Nepal running low on foreign exchange, discourages imports

KATHMANDU, Nepal (AP) — Nepal is running low on foreign currency reserves needed to import medicines, oil products, cars and a range of other items, and will run out in seven months if things don't improve, a central bank official said Friday.

The central bank has increased interest rates, hoping it will discourage people from buying imports and help extend the foreign reserves, said Gunakar Bhatta, spokesperson of Nepal Rastriya Bank, the central bank.

“We are concerned about the sustainability of our foreign exchange reserves,” Bhatta said.

But he said there already are signs that the situation is getting better with the slowing of the pandemic. More tourists have begun to arrive and increasing numbers of Nepalese are going abroad to earn foreign currency and send it back home, he said.

“Compared to previous years, the foreign exchange reserve level has come down, but we can manage it because the number of migrant workers that are going abroad has increased," Bhatta said.

Nepal's main sources of foreign currency are tourism, remittances from overseas workers and foreign aid.

Normally, hundreds of thousands of foreign tourists visit Nepal every year. However, the number declined sharply due to restrictions imposed during the coronavirus pandemic.

Tourists are trickling back, with hundreds of climbers already applying to climb the world's highest peaks and thousands more trekking on mountain trails.

Nepal has few exports and imports almost everything from abroad. Motor vehicles and oil products account for one fourth of the imports, Bhatta said.

The finance ministry said earlier this week that the government is working to reduce imports of gold and luxury goods, but did not provide details.