Nepal is one of the poorest countries in Asia. It maximally relies on imports from its surrounding nations- India and China. It has a population of about 2.91 crores (in 2020). Like any other country, the pandemic has hit Nepal rigorously and has increased the difficulties for people residing there. 

Currently, Nepal is undergoing its largest economic turmoil. Common men are facing an increase in prices of basic commodities like fuel, cooking gas, food, shelter, etc. Consumer organizations have claimed that the prices of food items have risen by 20%. 

The country’s forex reserves have declined by 18.5%. Forex reserves are assets like foreign currencies, gold reserves, treasury bills, etc. that are retained by the Central Bank of the country. A decline in these can simply lead to inflation in the market and economic disruption.

 The reasons for this fall in Forex Reserves in Nepal are- 

  1. Covid-19 pandemic
  2. Decline in foreign remittances 
  3. Russia-Ukraine War 
  4. Internal inflationary pressure

The tourism sector has been one of the major breadwinners for the country. Nepal has seen a decline in tourist arrivals from major countries especially India due to Covid-19. It has slumped by almost 35% in 2021. This has impacted the GDP of the country. 

Nepalese who live outside Nepal for better job opportunities send remittances back to the country. Pandemic resulted in a loss of their jobs which led to a decline in foreign remittances. These remittances aided the GDP of Nepal to flourish. 

The Russia-Ukraine war led to an increase in fuel prices including CNG gas, petroleum, sunflower oil, etc. It has also disrupted the global supply chains. Nepal depends upon India for its fuel requirement. India is also facing a hike in fuel prices which has impacted Nepal. 

Read More: A Personal Account Of Crossing The Border Between Nepal And China

The internal situation in Nepal is also not well. The Central Bank of Nepal said that the inflation is 7.1% which is very high. It is likely to surge more in the upcoming days.

Nepal has also depended on foreign exchange reserves to meet its import expenditure. This has also seen a decline due to the fall of K.P. Sharma Oli’s government in July 2021. Since then, the balance between imports and exports has lost track. The imports have been surging while the earnings from tourism and exports have declined. 

 Response Of Nepal’s Government- 

Nepal’s government has sacked the head of its Central Bank, Mr. Maha Prasad Adhikari. He was accused of leaking sensitive information and failing to perform his duties. 

The government has decided to support the Nepal Oil Corporation. Till now, Nepal was buying oil from the Indian Oil Corporation. But because of the surged prices, the government has decided to support its oil corporation to meet the fuel requirements. 

It has also banned the imports of certain goods like gold, silver, electrical appliances, textile, types of machinery, etc. to maintain its foreign exchange reserves. 

The government of Nepal has also opted to borrow $150 million from the World Bank’s International Development Association (IDA). 


It is said that the economic future of Nepal is not so bleak as the current forex reserves are enough to pay the government’s import bills. The steps taken by the Nepal government can prove to be very efficient. Unlike Sri Lanka, Nepal is free from external debts. 

The Finance Minister of Nepal, Janardhan Sharma has assured that Nepal is in a much better condition as compared to Sri Lanka and nowhere heading in the direction of more severe turmoil. 

Disclaimer: This article is fact-checked

Sources: The Hindu, BBC News, India Today

Image sources: Google Images

Feature Image designed by Saudamini Seth

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This post is tagged under: Nepal inflation, India, China, economical turmoil, prices, price hike, food items, necessities, Russia, Ukraine, petroleum, CNG, Sri Lanka, imports, exports, inflation, pandemic, Covid 19, tourism, forex reserves, gold, machinery, oil corporation, remittances, GDP, National bank, World Bank, IDA, Sri Lanka, exchange reserves

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