Imagine you’re at a store, picking up your favorite food, and suddenly notice a price hike. Next, you check online, and even the gadgets you’ve been eyeing cost more than last week. What's behind these price jumps? The surprising answer might just be a dollar sign.

The US dollar is flexing its muscles in Nepal’s market, setting an ‘all-time high’ record. For each dollar, it’ll now take Rs 134.24 to buy and Rs 134.84 to sell!

But this is no ordinary exchange rate bump—it’s like a financial earthquake with aftershocks for everything from businesses to your daily grocery bill. Let’s dive into how we got here and what this means for all of us.

How Did We Get Here?

This dollar rise story actually kicks off in India, believe it or not. The Nepali rupee is pegged to the Indian rupee at a fixed rate of 1.6 NPR per INR, which means any shift in the Indian rupee’s value against the dollar impacts Nepal just the same. 

Lately, India’s been on a mission to increase its stash of dollars and gold to strengthen its economy. But high-interest rates worldwide have made the dollar a hot commodity, causing its demand to soar and supply to dwindle.

As India’s dollar demand rises, the dollar value climbs in India, and thanks to our currency link, it does in Nepal too. So while this peg gives Nepal some stability by tying it to the rupee of its biggest trade partner, it also leaves us vulnerable. Whenever the Indian rupee wobbles against the dollar, Nepal’s rupee wobbles right along with it.

Nepali Imports Taking The Hit

So, what does this dollar climb mean for Nepal? For starters, it means imports are about to get pricier. Imagine it like this: Nepal’s shopping cart is filled with imports—from high-end gadgets to everyday essentials like cooking oil. And we pay for all of it in dollars. So, as each dollar gets pricier, it’s like we’re being handed a steeper bill for everything we import.

For Nepali businesses, this means tighter margins and rising costs, as they’ll have to pay more in rupee terms for every dollar spent. And as companies pass these costs on to us, the consumers, we’re likely to see an increase in prices at every turn. So, a stronger dollar doesn’t just stay a figure on an exchange board—it works its way into our wallets, making life a bit pricier.

A Boost for Remittances?

But it’s not all bad news! If you’ve got family members sending money home from abroad, they’re actually sending a little bonus now. Each dollar they send is worth more in rupees, so those remittances stretch further for families here. That extra boost can make a real difference for households relying on that income. Plus, a stronger dollar might even pull in more tourists since their money will go further here in Nepal, giving tourism a nice bump.

And the remittance doesn’t just come from the family members abroad. A number of professionals mainly in the IT and accounting are working for global companies while staying in Nepal. And most of them too get paid in dollars. That converts to more Nepali Rupees. Same is also the case with export oriented businesses. Meaning the individuals and companies getting paid in dollars are certainly going to benefit from this. 

A Weakening Rupee: Strain on the Economy

But before we get too excited, let’s look at the the flip side of a weak rupee:

• Costlier Foreign Loans: With a falling rupee, Nepal’s dollar-based debt gets pricier. We need more rupees to pay off the same loan amount, adding financial pressure on the government, which can eventually affect the public through spending cuts or tax increases.
• Inflation on the Rise: Costlier imports mean businesses may raise prices, making groceries, gadgets, and necessities more expensive. This inflation hits average Nepali households hardest, especially those already on tight budgets.
• Government’s Balancing Act: To keep things stable, the government might need to tap into foreign reserves or make policy changes affecting other sectors—like using limited resources to put out a fire, where tough choices have to be made.

So, What Can Be Done?

The dollar is likely to remain strong for the foreseeable future unless there’s a big shift in global markets. But Nepal doesn’t have to sit back and let the rupee ride the currency rollercoaster. Strengthening the rupee means taking steps to bolster our economy. Imagine if Nepal increased local production, reduced its dependency on imports, and attracted more foreign investment—these moves could make our currency more resilient against future dollar surges. And we should also be looking for ways to boost our export. These are not quick fixes, but it’s high time that we have a long-term strategy that could help Nepal weather these currency storms with less impact on everyday life.

The Bottom Line

The dollar’s dominance in Nepal isn’t just a distant finance headline; it’s a reminder of how globally connected our economy is. It impacts our grocery bills, loan payments, and even the price of our favorite gadgets. But it also shows how, with the right strategies, Nepal can reduce its dependency on the dollar and make the rupee stronger and more self-reliant. 

Until then, we can only watch the dollar dance on the exchange board and hope that one day the rupee will find its rhythm too.