Nepal seeks overseas nationals’ help to build up forex reserves amid economic woes

Nepal is asking citizens living abroad to deposit funds in domestic banks as part of efforts to ensure the financial system has enough liquidity and to preserve foreign exchange reserves, finance minister Janardan Sharma said on Saturday.

Speaking to Reuters, he denied Nepal was facing an economic crisis despite the impact of soaring commodity prices as the tourist industry, a key source of revenues, struggles to recover after the Covid-19 pandemic.

Nepal, wedged between China and India, this month imposed curbs on luxury goods imports to rein in capital outflows. Foreign exchange reserves fell over 18 per cent to $9.6 billion as of mid-March from mid-July - enough for around six months imports.

By depositing their savings in Nepal, overseas Nepalis would continue to “maintain their link as well as benefit from 6 to 7 per cent interest” offered by Nepali banks, Sharma said.

Sharma said the economy did not face a crisis and Nepal’s situation could not be compared with Sri Lanka. That South Asian country is facing its worst economic crisis in decades and anti-government protests.

In Nepal, remittances by overseas workers, which constitute nearly a quarter of the economy and are crucial for external payments, fell 3.0% to $5.3 billion between mid-July to mid-March, compared with a 5 per cent increase in the same period a year earlier.

Earnings from tourism, which fell sharply after the start of the pandemic in 2020, are slowly picking up, but remain well below pre-Covid levels.

“The money to be received from the United States over five years is a (non-refundable) grant,” he said.