The government is preparing to tighten the payment system and foreign currency expenses amid growing pressure on the country’s foreign exchange reserves. A government panel formed last month to study the country’s deteriorating balance of payments situation said that service trade and imports were the key reasons behind the depletion of Nepal’s foreign currency reserves.

Multiple sources at the Finance Ministry said that plans were afoot to impose restrictions on payments for the import of services and luxury goods. Ministry official Ram Sharan Kharel said that the panel had recommended tightening the service trade and import substitution to address the balance of payments situation.

The Finance Ministry had formed a committee under Revenue Secretary Lal Shankar Ghimire to study possible measures to check the outflow of foreign currency in particular. The panel that comprises senior officials from the ministry, Nepal Rastra Bank and the Customs, Commerce and Industry departments is scheduled to submit its report to the ministry this week, according to Kharel.

Kharel said the panel would draw up a list of luxury goods whose import would be restricted.

“The committee has also identified a number of payment systems through which the country is losing a large amount of foreign currency, and it will urge the government to intervene,” said Kharel, adding that it would also recommend a number of export promotion measures.

According to Nepal Rastra Bank’s current macroeconomic report of five months, the country’s balance of payments deficit stood at Rs85.32 billion. It reveals a sharp decline in foreign currency reserves, putting pressure on the country’s ability to purchase goods and services from abroad.

As of mid-December, the gross foreign exchange reserves stood at $9.29 billion, a decrease of 7.9 percent from $10.08 billion in mid-July. The amount is sufficient to finance goods and service imports for only 7.8 months, the central bank report says.

With mounting pressure on foreign currency reserves, the central bank took a number of measures to track payments made abroad. Two months ago, it reduced the maximum amount of foreign currency that a Nepali national travelling abroad can take to $1,500 from $2,500 per person.

Nepal Rastra Bank has also imposed caps on currency withdrawals using debit, credit and other prepaid cards to make payment for goods purchased in India. Nepali card holders are now barred from withdrawing cash in excess of IRs100,000 per month in India.

Recently, the central bank asked travel agencies, cargo agents, courier services, hotels and other organisations which deal in foreign currency to receive repatriation within two weeks from the date of transaction. It has also made permanent account numbers compulsory for individuals seeking to pay bills worth more than $5,000 for study, healthcare and migration.

As per ministry officials, the panel seeks to regulate payments being made electronically. “Many tourists have been paying for the goods and services they bought in Nepal via mobile payment systems after returning to their homeland,” an official said.