Nepal is tightening imports of cars, gold and cosmetics as its foreign exchange reserves have fallen, a central bank official said on Monday, after the government suspended the central bank governor and named his deputy the interim chief.
A central bank spokesperson referred questions about the governor’s suspension to the finance ministry.
A ministry spokesperson said he did not know why Nepal Rastra Bank’s (NRB) governor Maha Prasad Adhikari was suspended on Friday but that a government panel would investigate the matter.
A government official said on condition of anonymity that Adhikari was accused of leaking sensitive financial information to the media. Reuters could not immediately contact Adhikari, whose mobile phone was switched off.
With tourism struggling to resume after two years of the COVID-19 pandemic, the Himalayan country’s gross foreign exchange reserves fell to $9.75 billion as of mid-February, down 17% from mid-July last year when its financial year started. The current reserves are sufficient to support imports for about six months.
“Nepal Rastra Bank feels the country’s foreign exchange reserves are under pressure and something must be done to restrict the import of nonessential goods, without affecting the supply of essential goods,” NRB deputy spokesperson Narayan Prasad Pokharel told Reuters.
He said importers would be issued letters of credit to bring in 50 “luxurious goods” only with full upfront payments with the bank, declining to name all the items.
“We have already directed all the border customs points about the new arrangements for the import of these goods,” he said. “This is not banning the imports but discouraging them.”
Data from the bank shows remittances fell 5.8% to $4.53 billion between mid-July to mid-February.
The balance of payments had a deficit of $2.07 billion in the first seven months of the current financial year, compared with a surplus of $817.6 million in the same period the previous year.
Opposition parties have criticised Prime Minister Sher Bahadur Deuba’s government for suspending the central bank governor when the economy is weak.
“He was doing a good job and his removal at a time when economic indicators are not good is a wrong decision,” said Surendra Pandey, a senior leader and lawmaker of the opposition Communist Unified Marxist-Leninist party.
Nepal’s financial woes come at a time when fellow South Asian country Sri Lanka is going through an economic crisis due to a shortage of funds.