Repercussion of Increasing Dollar on Nepal
Continuous depreciation of Indian rupee vis-à-vis the US dollar has dragged the Nepalese rupee to an all-time low of 113.49 on Friday 31st August 2018. Economists from around the globe have forecasted that this trend would sustain and the rupees is expected to trade at 113.19 by the end of this quarter and 114.59 in 12 months’ time.

Nepalese currency is currently pegged with the Indian currency at 1.6:1, which was last reviewed in the year 1994 AD. After having witnessed an unprecedented growth of GDP in the year 2017, reaping the rewards of Indian Prime Minister Narendra Modi’s ‘Make-in-India’ campaign to attract investments in the value chain. The reality of President Trumps “Make America Great Again” has started to creep in into the subcontinent economy. So, how does this increase in America’s greenback effect Nepalese economy?
Here is my take on the increasing dollar and its impact on Nepalese Labor market;
- Increase in Price of Imported Goods

Refined Petroleum is the major import of Nepal, which accounts for 8.7% of the total import in the year 2018. Being a landlocked country all imports are shipped into our country via the dry port through means of road transportation and an increase in the price of fuel results in an increase in the price of all imported goods. This results in an economic inflation whereby the price of goods increases and adversely impacts worker living near the minimum wage limit.
And with the festive season just around the corner, the price of meats, clothes and electrical appliances will increase making this Dashain a costly affair as compared to previous years. Hence, the rise of the US Dollar will definitely burden both employees and employers.
2. Impact of Foreign Outsourcing companies operating in Nepal
Outsourcing, a phenomenon of the new age business era allows organizations to pay for service and business functions they need when they need it. Significant reduction in in-house development cost is an invaluable advantage in a present-day competitive environment, and companies operating in North America, Western Europe, and Australia heavily depends on this phenomenon.
With an increase in the rate of US Dollar outsourcing companies operating in Nepal who undertake projects from foreign employers gains unprecedented profit. They get a bigger share of the pie by accepting projects in US Dollar and paying employees in fixed monthly Nepalese Rupees. Although employees do not reap the rewards of increasing dollar it does help employers financially prepare themselves when Rupees perform better.
Increase in Remittance entering Nepal

The increase in the value of US Dollar in comparison to Nepalese Rupees provides added incentives for Nepalese residing abroad to send money back home. If invested in productive sectors as opposed to the unproductive sector, the increase in dollar price would fuel in opportunities for the families’ dependent on Remittance.
3. Impact on Foreign Travelers
With the ever-increasing demography of middle-class earners, the culture of foreign family vacation has been brewing in Nepal and is at its peak during the oncoming festive season. Companies catering services of such luxurious vacations are bound to be affected by the increasing price of US Dollar, people wanting to go on vacation have to pay more this year as opposed to previous years. As a result, such companies must cut off their profits to provide competitive prices to the clients.
Not only this, students wanting to pursue their higher education abroad will also suffer from the increasing Dollar. The ever-increasing tuition fees of universities abroad become much dearer to Nepalese students when the Dollar strengthens.
4. Impact on Tourism Industry

An increase in the value of the US Dollar would definitely benefit the tourism sector and people associated in this sector. An influx of tourists in the peak holiday season and an increasing price of the US Dollar is ideal for businesses associated with tourism. With the Government targeting to bring in 2 million visitors for the year 2020 by launching “Visit Nepal Year 2020”, the rise in the value of greenback brings forth positive vibes to businesses involved in Tourism.