In the first three months of Nepal’s current fiscal year, the country experienced notable economic developments, especially in remittances, foreign trade, and overall financial balance.
Remittance inflows were one of the standout figures, reaching a total of Rs 407.31 billion, which represented an 11.5% increase compared to the same period last year. However, this growth was slower than the 25.8% increase seen during the same period in the previous year. In US Dollar terms, remittances amounted to $3.04 billion, up from $2.76 billion last year. Over the same period, 110,654 Nepali workers received first-time approval for foreign employment, while 59,939 workers had their foreign job entries renewed.
The country’s current account saw a significant improvement, with a surplus of Rs 111.87 billion, compared to a smaller surplus of Rs 59.65 billion the year before. This surplus was supported by net capital transfers of Rs 2 billion and foreign direct investment (FDI) inflows of Rs 4.81 billion. Nepal’s Balance of Payments (BOP) also remained in surplus, reaching Rs 184.99 billion, which was a considerable rise from Rs 101.66 billion during the same period in the previous year.
In terms of foreign exchange reserves, the country’s reserves grew by 9.4%, reaching a total of Rs 2232.28 billion by mid-October 2024, up from Rs 2041.10 billion in mid-July 2024. This increase is a positive indicator of Nepal’s external liquidity position.
However, trade figures showed a mixed picture. Nepal’s exports declined by 6.1% to Rs 38.38 billion, with a significant drop in exports to major partners like India, China, and other countries. Exports to India, China, and other nations fell by 5.3%, 24.8%, and 6.6%, respectively. On the other hand, some product categories like soybean oil, tea, and sandals saw increases, while products like zinc sheets, palm oil, and readymade garments experienced a drop. Imports also decreased by 4.2%, amounting to Rs 390.75 billion, with imports from India, China, and other countries falling by 3.9%, 1.5%, and 7.9%, respectively. As a result, Nepal’s trade deficit narrowed by 4%, standing at Rs 352.37 billion.
Inflation, particularly food inflation, was another key area of focus. The consumer price index (CPI) increased by 4.82% in mid-October, a marked reduction from the 7.5% inflation observed in the same period last year. Within the food and beverage category, inflation was 7.18%, driven by steep rises in prices of vegetables (up 25.15%), pulses (up 10%), and cereal grains (up 9.57%). However, the price of meat and fish decreased by 1.18%, providing some relief.
Overall, while Nepal’s economy continues to benefit from robust remittance inflows and a healthy increase in foreign reserves, the decrease in exports and imports points to challenges in foreign trade. The current inflationary pressures, particularly in food prices, remain a concern, though inflation as a whole has been somewhat contained compared to the previous year.
