Foreign currency holding of Nepal´s banking system recorded a drop of 2.2 percent and fell to $ 3.50 billion in mid-August 2009, the first month of the current fiscal year. The reserve was $ 3.58 billion in mid-July 2009.
However, the reserve for the first month was a growth of nearly 19 percent over foreign currency the country held in the same period last year. The banking system had $ 2.99 billion worth of foreign currency in mid-August 2008.
Nepal Rastra Bank (NRB) has attributed this year-to-year rise in reserve to the rise in remittance, which grew by 35 percent, and also better exports income recorded during the period this year. The central bank data further shows that country´s convertible currency holding dropped by about eight percent in mid-August, compared to mid-July 2009, and stood at $ 3.03 billion (Rs 231.28 billion). This drop in reserve caused the share of convertible currency to total reserve go down to 85.6 percent during the month, compared to 90.7 percent of mid-July 2009.
Reserve of inconvertible currency, on the other hand, swelled to $505 million (Rs 38.89 billion) in mid-August from $333.5 million (Rs 26.02 billion) of mid-July 2009. This caused the share of inconvertible currency to jump to 14.4 percent of the total reserve during the first month of 2009/10 from 9.3 percent of mid-July 2009.
The central bank has attributed this change in composition of currency in total reserve to the massive procurement of Indian currency by selling US dollar. To manage growing imports from India, which soared by 15 percent, and widening trade deficit with it, which grew by more than 17 percent, the central bank had purchased Rs 15.93 billion worth of Indian currency by selling $330 million.
Moreover, NRB data shows that of the total reserve, foreign currency holding with the central bank declined by 2.1 percent during the period and stood at $2.81 million in mid-August 2009. Of that, convertible currency holding was $2.36 billion, while inconvertible currency holding was about $446 million. Foreign currency holding with the commercial banks also dropped by almost three percent over the first month of the current fiscal year.
According to the central bank, foreign currency holding of commercial banks totaled $696 million during the period. Of the figure, $637 million was convertible currency and remaining $59 million was inconvertible currency.
The central bank has reported that the present gross foreign currency reserve is sufficient to finance merchandise imports for about 11 months.
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