Change in Net Foreign Assets: Why Nepal Still Faces Rs. −89B Pressure Despite High Reserves

Nepal’s foreign exchange reserves have reached a record Rs. 2.95 trillion, yet the country’s net foreign assets (NFA)still reflect a contraction of Rs. 89 billion as of mid-August 2025/26, according to Nepal Rastra Bank’s latest data. The contradiction — high reserves but negative NFA change — reveals underlying external payment pressures and valuation effects that continue to test the country’s balance sheet stability.

Data show that the total net foreign assets stood at Rs. 2.79 trillion, up by 4.8% from mid-July. However, the change in NFA (before exchange rate adjustment) recorded a deficit of Rs. −127.7 billion, partially offset by a positive exchange valuation gain of Rs. 38.4 billion. This means that despite the strong accumulation of reserves, Nepal still experienced outflows related to loan repayments, trade payments, and government debt servicing, which weighed down the monthly net change.

Economists note that such NFA contraction, even amid healthy remittance inflows and reserve build-up, signals hidden vulnerabilities in Nepal’s external sector. These include rising import bills, slower FDI inflows, and continuing outflows through the financial account. While the NRB’s reserve management and higher remittance inflows have strengthened the macro buffer, sustaining long-term external stability will require diversifying export earnings, reducing external debt, and attracting more productive foreign investment.