Enforces hedging regulation to minimize risk on foreign investment

10 Sep 2022

On 10 September 2022, the Ministry of Finance enforced a new hedging regulation in a bid to attract more foreign direct investment. Publishing a notice in the Nepal Gazette, the Ministry introduced a provision that will help minimize the potential financial risk emanating from the fluctuation of the exchange rate with the US dollars. According to the new rule, foreign investors in infrastructure looking to repatriate capital after 7 or 12 years will be able to exchange the Nepali currency against the US dollars at the current exchange rate of around Rs 127 per dollar.

The new hedging facility will be available for investors in reservoir or semi-reservoir hydropower projects with at least 100 MW of capacity; 220 kV transmission lines in a stretch of 30 km or more; metro railways or monorail of at least 10 km; the construction of roads, flyover, underpass, signature-bridge, tunnel roads, express highways of at least 50 km and international or regional airports that are subjected to toll charges.

Likewise, health, agriculture, education, tourism, information technology, industrial infrastructure and urban development projects with investment of at least Rs 2 billion (about $15 million) will also be eligible for the hedging facility.

The Government will bear liability between 5 to 20% of the hedging risk, while the investors concerned will have to assume up to 35% of the premium amount of hedging.