The net inflow of foreign currency or balance of payments (BoP) doubled in the past one month period between mid-December and mid-January, mainly due to a rise in remittance earnings and net transfer amid slowdown in current account deficit.
The ‘Current Macroeconomic and Financial Situation Report of Nepal’ unveiled by Nepal Rastra Bank (NRB) on Monday shows that the country’s balance of payments (BoP) remained at a surplus of Rs 97.10 as of mid-January. Until mid-December, the BoP surplus was Rs 45.87 billion. Just in one month, the country’s net foreign currency earnings grew by Rs 51.23 billion.
The BoP records a country’s financial transactions with the rest of the world under three sub-headings — current account, capital account and financial account. It is a major indicator to show a country’s net balance in terms of foreign currency reserves, which is an important factor for import-based countries like Nepal.
In US dollar terms, the surplus amount stood at 734.4 million, compared to a deficit of 2.02 billion during the corresponding period of last year. The landlocked country has started getting respite in terms of the external indicator since November, after feeling the heat of negative BoP pressure for over 14 months.
According to an NRB official, a notable drop in the country’s import expense along with a notable rise in the remittance inflow has led to the BoP surplus.
With an improved BoP, the foreign currency reserves increased 10 percent to Rs 1.337 trillion (USD 10.30 billion) in the first six months of the current fiscal year. The amount is sufficient to cover the merchandise imports of 10.4 months and merchandise and services imports of 9.1 months, according to the NRB report.
The notable rise in the BoP surplus was attributed to an improved current account balance. In the review period, the current account balance stood at a deficit of Rs 29.47 billion, compared to a negative balance of Rs 352.16 billion in the same period last year.
Remittance, one of the major elements of the current account balance, increased 24.3 percent to Rs 585.08 billion. In the review period last year, remittance was downsized by five percent.
The rise in remittance has been attributed to a significantly increased number of outbound workers. During the review period this year, a total of 275,643 individuals took approval for foreign employment, which was 64.6 percent more than that of the last year.
Likewise, the net transfer also increased 22.7 percent to Rs 644.72 billion. The imports also decreased 20.7 percent to Rs 792.67 billion, preventing the country from heavy draining of the foreign currencies.
