Kathmandu, May 23

The Nepali rupee reached the lowest level against US dollar on Wednesday when the Nepal Rastra Bank (NRB) fixed the selling price of per dollar at Rs. 88.23, while the buying price at Rs. 87.63.

The depression of the Nepali rupee against the US dollar is chiefly because of the devaluation of the Indian currency.

The constant rise in the value of US$ against Nepali rupee could pose various problems to the country’s economy, a senior economist said.

Due to the devaluation of Indian Currency, with which the Nepali Currency is pegged to, the value of US$ has increased this year by around 22 per cent as compared to last year.

The increasing value of US dollar will have a serious impact on the country’s inflation rate and foreign reserves, economist Dr. Chiranjibi Nepal said.

As Nepal is an import-base country, the increase in dollar value would make the imported goods more expensive pushing the inflation rate up, he said.

Nepal pays US dollar for its imports from third countries and also from India, to some extents.

Though the central bank has claimed that the inflation is at 7 per cent at present, it is unbelievable, he said.

"The rising value of US dollar may push the inflation rate to a double-digit," he said.

Another serious impact of a higher value of US dollar will have on paying the principle and interest of foreign loans, he said. The allocated Rs. 20 billion for the purpose of paying the principles and interests in the current fiscal year’s projects will not be sufficient, he added.

Similarly, the cost of development projects being implemented in the country would also be higher due to the increased value of US dollar.

The only positive impact of the increased value of US dollar will be on remittances receiving the country, he said.

"If the remittance income keeps decreasing due to any other reason, it will cause a serious depletion of the country’s foreign reserves," he said.

The impact of devaluation of Nepalese currency will make the country’s products cheaper in the countries where we export goods in terms of dollar, he said.

This theoretical concept, however, may not be applicable in Nepal in the current situation, as most of our products are based on imported raw materials, he said.