Currency volatility across the world markets is also affecting Nepal as the US dollar is taking a steep climb vis-à-vis domestic currency.
Depreciation of domestic currency can, however, be a boon to remittance receiving families and the economy on the eve of festivals like Dashain and Tihar as the value of foreign currency that the migrant workers send to their families will go up in Nepali currency.
The value of Nepali rupee vis-à-vis US dollar has gone down by 4.3 percent to Rs 106.98 on Tuesday compared to a month ago, according to Nepal Rastra Bank (NRB).
Remittance inflows tend to increase in the festive season as migrant workers return to home for celebration or transfer money to their family to celebrate the festival.
Remittance accounts for nearly one-fourth of the gross domestic product (GDP) of the country. Country's remittance earnings jumped by 13.6 percent in the last fiscal year to Rs 617.28 billion. The country had received remittances worth Rs 543.09 billion in 2013/14, according to NRB.
Depreciation of rupee encourages migrant workers to transfer their hard-earned money back to the country, according to remitters. "Generally, the appreciation of US Dollar increases flow of remittances as it encourages migrant workers to send their earning or saving immediately to the country to cash in on the rising value of dollar," Suman Pokhrel, secretary of Nepal Remitters Association, told Republica. He, however, said the current volatility of currencies across the world will have a mix effect in remittance inflow.
"Value of some currencies like Ringgit (Malaysia) and Yen (Japan), where most of the Nepali workers are based, is declining. This will encourage workers there to hold their earnings rather immediately send them home immediately," Pokharel, who is also the CEO of IME, said, adding, "There are many workers in countries like Qatar and UAE whose currencies are pegged with US Dollar. Workers in these countries will have the immediate urge to send their money home."
The value of domestic currency is taking a dive in line with depreciation of Indian currency (IC), with which it is pegged, compared to US Dollar.
People's Bank of China's recent decision to let the market play a bigger role in setting currency's level has spurred remnimbi's biggest devaluation in two decades. It has sent jitters across the currency market. Currencies of most of the countries, particularly the emerging economies, have been falling with the devaluation of Chinese currency. Financial experts say that the devaluation of the emerging economies like India's currency is also mainly due to the possibility of Federal Reserve increasing interest rate within this year.
The continuous appreciation of US dollar vis-à-vis local currency is likely to take a toll on import-based economy. The appreciation of US dollar means importers will have to pay more to import goods and commodities which will in turn raises price of imported goods and inflation.
According to NRB, total merchandise imports increased by 8.4 percent to Rs 774.68 billion in 2014/15. "Rise in the value of dollar has some positive consequences like rise in remittance, increment in the number of budget tourists, as well as revenue growth. However, it will also make our import more expensive and this can fuel inflation," said Economist Keshav Acharya. "Appreciation of dollar, however, gives incentive to exporters as Nepali goods become cheaper in the international market."
source: Sagar Ghimire, republica, 26 august 2015
LINK
Depreciation of domestic currency can, however, be a boon to remittance receiving families and the economy on the eve of festivals like Dashain and Tihar as the value of foreign currency that the migrant workers send to their families will go up in Nepali currency.
The value of Nepali rupee vis-à-vis US dollar has gone down by 4.3 percent to Rs 106.98 on Tuesday compared to a month ago, according to Nepal Rastra Bank (NRB).
Remittance inflows tend to increase in the festive season as migrant workers return to home for celebration or transfer money to their family to celebrate the festival.
Remittance accounts for nearly one-fourth of the gross domestic product (GDP) of the country. Country's remittance earnings jumped by 13.6 percent in the last fiscal year to Rs 617.28 billion. The country had received remittances worth Rs 543.09 billion in 2013/14, according to NRB.
Depreciation of rupee encourages migrant workers to transfer their hard-earned money back to the country, according to remitters. "Generally, the appreciation of US Dollar increases flow of remittances as it encourages migrant workers to send their earning or saving immediately to the country to cash in on the rising value of dollar," Suman Pokhrel, secretary of Nepal Remitters Association, told Republica. He, however, said the current volatility of currencies across the world will have a mix effect in remittance inflow.
"Value of some currencies like Ringgit (Malaysia) and Yen (Japan), where most of the Nepali workers are based, is declining. This will encourage workers there to hold their earnings rather immediately send them home immediately," Pokharel, who is also the CEO of IME, said, adding, "There are many workers in countries like Qatar and UAE whose currencies are pegged with US Dollar. Workers in these countries will have the immediate urge to send their money home."
The value of domestic currency is taking a dive in line with depreciation of Indian currency (IC), with which it is pegged, compared to US Dollar.
People's Bank of China's recent decision to let the market play a bigger role in setting currency's level has spurred remnimbi's biggest devaluation in two decades. It has sent jitters across the currency market. Currencies of most of the countries, particularly the emerging economies, have been falling with the devaluation of Chinese currency. Financial experts say that the devaluation of the emerging economies like India's currency is also mainly due to the possibility of Federal Reserve increasing interest rate within this year.
The continuous appreciation of US dollar vis-à-vis local currency is likely to take a toll on import-based economy. The appreciation of US dollar means importers will have to pay more to import goods and commodities which will in turn raises price of imported goods and inflation.
According to NRB, total merchandise imports increased by 8.4 percent to Rs 774.68 billion in 2014/15. "Rise in the value of dollar has some positive consequences like rise in remittance, increment in the number of budget tourists, as well as revenue growth. However, it will also make our import more expensive and this can fuel inflation," said Economist Keshav Acharya. "Appreciation of dollar, however, gives incentive to exporters as Nepali goods become cheaper in the international market."
source: Sagar Ghimire, republica, 26 august 2015
LINK
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