New foreign currency restrictions for imports

Amid the depletion of foreign exchange reserves, the central bank has reduced the amount of foreign exchange that importers of various agricultural products can purchase from banks to pay for imports.

According to Unified DirectiveAs issued Friday by the Nepal Rastra Bank, importers of agricultural products can purchase a maximum of $ 50,000 per import. Government approval is still required to import such products.

These importers must take approval the government for the import of cereals and food products made from cereals; oil and ghee; milk and dairy products; fruits and vegetables, frozen and processed fish and meats, dried fruits such as walnuts and cashews; food for children; drinks; chocolate and chewing gum; snacks; spices; honey; and sugar and other processed food products.

Narayan Prasad Pokharel, deputy spokesperson for the central bank, will not enter into the specific provisions. But he said: “We have also taken a number of measures to discourage further imports. “

The import of agricultural products from the country is increasing as people’s incomes have increased over the years, with remittances playing a crucial role in increasing people’s purchasing capacity.

According to a study by the National Planning Commission, Nepal imported agricultural products worth more than 200 billion rupees in fiscal year 2019-2020, although these goods are produced domestically. Most of the agricultural products came from India, according to the study titled ‘Status of exports and imports of agricultural products. “

The external sector of the economy is threatened because the country’s imports are several times greater than its exports. This has led to a higher foreign exchange outflow as the country struggles to increase its foreign exchange earnings due to a slowdown in remittance flows and tourism income due to the Covid-19 pandemic, according to the report. central bank and the customs service The data.

Exports, imports, foreign exchange reserves and remittances are part of the external sector of the economy.

Foreign exchange reserves and remittances have declined for four consecutive months since the start of the current fiscal year, according to the central bank.

Thus, the government and the central bank have taken measures in recent weeks to discourage imports and encourage remittances.

On December 20, the central bank made it mandatory for importers to keep a margin amount of 100 percent [guarantee given by importer to the bank] open a letter of credit (LC) to import a number of goods.

According to the central bank, traders must keep a 100% margin to open a letter of credit for importing alcoholic beverages, tobacco, money, furniture, sugar and foods containing candy, glucose , mineral water, energy drinks, cosmetics, shampoos, hair oils and dyes, caps, shoes, umbrellas and building materials such as bricks, marble, tiles and ceramics, among others.

Importers of motorcycles and scooters and importers of diesel-powered passenger cars are now required to keep a 50 percent margin to open a letter of credit. As potential importers have resorted to short-term credit without depositing cash, the central bank directive is expected to stem the importation of these products.

The central bank also decided not to provide foreign currency more than twice per year to people traveling abroad. A Nepalese citizen can purchase a maximum of $ 1500 per overseas trip. Previously, the central bank had also set an exchange limit allowed for importing money.

But the central bank has allowed importers of peas, betel nuts, dried dates and pepper to source clearance even in the current fiscal year 2021-22 if their shipments had taken place before the end of the last fiscal year 2020-21.

The government had authorized the importation of peas, betel nuts, dried dates and pepper until mid-July by setting quantitative limits for each item — 80,000 tonnes for peas, 25,000 tonnes for walnuts. of betel, 5,000 tonnes for dried dates and 15,000 tonnes for pepper in the last financial year ending in mid-July 2021.

However, the government has not taken any decisions regarding the provision of foreign currency for the importation of these items during the current fiscal year 2021-2022.

Thus, importers who had not taken delivery of these goods during the last fiscal year encountered difficulties in obtaining customs clearance.

But the unified guidelines released on Friday opened the door for importers of the aforementioned four food items to receive currency and customs clearance even in the current fiscal year if their shipment had taken place in the past fiscal year.

Previously, the central bank said it would provide foreign currency for such imports if shipments had taken place before the end of last fiscal year, but the bank withdrew the announcement hours after reports of a dispute on the issue between the central bank and finance. ministry.

Pokharel, deputy central bank spokesperson, said a new step had been taken to ease the situation for importers of the items.

“Importers whose consignments arrived in the previous fiscal year but were unable to obtain customs clearance can submit a request to the central bank for foreign currency and the bank will make decisions on a case-by-case basis,” he said. he declared.