Nepal rules out changing exchange rate with India
Nepal`s central bank said the country first needs political stability.
Kathmandu: Nepal`s central bank has ruled out changing the exchange rate of the national currency against the Indian rupee.
"This is to inform the public that since the exchange rate (with the Indian rupee) acts as the foundation on which economic stability rests, there is no situation to alter the rate or process," Nepal Rastra Bank (NRB) said in a statement.
The Indian rupee fetches NRs 1.60 as per NRB guidelines while authorised foreign exchange dealers sell per 100 Indian rupees at NRs 160.15.
NRB said its attention was drawn to media reports claiming that the value of the Nepali rupee vis-à-vis the Indian rupee would be changed after the London-based Financial Times carried an interview with NRB governor Yubaraj Khatiwada.
Nepal`s local media accused Khatiwada of pressing the panic button and triggering a rush in buying Indian currency for fear that it would become dearer soon.
The NRB said the media had misconstrued its governor.
"Though Nepal feels the exchange rate should be evaluated in a bid to cut down on the ballooning trade deficit with India as well as discourage cross-rate trading, the governor had indicated that it would not be possible till certain conditions are met," said Gopal Prasad Kafle, NRB spokesman. "And some of these conditions may take a long time."
Nepal, smarting under political turmoil since the 1990s, first needs political stability and improved security conditions, according to the conditions laid down by the governor.
It also needs stability in the macro-economy, greater confidence in the Nepali rupee and a stable foreign exchange reserve.
With Nepal scheduled to get a new Constitution in May 2011, followed by general elections within six months of that and the formation of a new government, it will be at least 2012 till the issue comes up for discussion among the ruling parties.
Given the Himalayan republic`s failure to promulgate the much-awaited new Constitution in two years and being forced to postpone the last elections twice, it might take even longer to have a new elected government which can take the issue up for discussions.
The talks would also take time, including discussions with India, Nepal`s biggest trading partner accounting for over 60 percent of trade.
Meanwhile, to allay panic-buying of the Indian rupee, NRB also issued a separate statement, warning it would take action against unauthorised dealers and even authorised dealers found to be charging buyers more per Rs 100 than the mandatory NRs 160.15.
The first crackdowns started in the towns bordering India, where the demand and illegal trade in Indian currency is the highest.
In Butwal town in southern Nepal, police arrested an Indian who had come to sell Indian currency at a higher rate.
Chandra Shekhar Baniya, 38, was arrested on Sunday with Rs 350,000 in possession. Baniya, who had no authorisation, was hoping to make a quick profit of NRs 3,500 from the transaction, police said.
The Indian also violated the ban on 1000 and 500 Indian rupee notes in Nepal due to the mushrooming of fake Indian currency.
He was carrying the money in banned notes wrapped in a piece of cloth tied round his waist, police said.