Is the peg to INR still a safe harbour?

It would be unwise to change it and contribute to inflation and capital outflow.

For millions of Nepalis, the act of crossing the border into India for employment, trade, or tourism is an essential part of their lives. This ease of movement is made possible by a subtle yet highly successful economic strategy: The ‘fixed’ currency exchange rate. Since 1993, the Nepalese Rupee (NPR) has been tied to the Indian Rupee (INR) at a rate of 1.6, which has its roots in 1960. Although this policy has ensured a stable environment for Nepal’s extremely trade-dependent economy, a pressing question arises as Nepal works towards realising its graduation from Least Developed Country (LDC) status by 2026: Is this long-standing policy still a force for good in the country’s economy or has it become an economic burden? The political environment is already witnessing a shift to counter this problem. The Rastriya Swatantra Party (RSP) has already committed to reviewing the ‘fixed’ peg in its election manifesto, which shows that this ‘sensitive’ topic is finally being brought into the mainstream policy debate.