The depreciating Nepali rupee set another record against the US dollar when it slipped to an all-time low of 105.31 on Tuesday. The Nepal Rastra Bank (NRB) has fixed the reference exchange rate for Wednesday at Rs 105.31 per dollar .
According to bankers, the greenback was traded at more than Rs 105 per dollar on Tuesday. The US dollar has become expensive by more than Rs 10 in a month’s time, resulting in imported goods becoming expensive, while those going abroad for studies are having to pay more and the remittance inflow has gone up. Nepal Oil Corporation (NOC) and Nepal Electricity Authority (NEA), the two cash-strapped public enterprises, have also been forced to pay more for the purchase of oil and electricity.
While the NOC said its monthly loss is expected to go up to Rs 1.5 billion from the current Rs 1.06 billion, the NEA said its monthly loss has increased by Rs 50 million as it has to pay the Khimti and Bhotekoshi hydropower projects in US dollar .
“Imported goods have, however, not become as expensive as it should have been at this exchange rate due to availability of stocks,” said Keshav Bahadur Rayamajhi, first vice-president of the Nepal Trans-Himalayan Border Commerce Association, a grouping of traders importing goods from China.
“However, goods being imported for the upcoming festivals will definitely be expensive by 30-35 percent.”
He said orders for the Dashain festival have decreased by 20-25 percent as compared to last year, following speculations that sales would dip due to the increased prices. Nepal mainly imports readymade garments, textiles, shoes, cosmetics and electronics for the festive season. The government has decided to boost market monitoring, following suspicions that traders have hiked prices of those goods that they have in stock.
“Market monitoring agencies have been directed to speed up monitoring to check the prices,” chief economic advisor at the Finance Ministry Chiranjeevi Nepal said.
According to banks, the trend of opening letter of credit L/C has seen a fall, while forward booking of exchange rate has increased and traders are making early payments.
Chief Executive Officer of Himalayan Bank Limited Ashoke Rana said that the L/C opening trend has gone down by 10-12 percent as compared to the same period last year. “The remittance inflow has, however, increased modestly, as families of migrant workers here get more in domestic currency,” he said.
An official of Nepal Investment Bank Limited said there has been a good rise in forward bookings of exchange rates and the trend of making payments earlier than schedule due to the volatility of the exchange rate.
“Traders can settle the payments within five
days after the L/C document comes from abroad. But traders are now making payments by demanding the photocopy of the documents through the fax system,” the official said. Traders and industrialists, however, complained that banks have been charging higher for forward booking of exchange rates.
The rupee fall has also hit industries as a majority of them here depend on imported raw materials, while their operation costs have now gone up.
Vice-president of the Confederation of Nepalese Industry Hari Bhakta Sharma said the cost of production has gone up by 15-20 percent.
Due to heavy dependence of industries on imported raw materials, even exporters who usually benefit from the depreciation of the domestic currency are not benefiting adequately this time around.
Lanka Man Roka, a carpet exporter, said they are not making good profit from exports as their cost of production has gone up.
An official at the Education Consultancies Association of Nepal (ECAN) said the rising dollar has led to fees in colleges abroad going up, while tickets for travel to foreign countries have become expensive.
However, as the rise of the US dollar starts taking its toll on the country’s economy, both the Nepal government and the Nepal Rastra Bank are in a wait-and-see mode.
Even as the domestic currency’s peg with the Indian currency is mainly responsible for the current exchange rates, both the government and the central bank have said there will be no immediate review of the peg system.
No currency peg change: NRB guv
NRB Governor Yubaraj Khatiwada on Tuesday said the domestic currency’s peg will not see a change. “Doing so will neither be timely nor beneficial for the country,” he said at the Power Summit 2013 here. “Yes, this peg withholding has limitations, but it has also served better than other alternatives.”
NRB’s Chief of the Research Department Min Bahadur Shrestha said the peg change would bring about further instability at a time when the exchange rate is already unstable. “Such a change can be considered only when the country’s economic fundamentals such as growth, inflation and status of trade remain stronger,” he said. (PR)
Source: The Kathmandu Post
