The import ban: Essential or impractical?

Ban on the import of various luxury goods was met with an array of reactions across the country. This drastic decision was taken by the Ministry of Industry, Commerce, and Supplies to salvage the economic situation in the country as the FOREX (Foreign Exchange Reserves) declines rapidly.

Typically, remittance from foreign employment contributes to about 30% of the GDP (Gross Domestic Product). Ironically, although the number of migrant workers receiving permits had increased this fiscal year, the amount of remittance went down. According to the data released by Nepal Rastra Bank, remittance for this fiscal year was Rs. 540.12 billion while it was Rs. 567.7 billion last fiscal year—going down by about roughly 5.10%.

The aforementioned factors, in addition to many others, have made Nepali FOREX fall over by 18% to 9.6 billion in the span of mid-March to mid-July. This amount roughly covers the number of imports for 6 months. To deal with this economic crisis at hand, a ban is currently in place since 26th April 2022 and will go up till mid-July of this year as specified in the Nepal Rajpatra. The products affected by the ban are as follows: Snacks; example Lays and kurkure, liquor (not raw materials), cigarettes, diamonds, mobile phones over USD 600$, televisions over 32 inches, vehicles; example jeep, cars, vans (except for emergency vehicles), motorbikes over 250 CC, all types of toys and playing card.

In the wake of this ban, importers scramble to keep businesses alive. Rakshit Bhimsaria, the interim CEO and director of GenXT– the authorized distributors of Apple, Dell, and HP, too had a lot to say regarding this matter. When asked about how the ban will impact the market, he responded, “The market will definitely be affected because when the imports have stopped they’ve actually restricted the income of many people in the industry—businesses, small retailers or middlemen—a lot of people are directly and indirectly affected by this ban. A lot of them have started saving up in fear of a recession so they’re going to spend less, with less circulation of money in the market and more liquidity issues.”

While he does believe that the government’s ban will help conserve the foreign reserves, he implies that the effect will be rather transient- especially in the case of phones. He says, “In the absence of proper distributors of iPhones or other flagship phones, people will want it anyhow and won’t opt for a cheaper phone because the government has banned it. They will go through illegal methods to acquire the phone which will, in turn, increase the shadow economy where the money goes through hundi and other illegal methods which do not contribute to any forms of taxation in the country—VAT, excise duty, or even the income taxes borne by the businesses. It will also take a hit on employment.”

Illegally purchased phones already enter the nation under the radar of the government, Bhimsaria anticipates that this predicament will worsen as the restriction of choice will only encourage individuals to pursue illicit methods to acquire these devices. “More than 50 crores were paid each year just by the import of phones over 600$. Since the phones will most likely enter Nepal through illegal channels, these import taxes will not go to the government anymore, and will just be facilitating the shadow economy. It's definitely biased since only iPhones and flagship phones cost more than 600$ so it affects our business directly. It is also asking citizens to compromise on the quality of phones and narrowing the choices they have in the market.”

The faceted response to the government actions, leads individuals to consider whether they are indeed necessary. With foreign products terminated from the national market, consumers are devoid of the freedom to make comprehensive decisions. At the same time, the mobilization of local goods and products could help stir the pot for domestic business owners and entrepreneurs.