Forex reserves enough for 21 months imports

kathmandu December 6- Nepal Rastra Bank (NRB) has said the foreign exchange reserves can finance imports of about 21 months if the current trend of sluggish import continues. Gross foreign exchange reserves increased 8.3 percent to Rs892.07 billion as of mid-October 2015 from Rs823.87 billion as of mid-July 2015 as remittance continued to soar while imports slumped as a result of India-imposed trade blockade.

In the first three months of the fiscal year, imports dropped 31.9 percent to Rs130.49 billion from Rs191.72 billion in the same period a year ago. The current scenario of the foreign exchange reserves sustaining merchandise imports of 20.8 months won’t remain the same if normal imports resume. At the end of 2014-15, the foreign exchange reserves were enough for finance imports of 13 months.
 

Internationally, there is a practice of maintaining foreign exchange reserves enough for at least three months’ of imports, but Nepal has been recognising the necessity of maintaining the reserves for at least six months’ imports. Even during normal situation, having larger foreign exchange reserves is not good as it suggest the state’s low capacity to mobilize foreign exchange in economic development.