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.
The almighty dollar, PAAVAN MATHEMA
The fall and fall of the Nepali rupee