January 26: The government had introduced quota system for the import of gold more than ten years ago in order to increase the foreign exchange reserve. Back then, the quota system was imposed with an intention to increase foreign exchange reserve for only six to seven months. However, it has been extended till now although the country’s foreign exchange reserve is quite strong.
Nepal’s foreign exchange reserve was Rs 1474.34 billion as of December 15, 2020, according to Nepal Rastra Bank.
The demand for gold in Nepal used to be 55 kg per day before the 2015 earthquake while it shrunk to 45-50 kg per day after the quake. The demand for gold was 30 to 35 kg in last December. Currently, there is a demand for 25 kg gold per day but only 10 kg is available. Out of the 10 kg gold, dealers get access to six kg of gold while four kg is supplied to artisans involved in making handicraft products.
The dealers and artisans are worried that they are getting very less amount of gold. Former chairman of the Federation of Nepal Gold and Silver Dealers Association Mani Ratna Shakya says that they are forced to buy gold at higher rate from the dealers due to the short supply. According to him, the dealers are forced to purchase gold at excessively high rate during the marriage season when the demand is high.
Nepal Rastra Bank had introduced a work procedure in 2009 for proper management of gold import and to maintain the country’s Balance of Payment. The quota system was launched in accordance to the work procedure. Businessmen and dealers were allowed to purchase only 15 kg gold per day from banks as per the work procedure. It was later increased to 20 kg per day. However, the daily limit for gold purchase has been reduced to 10 kg per day after the government imposed lockdown in March 24 last year. The ceiling was capped to minimize the impact of coronavirus on the country’s foreign exchange reserve.
This has resulted in scarcity of gold in the market.
“We have demanded with the government to either increase the supply of gold or to remove the quota system, but to no avail,” said Shakya.