Nepali Times
My Two Paisa
Not all doom and gloom


This week, the Nepali rupee reached the lowest level against US dollar with the Nepal Rastra Bank (NRB) fixing the selling price of dollar at Rs 89.30, and the buying price at Rs 88.70. A year ago on Thursday the dollar was selling at Rs 72.57.

The freefall of the Nepali rupee against the dollar is not good news for the economy, but it is not happening because of anything Nepal has done, or not done. The NPR peg to the INR which cushioned us against our own non-performing economy is now also the reason why the Nepali rupee is affected by the misfortunes of the Indian rupee.

India's widening trade and current account deficits, coupled with declining foreign fund inflows, have depressed the Indian rupee. India spends nine per cent of its GDP in subsidising basic necessities and fuel. With the increase in oil prices, India's trade deficit has increased by 56 per cent this year. Removing subsidies is not an option for an already weak UPA government. The crisis in the Eurozone is not helping either.

Essentially, there is nothing Nepal can do about it. Our rupee leans on its Indian counterpart, and so when the Indian rupee falls, we tumble down too. As the dollar becomes stronger in the global financial market, currencies of emerging markets have depreciated against the dollar. Currently, the Indian currency is one of the worst performing currencies against the dollar.

The dollar can be expected to rise further in the future if the Reserve Bank of India (RBI) does not intervene. RBI's target on arbitrage and speculation in futures and options markets, and its order to exporters of repatriating INR instead of holding dollars seem to have been ineffective so far. So there is nothing we in Nepal can do but wait, and watch, and suffer.

For an import based country like ours, higher exchange rates will put pressure on import prices and push inflation, which currently stands at seven per cent. Merchandise import has increased by 18 per cent to Rs 339.84 billion in the last nine months, and the appreciation of the dollar is unlikely to dampen these figures.

The strong dollar will also make payment of foreign loans and interests expensive. The Rs 20 billion allocated by the government to pay the principle and interest in the current fiscal year's projects will no longer be sufficient. Since fuel prices are bound to rise if this trend continues, expect longer queues at the gas stations, and more political instability as various pressure groups try to use price hikes to fuel street protests.

However, the rising dollar has helped inflate Nepal's economic figures. If you looked beyond the political news last week, you would have noticed some positive developments on the economic front. Nepal's export has already risen by 15.9 per cent this fiscal year, from five per cent a year ago. Remittance inflow has grown by 36.5 per cent to Rs 248 billion in the same period. Income from tourism has risen by 28.9 per cent. A lot of this has to do with the appreciation of the dollar.

After remaining in deficit for two years, the country's balance of payments registered its highest ever surplus of Rs 91.37 billion during the first three quarters of 2011/12 fiscal year. The gross foreign exchange reserves surged by 42.2 per cent to Rs 386.96 billion in mid-April 2012 from Rs 272.15 billion last year.

The dollar alone is certainly not responsible for these figures. What it shows is that despite political uncertainty, power shortages and strikes, our economy managed to do more than just stay afloat. The test will be to monitor if these figures drop and by how much when the dollar stabilises. The Nepal Investment Board was finally given charge of large-scale prestige projects, but this coincided with the demise of the constitution. It won't help allay investor fear of doing business in Nepal if the country doesn't have a legislature, and not even a constitution.

But if we keep waiting for politics to settle down, we may wait forever. So let's move while we can.

See also:
Last chance on FATF
In our obsession with the constitution, let's not forget the other deadline Nepal has to meet

The almighty dollar
The fall and fall of the Nepali rupee

For a few dollars more

Read also:
The Euro awaits its verdict
Salvaging the Euro dream is a possibility, but how many want it?

1. Gunda Digshit
The writer rushes to list all the negativities relate to Nepalese rupee being pegged to INR. There are definitely plenty of benefits of this pegging which one or the least developed country has enjoyed so far. As usual, only one-side of the story.  

2. sarva gyaani
dear all-knowing, smartest human on earth gunda, please enlighten me as to why it's good for NRS to be pegged to IRS? let's hear something positive from your mouth for once? 

