The price of the dollar is high again, advantage or disadvantage for Nepal?
Although the increase in the value of the US dollar has benefited some sectors related to the Nepali economy, it will have a major disadvantage in the overall economy.
When the value of the dollar increases, there is an internal benefit, especially in the remittance sector. When the value of the dollar increases, the value of the currencies of the Gulf countries also increases. As a result, the remittances sent from those countries fetch a higher price. Even though there is benefit internally, the weakening of Nepali currency is not considered beneficial in the foreign currency market.
Since Nepal's trade deficit with other countries is large, if the value of the dollar increases, the loss to Nepal is more. Foreign goods worth 140 billion rupees are imported into Nepal every month, while goods worth 13 billion rupees are exported from Nepal. Since there is such a large gap of trade deficit, if the value of the US dollar increases, there will be more losses. When the value of the dollar increases, all imported goods become more expensive.
The most imported petroleum products, vehicles and spare parts, industrial raw materials also become more expensive. Importing the same quantity requires spending a lot of foreign currency. On the one hand, if the imported quantity increases, on the other hand, if the price per unit increases, it pushes the accumulated foreign exchange.
When the price of imported goods increases, domestic inflation also increases. Due to the increase in the price of petroleum products due to dollar, the price of all goods and services will increase because the overall transportation cost will increase. Similarly, the prices of domestic products that depend on foreign raw materials become expensive. In general, if the dollar is expensive, it will have a negative impact on the foreign exchange reserves and the inflation of Nepal will increase. Therefore, an increase in the value of the dollar will damage Nepal's economy.
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