April 28: The government has restricted imports of 10 goods three weeks after banks stopped issuing letters of credit (LCs) for importing vehicles and luxury goods.

The Ministry of Industry, Commerce and Supplies published a notice in the Nepal Gazette on Tuesday banning the import of 10 different items. The ban will remain in place until mid-July.

The government's decision to ban imports indicates that the pressure on foreign exchange reserves has not abated. To discourage the import of luxury goods, the government has been adopting measures such as keeping 50 to 100 percent cash margin for opening LCs to import dozens of goods while the central bank has directed commercial banks to not opening LCs for luxury goods. 

However, the diplomatic mission will be able to bring imported goods, said Commerce Secretary Ganesh Prasad Pandey.

He said that the diplomatic missions would be allowed to import those items for their own purposes.

The Hotel Association of Nepal (HAN) has said that the ban on liquor import will have a negative impact on the hotel business. HAN's acting president, Binayak Shah, said that the government should reconsider its decision. He said that the tourism sector would be affected if the government did not correct its decision.

The Nepal Rastra Bank (NRB) had given a 16-point suggestion to the Ministry of Finance on April 3, saying that even the import of essential goods would not be possible if the import of luxury goods was not stopped.

After the Finance Minister ignored the suggestion, the NRB summoned the chief executive officers of all commercial banks on April 6 and verbally instructed them not to open letters of credit for the import of luxury goods.

According to Nepal Rastra Bank, the foreign exchange reserves have decreased to only US$ 9.5 billion. This is enough to support the import of goods and services for six and a half months. The ban on imports is likely to affect revenue collection. In April, the finance ministry had set a target of raising Rs 46 billion from customs duty but was able to collect only Rs 40 billion.

Although the government has banned the import of vehicles run on petrol and diesel, electric vehicles can be imported without restrictions. Similarly, import of motorcycles of less than 250 cc has not been stopped.

The Nepal Gazette mentions that no ban will be imposed on the goods which have already been processed for import through banking medium before April 27.

Dhruva Thapa, president of NADA Auto Mobiles Association of Nepal, said that it would be difficult to get vehicles in the market after two and a half months if the ban on import of  vehicles is not lifted.

He said that customers will not be able to get the vehicle they want in June, July and August if the LC is not opened by mid-July.