3. biku
@sarva gyaani 
me waiting to get enlightened too;D

4. who cares
1. Gunda Digshit, 2. sarva gyaani ,,

its the most stupid decision to peg nepali currency with indian one.

i thyink they did it either cause bureaucrats were lazy, zero confidence or evil indian forced nepali rulers to do so.

first of all pegging is bad and second, especially, when it is with a dozen times larger country. 

value of indian currency is reflected as per their economic status vs other foreign currency, and since they are developing country and one of the major exporting nation.

but since our currency value is fixed with that of indian and we are underdeveloped and no position in exporting so we can not compete cause of the currency value of our goods.

if our currency were freely tradeable, NC would have been weaker and we had been exporting in much larger quantity. our currency would have gradually become stronger with our ability to export increase.

fixed exchange rate with IC is like we running even before we learn to stand. 

so either make it free or devaluate it.

5. Gunda Digshit
Benefits are cheaper basic commodities (grains/seeds, vegetables, flowers, meat, medicine, agricultural products, automobiles, books, entertainment, oil and gas etc), travel, air/sea traffic charges, free people movement and education to name a few. 

Even China and Japan recently agreed to move away from dollar and deal directly in yuan and yen.

6. who cares
5. Gunda Digshit

how you are going to pay when you dont earn?

suppose basmati per kg is 1re, how are you planning to pay if we are in no position to export our goods or services?

if our currency is devaluated, cost of imported will definitely increase, but our income, cash in hand will increase too, by a far greater ratio.  

expensive import also means less import. 

7. Mr. Pradhan
If not for INR, we would be paying 60 bucks for a pack of waiwai. Ppl are so naive and ignorant. Just like they thought democracy would liberate them and would actually benefit if they could run themselves, they think having an independent currency could compete with INR. Stupidasses.........

8. who cares
some fools only see the number on the bill.

knock knock! its not how much you pay, the secret is the ration of how much you earn and how much you have to pay.

less noodles mean healthy doodles! 

9. Flexible 1
Pegging the Nepali currency to the Indian Rupee has prevented the need to travel to the bank in a truck for the number of rupees it would take to exchange for one USD. 
The currency of failed states, like Nepal NOW is, are also failed currencies, so get real! While this living in cloud cuckoo land continues Nepal continues to be a failed state in everyone's view except some of the writers here.

10. who cares
you need to travel to the bank in a truck to exchange foreign currency only when you start to print your note indiscriminately like zimbabwe, in nepal only agent bhatterai and agent puspa would do such a thing. 

nepal has been receiving stable foreign currency (through remittance and tourism sector and foreign donor) which determines the value of nepali currency 

and again

 the collateral against which nepali currency is printed is more than adequate- 5ton of gold and other valuable metal, billions of dollars worth of foreign currency. 

by the way, how much nepal currency is there in the market, a few trillions or even less. 

which is less than we should have printed cause this could make our currency stronger in international market. 

and dont try to fool idiots and commies that we will have to transport currency in trucks if our currency is devaluated. we dont. 

just because our value of100rs fall down to 1re value does not mean we have to print 100rs 100 times. in this case all we have to do is add two more zeros on the paper.

there is one more benefit in devaluating nepali currency- it will bring down thief's inflation. today, retailer charge 10rs for 9rs product which increases 10% inflation. so if we devaluate nepali currency by 10 times, there will be thief's inflation by only 1%.


11. Flexible 1
What an absolute load of codswallop!
Remittance sent electronically from foreign lands is converted from that countries currency into the receiving country's currency. This does NOTHING to alter the value of the rupee against the dollar or any other currency. 
And thinking that remittance plus 5 tons of gold is going to sustain the Nepali economy is just laughable.
So, remittance plus tourism equals prosperity?
About as laughable as thinking that Nepal will soon be a failed state. Nepal is already a failed state.

