Nepal has been going through an adverse impact on the economy for some time now. Currently, one of the biggest problems in Nepal is the high cost. With the rise in the value of the dollar, Nepal has been hit by inflation as Nepal imports far more than it exports. This problem is visible because the currency used in the international market, the US dollar, is becoming more expensive day by day.
The question of keeping your currency stable is more important than the value of money. Hence underdeveloped countries like Nepal connect with other countries through peg system and keep the value of currency stable. At present, Nepal has kept its currency stable through peg exchange rate with India. In general, developing countries want currency stability because the developed country is considered relatively stable and the situation in crisis is judged by the dollar or the developed country.
Dr. Sherjung Bahadur ChandiWhile the value of a currency is determined by aggregate supply and demand, the value of a currency is influenced by many other factors including interest rates, inflation, money supply, capital effects, and is determined through exchange rates, which are fixed rates and There are floating rate systems. ,
impact on citizens
If you are involved in the sale of products and services overseas, changes in exchange rates will directly affect you. If your buyer is a foreigner and you have to pay him, he will have to convert his money into your money (Nepali money) when making the payment. As a result, the exchange rate goes up between the invoice date and the payment date, so you will get paid less.
Nepalese importers will have to buy goods at a higher price if the US dollar rises, while they will receive a cheaper payment for exports. This will usually have a more direct impact on the time of issue of the invoice and the change in the payment date.
If you only do business in Nepal then the exchange rate is affecting you indirectly. For example, if you are in the business of buying and selling clothes in Kathmandu, when you buy, the exporter will sell the goods at a higher price due to the increase in the exchange rate against the dollar. You also have to sell it at a higher price. Selling at such a high price may not please your regular customers. Also trade is less and goods have to be kept in stock. If the sale does not take place within the expected time, it can be difficult to collect the investment interest and there may be a situation where you have to trade at a loss. If the money doesn’t move quickly, it can be a loss-making business.
Similarly, if you are an employee who is not involved in any other business, the increase in dollar value will not leave you untouched. The prices of daily consumer goods are skyrocketing. With the increase in the value of the dollar, the standard of living of the citizens also becomes more expensive. For example, if you ride a motorcycle or a car, you will have to spend a little more than before to travel 10 km because of the cost of fuel. If importing fuel is expensive, the government will have to sell it to you at a higher price.
The increase in the value of the dollar in Nepal does not adversely affect all sectors. Although more exports generally have more adverse effects, some sectors also have favorable effects. This will benefit Nepalese exporters. Tourism businessmen bring in foreign tourists. It brings in expensive dollars. But the cost of providing services to them increases due to high prices.