Nepal’s latest macroeconomic report presents a mixed picture, showing strong performance in external sector indicators while revealing continued weakness in the country’s domestic economy.
According to the Current Macroeconomic and Financial Situation of Nepal published by Nepal Rastra Bank (NRB), the country’s external position has strengthened considerably. By mid-April, the current account surplus surged to Rs 618.68 billion, compared to Rs 222.67 billion during the same period last year. Likewise, the balance of payments (BoP) surplus more than doubled to Rs 731.16 billion from Rs 346.23 billion a year earlier. Foreign exchange reserves also rose significantly to Rs 3.494 trillion, up from Rs 2.677 trillion recorded in mid-July 2025.
Despite these gains, internal economic activity remains subdued. The economy is projected to grow by only 3.85 percent in the current fiscal year, lower than the 4.43 percent growth recorded last year. The central bank attributes the slowdown to weak agricultural output, natural disasters, political uncertainty, and geopolitical tensions in the global economy.
Agriculture, which continues to be a major pillar of Nepal’s economy, is expected to register growth of just 1.58 percent. Food crop production declined by 6.76 percent during the first half of the fiscal year, with rice, maize, and other staple crops suffering significant setbacks. Although vegetable production increased marginally by 1.02 percent and fruit output rose by 6.51 percent, the livestock sector showed mixed results. Milk production plunged by 25.74 percent, while meat and egg production increased by 7.37 percent and 6.43 percent, respectively. In the forestry sector, firewood production dropped by 19.80 percent and timber production fell by 2.90 percent.
Industrial performance has also remained disappointing. Average industrial capacity utilization stood at only 42.11 percent despite the fact that 30.82 percent of total bank lending was directed toward the industrial sector. The low utilization rate reflects weak domestic demand, even though banks are awash with liquidity and interest rates have declined.
Government spending patterns have further highlighted the sluggishness of the economy. In the first 11 months of the current fiscal year, only 32.53 percent of the capital expenditure budget had been utilized, indicating persistent weaknesses in development spending and project implementation.
Investor sentiment has also weakened in recent weeks. The Nepal Stock Exchange (NEPSE) index has declined to around 2,700 points after several weeks of losses, signaling reduced confidence among investors.
Overall, the NRB report indicates that while remittance inflows, foreign exchange reserves, and external balances have remained strong, these positive developments have yet to translate into robust domestic economic growth. Weak agricultural production, underperforming industries, low development spending, and subdued demand continue to weigh on Nepal’s overall economic performance.