12. who cares
" Remittance sent electronically from foreign lands is converted from that countries currency into the receiving country's currency."

now you are talking like commie. 

where does your milk come from? shop.

electronically transferring is just a medium to transfer ownership.  through legal medium, remittance company has to sell that foreign currency to rastra bank and get nepali currency, illegally they may sell that foreign currency to someone who deal with nepal and get NC. 

it would have suited individual like you if you had said "the computer eats the foreign currency and the remittance company has to pay to the receiver from their pocket.

and 5ton gold does not sustain economy. that gold and foreign currency maintains the value of nepali currency, it maintains the credibility of nepal govt., those collateral guarantee that if govt. cant pay back/exchange (something like that) the value of NC, they will reimburse  the owner of nepali currency with gold or foreign currency.  

So, remittance plus tourism equals prosperity? 

if not then what is prosperity?

nepal is not a failed state, nepal is a doomed state.

doomed by opportunist bahuns running politics, media and the those bahuns' pet from ethnic warlord. 

13. Flexible 1
"Nepal has been receiving stable foreign currency which determines the value of Nepali currency"
If any body actually believes this we can all stop laughing now!
Fact: The volume of remittances has multiplied by approximately 10X in the past 5-10 years
Question: To what extent has this helped the Nepali economy within the GLOBAL market?
Rest assured that the volume of remittance, plus tourism will NOT lead to prosperity in Nepal. You can play with words and offer pseudo intellectual crap ad nauseum, but Nepal is not doomed (future tense) it is failed (present tense).
And ...
the collateral against which nepali currency is printed is more than adequate- 5ton of gold and other valuable metal, billions of dollars worth of foreign currency. 
Adequate for what?
Yet another doseage of crap.

14. devata

15. who cares
13. Flexible 1

looks like you are attacking my views without even reading my view.

our perceptions are same, only solution is different. 

""Nepal has been receiving stable foreign currency which determines the value of Nepali currency"

foreign currency inflow is one of the reason that will prevent our currency from converting into a piece of paper.

If any body actually believes this we can all stop laughing now!

of course, likes of you are laughing. 

Fact: The volume of remittances has multiplied by approximately 10X in the past 5-10 years
Question: To what extent has this helped the Nepali economy within the GLOBAL market?

exactly! one of the things that determines the strength of the currency is that country's strength in selling their product and services to international market.

our currency is fixed with that of india. india is a developing country, one of the most capable industrialized country in the world that can sell their product in international market and that determines the strength of IC.

where as nepal is in no position in competing in global market. so nepal needs weaker currency in competing in global market. IC position is determined by indian competing factor. since our exchange rate is fixed, strength of NC would move as per the strength of IC. 

how can we compete when our currency positioned as the position of the currency of that country which is developing rapidly?

so we need our currency to be traded freely, so the the value is fixed as per the strength of nepal, not india.

Rest assured that the volume of remittance, plus tourism will NOT lead to prosperity in Nepal.

that is why we need to develop some industrial capacity, for that we need weaker NRs. so that our goods be cheaper. 

Adequate for what?

adequate for the notes Nepal Rastra Bank has printed. 

nepal is doomed.

cause media of nepal are ruled by agents, sub agents. you may have read a few days ago that two of the national medias has been bought by agent puspa.

not just in nepal, even in the developed, educated countries, the views of majority of public are fixed by the propaganda created by the media.

even in nepalitimes, they dont mind publishing anti nepal column, comments but they block comments filled with nationalism. the blocked my yesterdays comment (Stateless in new Nepal ), earlier they blocked and called it raciest, but another time they did not get reason so they simply blocked, may be cause they are afraid their master would not issue them visa. their white friends would stop chatting with them.

so we are doomed!


we need free market to determine our currency value so that we could grow, not cause we are already there. 

16. Krishna S.
Hmnnn, Interesting. Why didn't the "Evil Indians" think of this one?
Easy peasy!
Hey,"Who cares", how can you give away the secret to the enemy??
I am beginning to doubt someone is a double agent here!

17. who cares
sub agent Krishna S


Why didn't the "Evil Indians" think of this one??????????
 how can you give away the secret to the enemy??????

(11 JAN 2013 - 17 JAN 2013)