Shabda Gyawali's Blog

Nepal Rastra Bank has blamed - 192 percent rise seen in gold import as one of the reasons behind the balance of payment deficit. In an attempt to curb the huge import of Gold, the Central Bank of Nepal has revised the import process. Now, gold importers are required to deposit 40 percent cash in the bank to get a standby Letter of Credit (LC), bank guarantee or normal LC from the bank for the import. If you look at the fundamentals, it is not just the lack of political instability or less investor friendly environment in the domestic market that have caused the balance of payment deficit in the country. Global financial crisis and its consequences are also supposed to be equally blamed for the BOP deficit. After the global economic crisis, many developed countries and emerging countries in the World decided to follow the Keynesian Model and introduced billions of dollars of stimulus package, the central banks of these countries also ease their monetary policy .With massive money supp...

Policy makers these days in Kathmandu are busy to find a solution to whether the upcoming economic storm -dual combination of capital flight followed by deficit BOP and inflation. Ministry of Finance and NRB have come up with different polices, and many more are in pipe line, most outrageous and unviable recommendation was by the Government of Nepal to the NOC to reduce import of oil. Capping the auto & housing loan, revising the gold import procedure or even asking people to consume less fuel is a short term solution. Unless we have a political and economic reform in a policy level, these kinds of erratic crises will continue to linger. With majority of the imports coming from India, and Nepal sharing an open border with India. You don’t have to be a PHD in economics to figure out why we are having a huge capital flight to India or why we have a ballooning trade deficit with India. Till the third quarter of the last fiscal year remittances flow to Nepal was decent. With infl...