Nepal in Forex Crisis as Forex Reserves Falls to $9.75 bn Turns to WB, USAID

· Central Bank Governor sent Home

· Tourism Plummets on Covid Fears

The Nepal Government is taking measures to bolster its foreign exchange reserves to avoid going down the same path as Sri Lanka.

After announcing curbs on imports of luxury cars and other high end consumer durables, Nepal now wants Nepalese nationals living abroad to open dollar accounts in the country and make investments. Kathmandu is also discussing whether to waive all fees on visas to again attract tourists.

Nepal is also planning to negotiate a loan of $150 million from the World Bank and has decided to accept grant aid of $659 million from the US States Agency for International Development (USAID).

Both Sri Lanka and Nepal are heavily dependent on tourism, which was dealt a death blow by the pandemic. The slump in tourism has plummeted Nepal into a deep problem but unlike the Rajapkasa regime, successive governments in Nepal have been fiscally prudent thus helping the country escape Sri Lanka's fate.

Nepal's Finance Minister Janardan Sharma has said the opening of dollar accounts in Nepalese banks by Non-resident Nepalese (NRN) would help the country to get rid of the current foreign currency crunch. Reserves though are precariously poised. By the end of last month, Nepal's forex reserves had decreased 17 per cent to $ 9.75 billion from $ 11.75 billion six months back.

Last week, Nepal's government removed central bank governor Maha Prasad Adhikari from his role, without giving a reason for the decision.

Government debt in Nepal has risen to more than 43% of its gross domestic product, as officials increased spending to help cushion the economic impact of pandemic, Nepal's finance ministry said on Monday.

The ministry also said indicators of the country's economic health were "normal".

Last week, Sri Lanka named a new central bank chief and almost doubled its key interest rate to help tackle soaring prices and shortages of essential goods.

Sri Lankans are faced with shortages and rising inflation after the country steeply devalued its currency last month ahead of talks with the International Monetary Fund over a bailout. Sri Lankan rupee is now at 300 to the dollar.