Import ban on ‘luxury goods’ extended, with some items allowedBan on diamonds, big TV sets, toys, cards, snacks, and tobacco items lifted.
The government has continued restrictions on the import of automobile, mobile phones, liquor and motorcycles until October 14.
The decision follows a slight improvement in the foreign exchange reserves.
However, the government has decided to lift the ban of six goods including diamonds, television sets larger than 32 inches, toys, cards, snacks and tobacco and tobacco-related products.
The new list was published in the Nepal Gazette on Tuesday following the Cabinet nod on Monday, officials say.
An embargo on 10 types of products deemed as “luxury goods” was in place since April 26 to conserve foreign currency. On July 17, the Nepal government extended the embargo till August 30.
Nepal’s imports bill in the first month of the current fiscal year ended mid-August declined 12.90 percent to Rs131.28 billion as compared to the same period last fiscal year.
When the ban was first imposed in April, the government prohibited imports of mobile sets worth over $600 and motorcycles with the capacity over 250cc.
Harsher restrictions followed and mobile sets costing more than $300 and motorcycles with the capacity of more than 150cc were banned.
Traders have expressed their displeasure at the government’s latest move on the eve of the country’s biggest festive season.
“We were assured that the government this time would lift restrictions on automobiles in view of the festive season. It is unfortunate that the ban has been extended again for a month,” said Dhurba Thapa, president of the Nepal Automobile Dealers’ Association.
He said an import ban is not the solution in the name of saving foreign exchange reserves.
“If this trend continues it will have a negative impact on the market,” he said. “When we approach the government [at the political level] to lift the ban they always appear positive. But we don’t know how bureaucracy plays around.”
The government’s revenue has already started to decline, according to Thapa.
What the government considers luxury items that it blames for depletion of foreign currency reserves are actually the major revenue earners.
Customers who are planning to buy automobiles now have less chances of getting them before mid-January next year following Tuesday's decision to extend the ban, Thapa said.
Keshav Acharya, an economist, says banning imports is not a solution specially for a market-based economy.
“But having said that, if we do not have sustainable foreign income, unless we build up the reserve, there is no other way to control it,” Acharya told the Post. “Import bans can be lifted immediately if the reserve gets a boost.”
There is definitely distortion in the market due to the ban on imports, he said. “Black marketing has thrived.”
Availability of liquor and other snacks in the market can be an example of it, he said.
Despite the ban, external indicators have not improved.
According to Nepal Rastra Bank, imports increased by 24.7 percent to Rs1.92 trillion in the last fiscal year, as compared to an increase of 28.7 percent in the previous fiscal year.
The current account registered a deficit of $5.17 billion in the review period as compared to a deficit of $2.84 billion in the previous year.
The balance of payments remained at a deficit of $2.14 billion in the review year compared to a deficit of $3.1 million in the previous year. The gross foreign exchange reserves decreased by 18.9 percent to $9.54 billion in mid-July 2022 from $11.75 billion in mid-July 2021.
Based on the imports of 2021-22, the foreign exchange reserves with the banking sector are sufficient to cover prospective merchandise imports for 7.8 months, and merchandise and services imports for 6.9 months, according to the central bank.
According to the Department of Customs, imports of motorcycles declined 55 percent to Rs1.33 billion in the first month of the current fiscal year as compared to the same period last fiscal year.
The imports of automobiles declined sharply by 90.36 percent to Rs154.58 million.
The smartphone import declined by 46.66 percent to Rs2.57 billion, according to the customs data.
“Imports can be relaxed if the foreign exchange reserve is enough for goods and services for seven-eight months,” said Acharya. “To increase the foreign exchange reserves, the immediate measure can be to increase remittance through legal channels.”