Import Restrictions in Nepal- Is It a solution of a trade deficit? 2022

 Due to diminishing foreign exchange reserves, Nepal’s central bank has advised commercial banks not to issue fresh letters of credit for the import of vehicles and other non-essential commodities. NRB also planning to put import restrictions in Nepal for certain products.

“We advised the top officials of commercial banks to cease granting letters of credit for the import of vehicles and other non-essential commodities,” Prakash Kumar Shrestha, chief of Nepal Rastra Bank’s economic research department,

“In times of crisis, we must retain foreign exchange reserves to finance vital commodities like as medications, rather than spending them on luxury goods,” he added.

Nepal’s forex reserves have been dropping from the beginning of the current fiscal year, which began in mid-July 2021, due to rising imports, diminishing remittance inflows, and meager tourism and export profits.

Few Financial Data that pushes to impose import restrictions

According to central bank projections, the country’s entire currency reserves have decreased by 17 percent since mid-July 2021, to $9.75 billion in mid-February. The currency reserves are currently only sufficient to cover imports for 6.7 months, falling short of the central bank’s aim of at least seven months. Rising imports and plummeting FX profits have also contributed to a record high balance of payment imbalance, raising fears that the country would follow Sri Lanka’s path.

According to the central bank, Nepal had a balance of payment deficit of 2.07 billion dollars in the first seven months of the current fiscal year, compared to a surplus of 817.6 million dollars in the same time the previous fiscal year. Other indirect measures had failed to significantly reduce imports, so the central  bank issued its latest mandate on Monday.

“The central bank has clearly instructed us not to open letters of credit for non-essential products, including vehicles,” according to the central bank. 

Discouragement of vehicle imports would also contribute to lower fuel use. Fuel costs have risen in Nepal, as they have in other nations, as a result of the Russia-Ukraine situation and other considerations.

Vehicles and replacement parts are among Nepal’s most important imports. According to the Trade and Export Promotion Center, the South Asian country imported vehicles and spare parts worth 75.95 billion Nepali rupees (627 million US dollars) during the first eight months of the current fiscal year.

Nepal Considering Import restrictions on few of goods.

Except medical and here is the list of products that NRB has planning to impose import restrictions to save foreign reserve.

  • Rice, Chocolates, Chips, Wine, Fish, eggs, tea and coffee.
  • Clothing and its accessories
  • Vehicles and spare parts
  • Gold & Silver including other peripherals
  • Wooden and luxury furniture item
  • Electronics devices- like mobile and toys including watch and tobaccos etc.

Are these Steps are enough to increase foreign reserve?

These are short terms reactive measures that can prevent us for short term. We have a benefit of having India as our Neighbors which is a stable and strong economy and our friend as well. But in long run we must reduce our dependency on another nations and focus on nation building and make export and innovation oriented economy. We are mainly dependent on remittance and that is not good for us.

Few things that needs to consider for a long term

  • Reducing unnecessary expenditure in upper level.
  • Focus on agriculture and promote agriculture.
  • Production & Manufacturing Incentives especially for export item.
  • promote Innovations and companies that have potential to bring FDI.
  • High duty on luxury imports and tax benefits to export.
  • Utilize foreign loan on capital expenditure and reduce corruption.
  • Promoting Local currency over foreign currency on international company earning in Nepal.
  • Alignment of NRB, Home ministry and Policy makers.
  • Transparency and Accountability
  • Stable Government

What impact we see in short term due to low foreign reserve and Import restrictions.

  • Inflation
  • Difficult to handle external obligation
  • low confidence in economy

What are counted as factor that increases foreign reserve?

Here are the factors that helps to boost your foreign reserve.

  • foreign Currency especially USD $
  • Gold
  • SDR
  • Reverse Transpositions


Import restrictions will not going to help Nepal in the long run and it is the time Nepal act different and bring policy that boost our economy and increase foreign reserve. Tech and Innovation sectors must get nourished that helps to bring USD or FDI from other nations. Increase the Exports and incentives to productions and manufacturing. Keep the NPR weak until you have sufficient reserve, especially helps when you exports. Import Restrictions will not helps.

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