Rising value of US dollar likely to affect Nepali economy

By Laxman Kafle,Kathmandu, Sept. 9: The value of the US dollar against Nepali rupee has reached a historic high on Friday.

Nepal Rastra Bank (NRB) fixed the selling exchange rate of one US dollar at Rs. 133.44 on Friday.  The buying rate of a dollar was fixed at Rs. 132.84.

It was the record-highest exchange rate of the US dollar. 

The exchange rate of the US dollar against the Nepali currency had been steadily rising for the past few weeks.  

Earlier on August 18, 2023, the selling exchange rate of one dollar was Rs. 133.34.

Under the current system, the exchange rates quoted by different commercial banks may differ, the NRB said.

Nepali currency has come under pressure because of the devaluation of the Indian rupee with which it is pegged. The Nepali rupee has a fixed exchange rate of 

Rs. 160 for IRs. 100.

Experts have said that if the value of the dollar increased continuously, the disadvantages would outweigh the advantages.

Economist Dr. Chandra Mani Adhikari said that when the value of the dollar increased, prices of imported goods would increase.  

“If the export is increased at a higher rate,  the value of the dollar will be beneficial. However, since the production cannot increase, the pressure on imports will increase,” he said

In the fiscal year 2022/23, Nepal exported goods worth only Rs. 157 billion while it imported goods worth Rs. 1,611 billion.

“Since Nepal depends on imported goods almost everything ranging from consumer goods to luxury goods, the rising value of the dollar will cause more harm than good to Nepal. The goods and services bought by paying foreign currency become expensive. As the imported goods come in with expensive dollars, its pressure will be seen in the inflation,” Adhikari said.

When the dollar appreciates, the cost of foreign loans increases and exports become more expensive. The amount allocated in the budget to pay the loan and interest on foreign loans may be insufficient after the dollar value soars.

The weakening of the domestic currency, however, could be a boon for remittances, tourism and exports, among other sectors where the earnings are in US dollars, Adhikari said.

When the value of the dollar increases, the money sent by Nepalis working abroad will also increase.