Our country (Nepal) feels waves as Brexit initiates shockwaves

2016,June 25- The UK on Friday casted vote for Brexit in EU referendum activating market shockwaves across Eurozone markets and forcing pound to fall to a 30-year low,
the ripple effects that were felt all across the world reached Nepal as well. While rupee saw a plunge against US dollar, gold prices flew upward.

The instant impact of Brexit was particularly seen on foreign exchange rates that remained changeable throughout the day. With international financial markets
fluctuating wildly following the result of the referendum and Indian rupee plunging Rs0.96 against the US dollar,
the exchange rate of the Nepali rupee and the greenback surged to Rs109.60 per dollar before stabilising at Rs108.50 in the late afternoon.

The Nepali rupee falled mainly due to a devaluation of the Indian rupee with which it is marked.
“A direct impact was seen on foreign exchange rates with Indian currency going down,” said Sashin Joshi,
 CEO of Nabil Bank. Nepal Rastra Bank (NRB) had fixed the exchange rate at Rs107.96 per dollar for Friday.



Economists and bankers said medium to long-term impacts of Brexit would be felt in Nepal in terms of trade, remittance, aid and tourism.

Since the UK is one of Nepal’s largest bilateral donors, weakening British economy could hit our foreign aid programme,
 they said. The total foreign assistance to Nepal from the UK amounted to $168.07 million in the fiscal year 2014-15.
 “How emerging economies like India, China, Russia and Brazil, among others, react to Brexit will determine the impacts that Nepal will face,”
said Nar Bahadur Thapa,
chief of the research department at NRB. “If their currencies remain weak against the dollar, the impact will also be felt in Nepal.”

Meanwhile, remittance inflows from more than 90,000 Nepalis living in Britain could also be hit if its economy remains frail following Brexit.

Bankers said if dollar continued to rise, the country’s import bill would surge, driving inflation, which is already in double digits, further.

“As our economy is an import-based economy, a stronger dollar means increased inflationary pressure,” said Joshi.