The slight improvement in remittance inflow combined with import restrictions on non-essential goods, appear to have bolstered the country’s foreign exchange reserves, which increased by $170 million in one month period between Jestha to Asar, according to the latest macroeconomic update released by Nepal Rastra Bank today.
According to the central bank, the country’s gross foreign exchange was $9.45 billion in Jestha, up from $9.28 billion in Asar. However, foreign exchange reserves have fallen 19.6 percent from $11.75 billion in Shrawan 2078 over the first 11 months of this fiscal year.
During the first 11 months of the current fiscal year, merchandise exports increased by 53.3 percent to Rs 185.84 billion, compared to a 37.8 percent increase in the same period last year. However, due to an increase in imports at the same time, export growth failed to narrow the trade deficit.
The central bank says the country’s existing foreign currency can be used to purchase goods and services for less than seven months.
This is considered good news, and Nepal’s balance of payment is at its lowest point in history. The Nepalese central bank tightened rules and requirements for foreign currency exchange as the country’s exchange reserves declined.
Nepal Rastra Bank also implemented a new policy that raised the prices of a variety of products ranging from alcohol and cosmetics to automobiles. The government is also planning to extend the import ban imposed in Baisakh on ten specific luxury items.
The foreign exchange market, also known as the forex market, FX market, or currency market, was one of the first financial markets to emerge to help structure the burgeoning global economy. It is, by far, the world’s largest financial market in terms of trading volume. The forex market facilitates currency conversion for international trade settlements and investments, in addition to providing a venue for currency buying, selling, exchanging, and speculation.