Nepal’s forex reserves cross US$3b mark

Nepal's foreign currency reserves rose by 18.5 percent during the first 11 months of the Fiscal Year 2007/08, supported by steady inflow of remittance, and rising flow of donors' aid.

Fresh data from the Nepal Rastra Bank (NRB) shows that Nepal's foreign exchange reserves reached over Rs 206 billion (US$ 3.1 billion) in mid-June 2008. The reserves were Rs 165 billion (US$ 2.54 billion) when the Fiscal Year 2007/08 began in mid-July 2007.

Economists said that the increment in foreign reserve is a stimulating factor for the economy. Rising forex keeps the country at a comfortable trajectory to meet debt-servicing obligations and pay import bills, they said.

They said when the foreign exchange reserves go up, foreign investors' confidence soars up as they sense that the country will not put any obstacle to recover their profit.

The current level of reserves is adequate for financing merchandise imports for 11.1 months and merchandise and service imports of nine months.

Nar Bahadur Thapa, director of NRB said the reserves are on the rise as Nepalis aboard are sending more money back and the country is getting more aid. During that period, influx of remittance went up significantly to touch Rs 125 billion. Of the total reserves, 92.8 percent or US$ 2.8 billion are in convertible currencies -- all units except Indian, and US$ 216 million in Indian rupees.

“It is exciting for the economy. The growth in foreign reserves makes the economy stable even in difficult times,” said Thapa.

He said it would clear the way for liberalization to push up the economy and create more employment opportunities by relaxing the monetary and fiscal policies.

“Foreign investors look for forex reserves and policy hurdles while investing in any country. And, the current reserves are enough to lure them,” he said.

Some argued that because of the rising reserves, Nepal is able to maintain the system of pegging its currency with India even as it is reeling under a severe shortage of Indian currency. The rise in reserves also led to a jump in balance of payment. The country reported a surplus of Rs 24.25 billion in mid-June 2008, up from Rs 6.34 billion in the same period last year.
Source: eKantipur