Nepal’s foreign currency reserves have seen a notable increase in the first four months of the current fiscal year.
As reported by the Nepal Rastra Bank (NRB) in its latest macroeconomic and financial update, Nepal’s foreign currency reserves for the first four months of fiscal year 2024/25 are now sufficient to cover imports of goods and services for over 15 months.
This growth in reserves has been attributed to several factors, including stronger remittance inflows, controlled imports, strategic fiscal measures by the government and central bank, and a rebound in tourism. The foreign currency reserves reached a record high of Rs. 2,255.35 billion by mid-November 2024, an increase of 10.5% from Rs. 2,041.10 billion in mid-July 2024.
From mid-October to mid-November 2024, foreign currency reserves grew by about Rs. 23.07 billion, from Rs. 2,232.28 billion to Rs. 2,255.35 billion. In US dollar terms, the reserves increased by 9.4%, reaching $16.70 billion by mid-November 2024, up from $15.27 billion in mid-July 2024.
The reserves are enough to cover prospective merchandise imports for 18 months and merchandise and services imports for 15.1 months. Of the total reserves, the portion held by the NRB grew by 8.6% to Rs. 2,008.15 billion, while reserves held by banks and financial institutions, excluding the NRB, rose by 28.4% to Rs. 247.20 billion. The share of Indian currency in total reserves was 22% in mid-November 2024.
Remittance inflows also contributed to this positive development, with Nepal receiving Rs. 521.63 billion in the first four months of the fiscal year 2024/25, marking a 9.1% increase compared to the same period the previous year. In US dollar terms, remittances reached $3.87 billion, up from $3.60 billion in the same period of the previous year. The month from mid-October to mid-November 2024 alone saw remittance inflows of Rs. 114.32 billion.
Net secondary income, or net transfers, reached Rs. 568.26 billion in the review period, up from Rs. 521.43 billion in the previous year. The number of Nepali workers approved for foreign employment also increased, with 147,478 first-time approvals and 94,105 renewals, compared to 137,475 and 68,841 respectively the previous year.
The current account surplus grew significantly, reaching Rs. 143.42 billion in the review period, compared to a surplus of Rs. 97.10 billion in the same period the previous year. In US dollar terms, the surplus increased to $1.06 billion from $730.58 million. Capital transfers amounted to Rs. 2.47 billion, up from Rs. 1.59 billion in the previous year, while foreign direct investment (equity only) inflows totaled Rs. 5.76 billion, an increase from Rs. 3.65 billion the previous year.
Finally, the balance of payments (BOP) remained in surplus, amounting to Rs. 205.83 billion in the review period, compared to Rs. 150.24 billion in the previous year. In US dollar terms, the BOP surplus grew to $1.53 billion from $1.13 billion.
