By Laukush Chaudhary 17 Apr, 2022 Business

Why NRB Imposed Restrictions on Import ? - Impacts of Import Restriction in Nepalese Economy

The Nepal Rastra Bank (NRB) has prohibited commercial banks from granting letters of credit for the import of non-essential products due to the ongoing economic crisis.

The central bank officials were more worried about automobile imports, requesting that they be halted for at least a few weeks.

The huge import and less export was already a problem. One of the major sources of the country’s revenue was remittance which dropped significantly. This caused an imbalance in revenue and expenditure. Therefore, the situation came to undertaking rapid import halts which are required to maintain control of the situation.

What went wrong?

The continued deficit in imports and export resulted in a diminishing the country’s foreign reserve. The situation came to the point where the country can now only import the essential goods.

If we compare the import data for nine months of the current fiscal year a significant increase in the import can be seen. The import has approximately increased by 60%, the export has also increased but the value is significantly low therefore the deficit was created. 


If you are wondering what falls under the essential goods and are not restricted for import you can check the list below:

-          Cooking oil.

-          Sugar, sugar-related items and natural honey.

-          Fish, milk, cream, curd, cheese, eggs, chicken and other animal products.

-          Whole fruit, other specified fruits, certain dry fruits and certain vegetables.

-          Waters including natural or artificial mineral waters.

-          Unmanufactured tobacco, cigars, cheroots, cigarettes, etc.

-          Perfumes, skincare and beauty products.

-          Fuelwood/wood charcoal etc.

-          Footwear/caps and hats/umbrella.

-          Tiles, marbles, granites, bricks and other stones.

-          Precious metals like gold and silver and metals clad with precious metals.

-          Motor cars and other motor vehicles are principally designed for public transport.

 The above list only contains the summarized goods. If you are looking for the complete list of the essential goods check the table below:

To check the details for the above table click the link here.

Is it necessary to restrict the import?

Yes, at least for a few weeks it is necessary to restrict the import. This will at least help to create the balance so the economy can be resumed for smooth operation again. However, alongside the import restriction government should also implement other policies to avoid a similar problems in the long run.


In this situation, the main interest of the government should be to increase the foreign reserve. Government should attract FDIs (Foreign Direct Investment) by easing the operations for foreign investments. The government should encourage and provide investment opportunities for Nepalese who are engaged in foreign employment.  

The government should also introduce policies to encourage production. New provisions for manufacturing industries must be announced and they should facilitate the existing industries involved in export-based business. Government should provide aid to them and also should encourage the new entrants for exports. Government can facilitate grants, subsidies loans, and waivers of tax to the exporting industries in order to promote them. For legal compliance government should provide a single window system to remove the hassle of lengthy compliance procedures.

 Impact of the Decision

This decision will have both positive and negative impacts on our economy. On the positive side, this action will undoubtedly raise foreign reserves and may also aid in the short-term mitigation of the country's financial issues. Before the government imposed restriction on LC the total deposit fund was 43 kharba 31 arba after the 4 days of restriction on LC the deposit fund significantly raised by 20 arba and now the total deposit fund is 43 kharba 51 arba which shows that the decision slightly helped to improve the current economic situation. Similarly, the loan has decreased by 3arba which is the good news for now.

On the contrary, it will also create the issues like reduction in tax revenues, raised inflation, reduced government capital investment, increase in unemployment, and lower per capita income and this will also have a negative influence on the forthcoming budget which will also slow economic development.