As Nepal continues to struggle with dwindling foreign exchange reserves, the South Asian country’s government has taken the decision to extend its complete ban on the import of ten different types of products, till the end of August.
The Xinhua news agency reported that the prohibition, which was initially enacted in late April, was supposed to last until mid-July, when the current fiscal year came to an end, however it has been extended by one month. As per IANS, the official notice says that the embargo is in place to protect the balance of payments and external financial position, in order to fend off any impending threats to the economy.
It must be noted that with the advancement of technology, the gaps in prices usually do not stay for a long period for arbitrage to happen quite smoothly. Since the prices move rapidly, executing an arbitrage strategy is not simple and risk-free.
Conventionally speaking, currency arbitrage involves purchase and sale of two or more currencies simultaneously, rendering the arbitrage risk-free. But with the popularity of algorithmic trading, arbitrage is not a common, or at least risk-free, occurrence any more.
So, currency arbitrage is a forex trading strategy to make money in imperfect market conditions where the same set of currencies are being sold at different prices at the same time in different markets.
He said that despite the impact of this ban on revenue, “we cannot let the country slip in the direction of Sri Lanka by allowing unrestricted import of goods.”
According to Nepal Rastra Bank, the country’s foreign exchange reserves declined by 19.6 per cent to 9.45 billion US dollars during the first 11 months of the 2021–22 fiscal year. In mid–July 2021, they stood at 11.75 billion US dollars.