For a few dollars more, BBC Nepali Service, NEW!

From The Nepali Press
For a few dollars more, BBC Nepali Service, NEW!
Interview with economist Keshav Acharya and Nepal Rastra Bank officer Lila Sitaula, 26 November

FROM ISSUE #581 (02 DEC 2011 - 08 DEC 2011) | TABLE OF CONTENTS

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BBC Nepali Service: What will be the consequences of appreciation of the dollar to the Nepali economy?
Lila Sitaula: It has both advantages and disadvantages. Exporters will profit from it, the country's balance of payment will go down and foreign currency reserves will increase. But those who make payments in dollars will suffer and imports will be costly.

Won't that cost us dearly since we import almost everything?
Keshav Acharya: Nepal's export is close to Rs 70 billion while imports stand at Rs 400 billion annually. We have a foreign debt of Rs 260 billion and are supposed to make a payment of Rs 17.5 billion in the next fiscal year. But the depreciation of Nepali currency by 13 per cent has added an additional liability of Rs 3.5 billion. This means we will have to pay Rs 21 billion more at the current rate of exchange.

What will be the impact on national economy?
Sitaula: It will have a mixed result. We should increase exports to keep the economy afloat. There will be an increase in remittance, which will increase our foreign currency reserves. The national economy can benefit depending on how productively the foreign currency reserve is spent. Currently, we have been spending all our reserve to import a single product: petroleum.

Acharya: At present, there are no possibilities of increasing exports. The government announcement of 4 per cent grant assistance for exports hasn't worked out. Besides, NEA has been purchasing power from private hydropower companies in dollars. Nepal will ultimately lose.

Is India worried that depreciation of Indian currency against the dollar value could disrupt its economy?
Sitaula: Indian economy is not an import-based economy. India's worry is that they won't be able to achieve the projected eight percent GDP growth.

We have a fixed foreign exchange rate with India. Is it good or bad?
Acharya: Fixed foreign exchange rate with India helped stabilise country's economy during the conflict. But it is not a good idea to maintain the same rate during the transitional period.

Sitaula: The exchange rate alone does not guarantee anything. Given geopolitics and nature of investments, a fixed foreign exchange rate with India is still a good idea.

Read also:
The almighty dollar, PAAVAN MATHEMA
The fall and fall of the Nepali rupee

1. who cares
see doodles, weaker nepali currency is always beneficial to nepal.

current turmoil in exchange rate is unexpected, and dont know how long it will last.

the impact is seen sooner on those goods and services which are imported... even those goods which were imported when dollar was stronger are made to be paid higher by customer at the time the dollar is weak after it is already imported.

when other currency is weak, then import will be less.

but to get benefit from export, it takes months... and if we want greater benefit, it may take some years since we dont got manufacturer who can produce better quality goods.

and again, since our exchange rate is fixed with IC, and we mostly deal with india, so there wont be much difference cause of stronger dollar... rather due to stronger dollar, we be earning higher so we might be consuming more of those indian goods.

so we need to depreciate our currency against indian's.

since our economy depends upon remittance, tourism,,, so let them earn bigger amount. .. and keep our currency weaker.

Posted on: 03 DEC 2011 | 2:41 PM NST

2. who cares
in the past, west had monopoly over their product and services that is why their stronger currency helped them to get goods supplied by poorer countries in exchange with a piece of paper while poorer countries had to give away everything to buy their products and services.

but today, they have to compete with developing countries. that is why their stronger currency is damaging their economy.

one example- recently US blocked 60mil or so to UNESCO. 60mil is nothing to US, but that tiny tiny amount, for US, made a major impact on UNESCO's project.

Posted on: 03 DEC 2011 | 2:48 PM NST