has raised questions about whether migrant workers are being used to launder money and import gold.
Nepal’s bullion market began fiscal year 2021-22 by importing Rs3.17 billion in gold in the first month [mid-July to mid-August], which is more than 900 times what they imported the previous fiscal year during the same period.
After Nepal imposed a lockdown in March 2020 to prevent the spread of the coronavirus, imports of the yellow metal had practically come to a halt.
Gold imports fell to a historic monthly low of Rs3.47 million from mid-July to mid-August, the first month of the fiscal year 2020-21.
Gold imports have put a strain on the foreign exchange reserve.
Nepal’s foreign exchange reserves fell by 3.2 percent to Rs1,353.82 billion in the month between mid-July and mid-August, as imports increased and remittances decreased.
The largest source of foreign currency reserves, remittances, fell by 18.1 percent to Rs75.96 billion in the review period, compared to a 23 percent gain in the same period last fiscal year.
In a single month, imports reached a high of Rs150.73 billion, placing pressure on foreign exchange reserves.
In addition to decreasing the minimum foreign currency exchange barrier, the Department of Immigration has said that immigration clearance will only be granted if foreign currency is purchased from commercial banks. Travelers could formerly purchase foreign cash through development banks and private money exchange organisations.
The central bank’s officials expressed alarm over a likely drop in foreign exchange reserves.
“There are also recommendations to lower the maximum amount of foreign currency that foreign-bound Nepalis can purchase from banks,” the official said. “We believe the present reduction in foreign exchange reserves is a one-time occurrence. However, we are keeping a careful eye on the situation as it develops.”
Aside from the new immigration requirements, the Ministry of Industry, Commerce, and Supplies has put a halt to the granting of licences to traders for importing betel nut, peas, peppercorn, and dried dates for the current fiscal year. After the government establishes import quotas, businesses and firms are permitted to import these products in limited quantities.
To save foreign cash, the government banned the import of these commodities in March 2020, fearing a drop in remittance income because to the Covid-19 pandemic.
After a little decline in 2019-20, Nepali migrant workers sent home Rs961.05 billion in the final fiscal year 2020-21, which ended in mid-July, setting a new high for money transfers to Nepal since Nepalis began looking for work abroad more than two decades ago. Year over year, the sum increased by 10%.
The government authorised the import of these commodities until mid-July by setting quantitative restrictions for each item in March of this year. Pea quotas were set at 1,225,290 tonnes, betel nut at 227,270 tonnes, dried dates at 41,995 tonnes, and peppercorn at 140,082 tonnes.
However, neither import licences nor quotas for the commodities have been set for the current fiscal year. Last Monday, the Department of Commerce, Supplies, and Consumer Protection sent a letter to the central bank requesting that no foreign currency be provided to traders for the import of these commodities.
The central bank, in response to the department’s request, issued a notice on Sunday [October 3], instructing commercial banks not to give any foreign currency for the import of certain commodities.
“Because the government hasn’t given import licences or set import quotas for these commodities, we’ve written to the banks asking them not to issue foreign currency for importing these items,” said Dev Kumar Dhakal, a spokesperson for the central bank. “In the context of diminishing foreign exchange reserves, this is a sensible decision.”
However, a senior official from the Ministry of Commerce stated that there is no link between the lack of quotas and the country’s foreign exchange condition.
The Commerce Ministry’s spokeswoman, Narayan Prasad Regmi, said, “We haven’t determined the quotas because we haven’t received import applications from enterprises.” “Once we receive applications for importing the commodities, we will determine the quota.”