Nepal’s foreign exchange reserves have risen to Rs 2.273 trillion as of mid-December, reflecting an 11.4% growth over the first five months of the current fiscal year.
The latest report from the Nepal Rastra Bank (NRB) indicates that the country’s foreign reserves are sufficient to cover imports for about 14.6 months.
The Central Bank’s Current Macroeconomic and Financial Situation Report, released on Friday, reveals that foreign currency reserves increased by 11.4% from Rs 2.041 trillion at the start of the fiscal year to Rs 2.273 trillion by mid-December. This marks a 25.9% annual increase, from US$13.305 billion in mid-December 2023, and represents a 28.6% improvement compared to the Rs 1.767 trillion in reserves at the same time the previous year.
The report further indicates that the foreign exchange reserves would cover goods imports for 17.6 months and both goods and services imports for 14.6 months.
Economists view this as a positive sign for Nepal’s economy, as the reserves are sufficient to manage the country’s import needs. “Typically, foreign exchange reserves covering 7-8 months of imports are considered ideal to maintain economic stability,” said Prof. Dr. Ram Prasad Gyawali. “With more than 14 months of reserves, Nepal is in a strong position.”
However, Gyawali also pointed out that while the rise in foreign reserves is positive, it is largely driven by increased remittances rather than an improvement in the country’s Balance of Trade (BoT), which poses a potential risk for economic stability.
The NRB report shows remittance inflows grew by 4.4%, reaching Rs 640.43 billion in the review period, compared to a 24.2% increase during the same period last year. In US dollar terms, remittances rose by 2.5% to US$4.73 billion, a slowdown from last year’s 21.1% growth.
On the other hand, Nepal’s BoT has deteriorated in the first five months of the fiscal year. The central bank reported a negative BoT of US$4.297 billion, which further worsened to US$4.405 billion during the period.
Regarding trade, Nepal’s goods exports increased by 16.5% to Rs 73.66 billion, compared to a 6.1% decline in the same period the previous year. Exports to India and China grew by 23.7% and 68.9%, respectively, while exports to other countries fell by 1.2%. Key exports, such as soybean oil, tea, polyester yarn, and woolen carpets, saw an uptick, while exports of palm oil, zinc sheets, ginger, ready-made garments, and herbs declined.
Goods imports rose by 3% to Rs 661.49 billion, reversing a 3.4% decrease a year ago. Imports from India and China increased by 4% and 4.6%, respectively, while imports from other countries fell by 1.8%. Notable increases in imports included transport equipment, soybean oil, sponge iron, garlic, and edible oil, while imports of petroleum products, gold, crude palm oil, peas, and bitumen decreased.
