Nepal suspends Central Bank Governor amid forex woes

Nepal’s forex reserves are now only enough to sustain the import of goods and services for 6.7 months

Differences had emerged between Nepal Rastra Bank Governor Maha Prasad Adhikari and country’s Finance Minister Janardan Sharma in the wake of the dwindling forex reserves and the current state of Nepal’s economy. File | Photo Credit: Twitter/@NepalRastraBank

In a rare move, the Nepal Government has suspended the country’s Central Bank Governor Maha Prasad Adhikari over disagreements with Finance Minister Janardhan Sharma and for not doing enough to pull the economy from doldrums.

Mr. Adhikari, the Nepal Rastra Bank (NRB) Governor, was suspended on Friday after the government formed a panel headed by former Supreme Court judge Purushottam Bhandari, the Kathmandu Post newspaper reported. Mr. Adhikari was appointed as Nepal’s 17th governor on April 6, 2020 under the previous regime headed by former Prime Minister K.P. Sharma Oli.

This is only the second instance that a sitting governor, who enjoys a five-year tenure, was suspended.

According to sources, differences had emerged between Mr. Adhikari and Mr. Sharma in the wake of the dwindling forex reserves and the current state of Nepal’s economy.

Last week, the NRB announced a ban on the import of vehicles and other luxury items, citing liquidity crunch and declining foreign exchange reserves.

Since July 2021, Nepal has seen a decline in forex reserves due to the surging imports, declining inflows of remittance and meagre earnings from tourism and exports.

By February 2022, the Himalayan country’s gross forex reserves had decreased 17% to $9.75 billion from $11.75 billion in mid-July 2021, according to central bank figures.

The forex reserves are now only enough to sustain the import of goods and services for 6.7 months, below the central bank's target for at least seven months.

Mr. Adhikari’s performance featured high on the agenda during last week’s Cabinet meeting.

In that meeting, Maoist Centre chair Pushpa Kamal Dahal and CPN (Unified Socialist) chair Madhav Kumar Nepal, who are key coalition partners, had expressed “serious concerns over the state of the economy and asked Prime Minister Sher Bahadur Deuba to take concrete steps,” according to the Kathmandu Post newspaper.

Deputy NRB Governor Nilam Dhungana Timilsina has been assigned the responsibility as the Acting Governor following Adhikari’s suspension.