The Nepali rupee recorded an all-time low on Monday, with the Nepal Rastra Bank (NRB) fixing the exchange rate at Rs114.24 per US dollar for Tuesday.
The Nepali currency weakened by 35 paisa a dollar in just a single day. According to reports, the Nepali rupee’s fall is an effect of the steady depreciation of the Indian rupee with which it is pegged.
Ram Prasad Gyanwali, economist and former head at the Central Department of Economics, Tribhuvan University, said the country is helpless in enforcing necessary measures to control the free fall of the domestic currency as the Nepali rupee is directly correlated to the currency of southern neighbour. “As a repercussion, the value of the domestic currency alters in the same proportion as the change in currency value in India,” said Gyanwali.
According to economists, the depreciation of the domestic currency could exert pressure on the balance of payments, especially at a time when the country is struggling to maintain it. In addition, Gyanwali said the depreciation of domestic currency is likely to trigger the inflation rate, as the country is highly dependent on imported goods and has very low levels of domestic production. According to NRB, the country’s export earnings amounted to Rs81.19 billion, while the imports’ bill amounted to a staggering Rs1.24 trillion in the last fiscal year that ended in mid-July.
Because of this new development, the country could also fail to benefit much from the tourism business—despite the appreciation of the dollar. “As the proportion of earnings from tourism is less than three percent of the GDP, it could hardly ensure the notable hike in country’s earning from the sector,” Gyanwali said.
On the other hand, remittance earners, however, can benefit out of the situation as the US dollars migrant workers send home can buy more Nepali rupees.
