7.2 Foreign Exchange Restrictions

The restrictions' types (the taxonomy): Current-account restrictions: the trade payments' controls — the import licensing, the L/C mandates, the quantitative limits (the exchange budgeting: the scarce reserves rationed); Capital-account restrictions: the investment-and-loan flows' controls — the outward investment's permissions, the borrowing abroad, the repatriation rules (Nepal's capital account remains substantially controlled); The holding restrictions: the foreign-currency holding limits (the residents' accounts, the export proceeds' surrender-and-retention quotas); The rate restrictions: the exchange-rate management (the peg's discipline — the rupee's long tie to the Indian rupee's practice); The purposes' restrictions: the invisible payments' controls (the travel, the education, the medical quotas). The why (the honest analysis): the reserves' scarcity; the balance-of-payments' defence; the flight-of-capital prevention — against the costs (the trade's friction, the parallel market's birth, the IMF Article VIII's current-account-liberalisation discipline).