The devaluation of Indian rupee has caused the Nepali rupee to hit a record low of 93.79 against the dollar on Wednesday. The Nepali rupee which is pegged with Indian rupee has been sliding continuously following the freefall of Indian rupee since the last eleven days. According to analysts the sharp depreciation of Indian rupee has been accelerated by slower growth and worsening public finances.
According to the records of Nepal Rastra Bank, the Nepali rupee has been devalued by 3.5 per cent in the last 11 days. The exchange rate was Rs 90.60 per 1 USD on 1 June. The weaker currency makes imports costlier so if the trend continues Nepal’s import based economy will be adversely affected by stronger dollar.
Advantage
1. For people who send remittance to Nepal
2. Export could rise if inflation was reduced
3. Increase in customs revenue
4. Decrease in imports
Disadvantage
1. Imbalance of payments
2. Inflation increases because of increased imports (fuel etc)
3. Paying international loans will be harder
4. Power Purchase Agreement on electricity in USD will lead to a loss for NEA
5. Nepal will lose out its revenue to international business partner
6. Black market for dollars will thrive
Pushparaj Acharya, Karobar, 11 June