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By Sandeep Chaudhary

Financial Account Surplus at Rs. 80B: Reserves Build-Up Offsets Weak FDI

Financial Account Surplus at Rs. 80B: Reserves Build-Up Offsets Weak FDI

Nepal’s financial account posted a surplus of Rs. 80.4 billion in the first month of FY 2025/26, supported by a sharp rise in foreign reserves even as foreign direct investment (FDI) inflows remained weak, according to the latest Balance of Payments (BoP) data from Nepal Rastra Bank.

The strong financial account performance was mainly driven by a Rs. 93.5 billion rise in reserve assets, which offset outflows from other components such as loans and direct investment. Reserve accumulation, bolstered by record remittance inflows and controlled capital outflows, provided a solid cushion for external stability.

In contrast, FDI recorded a net outflow of Rs. 611 million, continuing Nepal’s worrying trend of investor withdrawal. Likewise, loan repayments worth Rs. 5.8 billion further tightened the external financing space. Despite these outflows, the large reserve buildup ensured that the overall financial account remained in surplus.

Economists note that this kind of surplus — driven by reserves rather than fresh investments — is a short-term buffer but not a sign of economic vitality. Sustaining long-term external stability will require attracting productive FDI, diversifying exports, and improving project-level implementation to convert financial flows into growth.

They caution that while reserves provide short-term protection, Nepal’s low investment confidence and weak capital formation remain major bottlenecks. Without real inflows into industries and infrastructure, the financial account’s apparent strength could mask deeper economic fragility.

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