Money exchange rate depends on so many factors, but mainly demand and supply of foreign currency, have been playing main role to fix exchange rate among countries money. which I have explained in details of my previous article as well. All countries are free to publish their exchange rate among the countries money but, there are certain rules and regulations, have been applied by IMF for stable financial transactions among the countries. If exchange rate highly fluctuates every day then so many difficulties and uncertainties may be occurred to do international trade among the countries. To minimize uncertainty of exchange rate among the countries, IMF have given some guideline to its 189 member countries. That’s why any country of IMF member cannot change their exchange rate highly difference in short period time, this is also not practical for stable financial transactions. For example, Today, USA businessman agree with Nepalese businessman for buying one t-shirt for RS 366, according to today exchange rate with dollar and rupees [1 dollar to RS 122] buyer should pay 3 dollars. After 2 days, if exchange rate changes like 1-dollar to Rs 100, then USA businessman should pay for 3.66 dollar for same t-shirt, in that uncertainty condition, very difficult to make international transaction among the countries, so that IMF has been playing role among the membership countries to minimize this kind of uncertainty in financial problems.
Every country should publish their exchange rate on the basis of dollar, if all countries take base on dollar then automatically fix their exchange rate each other country. This rule also is applied by IMF among the countries after that nobody can get benefit by doing exchange money in same time period with different money.
In Nepal, exchange rate is published on the basis of Indian currency rate. India publish their rate on the basis of dollar and Nepal follow Indian exchange rate by calculating [1.6 N Rs to 1 I Rs], which is fixed rate between two countries. large number of transactions should be done every day between India and Nepal, so both countries have agreed to fix exchange rate for financial certainty and stability. Currently, boarder issue has been occurred between two countries, at the same time, some Indian politicians have threatened to Nepal, that they would cancel fix exchange rate, and also said, after cancel fix rate, Nepal would be suffering by economy problem. After hearing their nonsense threat. I try to figure out of its impact in our economy.
First, I want to explain about what kind of impact may be occurred in our economy if exchange rate fluctuated. For example, today our exchange rate is 1-dollar to Rs 122, if tomorrow, our exchange rate will be 1 dollar to Rs 100 then, foreign businessman should pay more money than previous time to buy our goods, so they may go other countries to buy same goods, Nepal can lose their foreign trade. After decreasing exchange rate, remittance may decrease, everybody wants to send money by getting high exchange rate. Tourists also get less money by converting dollar to Rs than before, they may feel expensive after changing exchange rate, we may lose possible tourists as well. These are the bad effects of economy after decreasing our exchange rate with dollar. So many raw materials as well as finish products should be bought from foreign countries by Nepalese businessman, now they can buy 1 dollar by paying Rs 100 then, they can buy products from outside countries cheaper than previous time, it helps to reduce products price which is good for businessman and people but as perspective of country income, it does not matter, last time also should pay 1 dollar or this time also should pay 1 dollar. After decreasing rate Rs 122 to 100, in central bank should be facing high demand of foreign currency and decreasing of its supply so after some time bank compels to increase its rate like near to previous time 1 dollar to Rs 122. To match demand of supply of foreign currency. Again, if Nepal increases exchange rate 1-dollar to 150, then Nepalese businessman, who buys products from foreign countries should pay more money to buy 1 dollar, then they should pay more money to buy same products than previous. After they pay more, price of products would be more expensive than previous, which is not good for healthy economy. Our remittance would be increased, our products may be sold in foreign countries. But our money purchasing power would be decreased, price of all products and services would be increased. That’s why unnecessary and highly exchange rate changing in short period is not good for economy to all countries.
This whole above mention mechanism also applies in India as well. India cannot rapidly change their exchange rate in short period for intention of harming to Nepal economy. India should compel to publish their exchange rate by calculating their own demand and supply of foreign currency. So, after cancel tie up our fix exchange rate, India cannot do anything bad impact by intention to Nepal. India should publish their exchange rate on the basis of dollar, after breaking tie up Nepal also free to publish their exchange rate on the basis of dollar. Then automatically exchange rate will be fixed between two countries. Both countries cannot change their exchange rate rapidly in short period as guideline of IMF then why Nepal should scare from threat of Indian politicians regarding exchange rate. It is worthless threat; they cannot do anything with Nepal by breaking tie up fix exchange rate. If they make little bit strong their money than current situation, our central bank also can make strong own money, our central bank has also good deposit of foreign currency and gold so no need to worry about this matter. Nepal must accept if they want to break fix exchange rate. Breaking fix exchange rate both countries businessmen can get benefit or loss, it is equal chance for both. So I would like to request my government, Nepal is sovereign country, it should be free to publish own exchange rate on basis of its calculation. Nepal should not be following Indian exchange rate, even India doesn’t want to break, Nepal must break. Thank you for reading. My next article will come about Nepal must start iron mine factory for its development.
Comments
Post a Comment