Kathmandu. The country’s foreign exchange reserves have reached an all-time high. However, the government has been reluctant to utilize such a huge resource to make the economy dynamic.
Nepal Rastra Bank has not been able to reap any benefit other than interest from the dollar reserve due to the lack of a clear policy with the government. According to experts, although the stock situation is strong, the opportunity to reap the benefits from it is being wasted.
According to the NRB data, the country’s total foreign exchange reserves stood at Rs 3.055 trillion in Nepali rupees and Rs 21.52 billion in US dollars till mid-November. The current monetary policy had set a target of having sufficient reserves to sustain the import of goods and services for seven months. However, the current reserves are sufficient to sustain imports for 17.4 months.
The government has not been able to formulate a policy to utilize the foreign exchange reserves at a time when the foreign exchange reserves have more than doubled than the target of the monetary policy.
Dollar reserves seem to have been growing rapidly lately. Reserves increased by 10.3 percent to $21.52 billion in the first four months of the same month from $19.5 billion in mid-July last year. Experts say that the government has not been able to bring any concrete policy to use the stock in infrastructure, industry or manufacturing sector even when the reserve is more than enough.
Three years ago, when there was general pressure on the reserves, the government adopted strict policies to control imports. Imports of some goods were banned and measures were sought to reduce foreign exchange expenditure. However, now that the reserves are increasing at a high rate, the government seems to be confused about how to use it.
On the other hand, experts have expressed concern that the government, which is facing a shortage of resources for infrastructure construction and big development projects, has not been able to open the way to use foreign exchange reserves. According to them, the dollar reserves can be used not only for import payments or study and travel expenses, but can also be used in the production and infrastructure sectors.
Although it is important to keep the reserves safe, the economy has not been able to gain the expected momentum due to lack of mobility. At present, the Nepal Rastra Bank (NRB) is investing dollars in foreign countries at very cheap interest rates. Experts say that this will secure the reserves but will not contribute much to income and economic activities.
According to economists, the government can divert reserves to big projects by issuing foreign currency-based bonds. Projects of importance like fast track are at a snail’s pace due to lack of funds. They believe that mobilizing dollar reserves for such projects can have a direct impact on the economy.
Similarly, foreign exchange is also spent on the import of machines, equipment and technology that increase capital expenditure. However, due to the slowdown in the economy, the imports have not increased significantly.
The increase in remittances in recent years has played a role in increasing foreign exchange reserves. According to experts, foreign exchange reserves have been continuously strengthening due to increase in remittances and relatively low imports.
Experts have been saying that although the increase in reserves is an achievement in itself, the economy will not pick up a real pace unless it is linked to production, employment and infrastructure. Experts say that a policy decision is necessary to mobilize foreign exchange reserves in infrastructure and big development projects rather than protecting them.
They have stressed on the need for the government to adopt a clear policy linking foreign exchange reserve with the development as the construction works would be expedited and employment opportunities would be created and overall economic activities would be revived if the investment in various big projects increased. Experts insist that the government should work on this rather than the Nepal Rastra Bank.
