Nepal keen on devaluing its currency

Updated on May 19, 2007 03:26 AM IST
In the past five years, the average rate of growth of GDP has been 2.14 per cent - easily the lowest in South Asia, REPORTS Anirban Roy.
HT Image
HT Image
None | By, Kathmandu

The tumultous changes in Nepal have taken their toll. As the country haltingly proceeds towards a democratic setup, it has realised it needs to devalue its currency (Nepalese Rupee) in order to give some stimulus to its exports.

The macroeconomic indicators are grim. In the past five years, the average rate of growth of GDP has been 2.14 per cent - easily the lowest in South Asia.

While growth is slow, the rate of inflation rose to 8 per cent in March against 5.8 per cent in the same month of the previous year. It has also been projected that the economy will not grow at a rate higher than 2.91 per cent per annum till 2011. “We are open to devaluing our currency now,” Ram Sharan Mahat, Nepal’s Finance Minister told Hindustan Times, adding that the over-valued Nepalese Rupee has been a hurdle to the country's economic progress.

More than 70 per cent of Nepal’s export is to India.

“Theoretically, devaluing currencies always helps in increasing exports, but we have no idea what is going
to happen in Nepal,” Shankar Prasad Acharya, the Director of Nepal Rastra Bank’s Foreign Exchange
Department, said.

Acharya said that since the Nepalese Rupee is pegged to the Indian Rupee basket, and the Indian rupee has strengthened considerably, the currency value of the Nepalese rupee too rose considerably during the last few months against the US dollar. “And it is this that has also affected our exports,” Acharya said. The
readymade garment industry, which has been one of the largest exporters from Nepal, suffered considerably
during the last four months.

Several Nepalese economists have been arguing that as exchange rate determination is an important monetary
instrument for maintaining growth and containing competitiveness, the existing exchange rate with India
needs reassessment.

Diplomats at the Indian Embassy at Kathmandu were not unduly bothered. “If they (the Nepal government) are keen to devalue the Nepalese Rupee, we have no problem,” one of the Indian diplomats, who refused to be quoted, said,
adding New Delhi would not try to stop Nepal if it wanted to wriggle out of Indian currency

The diplomat said India would have no major problem even if the Nepalese government wanted to shift from
fixed to floatation exchange rates. At present, the fixed exchange rate between Indian and Nepalese Rupee
is at 1:1.60.

However, the Nepalese government would probably have to consider the fact that India, as an external factor, has
significant impact on Nepali domestic price levels.

Email author:


    Anirban Roy is the Deputy Resident Editor of HT’s Bhopal and Indore editions. A journalist for last 22 years, he has reported from India’s north-east and closely covered the Maoists’ Peoples’ War in Nepal.

Close Story

Less time to read?

Try Quickreads

  • FILE PHOTO: People watch a TV broadcasting a news report on the coronavirus disease (COVID-19) outbreak in North Korea, at a railway station in Seoul, South Korea.

    North Korean Parliament to discuss anti epidemic policy, rural development

    North Korea will convene two key meetings, including one to review the country's anti-epidemic policy, in coming weeks, state media said on Monday, as it claims no new COVID-19 cases since late July. The North Korean Supreme People's Assembly, the isolated state's rubber-stamp parliament, will meet on Sept. 7 to discuss law on rural development and organizational matters, according to the official KCNA.

  • The setting sun shines through a Black Lives Matter flag

    Over 600 kids strip searched by London police, mostly black boys: New data

    London's under-fire police force strip-searched more than 600 children over a two-year period, most of them black boys, according to new data released Monday. England's commissioner for children, Rachel de Souza, said she was "deeply shocked" by the figures after obtaining them from the Metropolitan police. The 15-year-old black schoolgirl was strip-searched by female officers in 2020 after being wrongly suspected of carrying cannabis, despite them being aware she was menstruating.

  • This picture taken from the southern Israeli city of Ashkelon shows Palestinian rockets fired from the Gaza Strip on August 7, 2022. (Photo by JACK GUEZ/AFP)

    Israel and Palestinian militants declare Gaza truce

    The three-day clashes echoed preludes to previous Gaza wars, though they were relatively contained as Hamas, the governing Islamist group in the Gaza Strip and a more powerful force than Iranian-backed Islamic Jihad, had so far stayed out.

  • A salvo of rockets is fired from Gaza City towards Israel, on Sunday. 

    Five more killed in Gaza amid truce reports: Health ministry

    Five more people were killed in Gaza on Sunday evening, the enclave's health ministry said, amid reports a ceasefire between Israel and Palestinian militants may be imminent. "Thirty-six martyrs, among them 11 children and four women, and 311 injured," the health ministry said, raising the death toll in the Palestinian enclave from 31 since fighting began on Friday.

  • A Chinese military jet flies over Pingtan island, one of mainland China's closest points to Taiwan, in Fujian province.

    China keeps up pressure on Taiwan with fourth day of drills

    China said Sunday it carried out its fourth consecutive day of military drills in the air and sea around Taiwan in the wake of US House Speaker Nancy Pelosi's visit to the self-ruled island, despite international calls to calm the tensions. The People's Liberation Army said the exercises focused on testing its long-range air and ground strikes. It did not say if it will continue the drills after Sunday.

Story Saved
Saved Articles
My Reads
Sign out
New Delhi 0C
Monday, August 08, 2022
Start 15 Days Free Trial Subscribe Now