On July 31, Bishnu Rimal, a CPN-UML leader and former Prime Minister KP Oli’s chief political advisor, posted a sleek infographic on his Twitter account (screenshot and link) claiming that the ruling alliance led by Prime Minister Sher Bahadur Deuba was responsible for the weakening of the Nepali rupee against the US dollar. “Who devalued the Nepali currency?” Rimal asked, presenting a graph depicting USD’s surge against the Nepali rupee from an exchange rate of 118 (“under Oli government”) to 127 (“under coalition government”).
Rimal also added text to his tweet sent to 130 thousand followers saying: “Not much needs to be done to make the country economically bankrupt. It’s just enough if you make the existing situation worse. This is exactly what the [ruling] alliance is doing. Let’s look at the facts.”
Rimal also shared the same content on his Facebook page, which has 60,000 followers. This was part of a series of social media posts Rimal made in late July comparing the economic figures and indicators from the period when the Oli government was in power with the latest ones, as Nepal heads to parliamentary elections in November. His posts were widely shared by social media users.
Nepal Check fact-checked Rimal’s claim that the Deuba government was responsible for the Nepali Rupee’s weak show against the US dollar.
First, let’s look at the timeline of the two governments.
Oli was appointed Prime Minister for the second time on February 15, 2018.
On that day, the one US dollar could be bought for Rs 102.25 and be sold at Rs 102.85 by the central bank, according to the Nepal Rastra Bank (NRB) official exchange rate.
Deuba took over from Oli on July 13, 2021 following a Supreme Court ruling.
On that day, one US dollar could be bought for Rs 118.31 and sold for 119.5, according to the NRB.
The value of one US dollar on July 31 (the day Rimal tweeted) stood at Rs 127.32 (buy) and 127.92 (sale).
As seen from this timeline, Rimal presents a half-true bit of information in his social media as he stripped the context, cherry-picked numbers, used two different comparison points, and omitted a crucial piece of relevant information: the exchange rate when Oli started his tenure.
Under Prime Minister Oli, between the day he assumed office and the day left, the Nepali currency had depreciated roughly by 17%, from 102.25 to 119.19 (buy) and 119.73 (sale). And under the Deuba government, the Nepali Rupee depreciated by almost 7%.
Therefore, it is not just under the current Deuba government that the Nepali rupee depreciated against the US dollar. The rupee also depreciated under the Oli government. Rimal stays mum on this.
Rimal also insinuates that the deprecation of the Nepali rupee against the US dollar is equivalent to “[making] things worse”. And he also alludes that the Government of Nepal can appreciate or depreciate Nepali currency against US dollar, if it wanted to do so. That’s not true.
Let’s look at the factors that determine Nepal’s foreign currency exchange rate.
Nepal has pegged its foreign exchange rate system with the Indian rupee (INR) with periodic exchange rate corrections through appreciation or depreciation of the Nepali currency in the past, according to a Rastra Bank study titled ‘Impact of Exchange Rate on Trade Deficit and Foreign Exchange Reserve in Nepal: An Empirical Analysis’. The analysis was carried out by a Rastra Bank official and published on the Bank’s website. In line with the economic liberalisation policy followed since the mid-1980s, Nepal introduced current account convertibility in 1993, effectively pegging the Nepali rupee (NPR) with INR at NPR 160 for INR 100, at the rate which was also set in 1960 when exchange rate with INR was pegged for the first time, according to the same study.
Since 1993, according to the same Rastra Bank study, the exchange rate of NPR with other convertible currencies such as the US dollar has been determined in line with that currency’s exchange rate with the INR. However, this has at times weakened or bolstered the rupee against the US dollar whenever the value of Indian currency against the US dollar has changed. Thus, the depreciation of Nepali currency in terms of US dollar is directly linked to the depreciation of Indian currency against the US dollar.
यो सत्यापन नेपालीमा पढ्नुस्
Why is the Indian currency weakening?
The Indian currency has been performing badly in the international market since the past few years. This has directly impacted the value of Indian currency against US dollar and other foreign currencies. Increments in crude oil prices triggered by Russia’s invasion of Ukraine on February 24, 2022 only worsened things.
Another reason can be traced to the policy decisions by the US central bank, the Federal Reserve.
In the second week of June, the US Federal Reserve decided to increase interest rates by 0.75 percent to contain inflation. The US central bank made another big rate increase in late July.
Global investors, who were already withdrawing money from developing nations such as India to park them safely in the US, frantically started pulling out the capital from these countries after the sharp rise in the interest rate in the US.
Russia’s invasion of Ukraine added fuel to the fire.
The dollar index, which tracks the US unit against a basket of major currencies, rallied 11% this year to a two-decade high–causing persistent depreciation of currencies around the world including the Euro which hit parity with the dollar for the first time in 20 years. Indian currency was no exception. As a result, the Indian rupee also breached the psychological mark of 80 against the US dollar to hit a historic low.
Indian Finance Minister Nirmala Sitharaman told Parliament on July 18 that global factors such as surge in crude oil prices and tight financial conditions as well as foreign portfolio outflows were the main reasons for the depreciation of the Indian rupee. Foreign portfolio investors have sold shares worth more than $30 billion so far in 2022 as reported by Business Standard.
Rimal’s suggestion that the ruling alliance is responsible for the devaluation of the Nepali currency is not wholly correct, and lacks context and background on what factors affect the exchange rate between US dollars and the Nepali rupee.
The government in Nepal doesn’t have any role whatsoever in determining the value of Nepali currency against the US dollar as long as Nepali currency is pegged with Indian currency at NPR 160 for INR 100, according to experts.
As stated above, the value of the Nepali currency was Rs 102.25 (buy) and 102.85 (sale) against one US dollar when Oli assumed office as Prime Minister on February 15, 2018. The value plummeted to 119.19 (buy) and 119.73 (sale) against one US dollar on July 12, 2021 when Oli left office. And the value further plummeted to Rs 127.32 (buy) and 127.92 (sale) on July 31, 2022.
Rimal doesn’t mention the exchange rate on the day Oli assumed office and thereby compares apples with oranges to present a half-truth narrative which is misleading.
|Claim||Claimed by||Nepal Check Verdict|
|The current government is responsible for the devaluation of the Nepali currency against the US dollar||A top official from Nepal’s opposition party||Misleading|
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