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By Sandeep Chaudhary

Financial Account Surplus at USD 577M: Reserve Build-Up Offsets Weak FDI

Financial Account Surplus at USD 577M: Reserve Build-Up Offsets Weak FDI

Nepal’s financial account recorded a strong surplus of USD 577 million in the first month of FY 2025/26, reflecting solid growth in foreign exchange reserves and stable external inflows despite continued weakness in foreign direct investment (FDI). According to the latest Balance of Payments (BoP) report released by Nepal Rastra Bank, this marks a sharp rise from USD 273 million in the same period last year.

The biggest contributor was the accumulation of foreign reserves worth USD 671 million, which helped offset the persistent FDI outflow of USD 4.4 million and limited loan inflows. The reserve build-up signals that Nepal’s external position remains resilient, supported by record-high remittance inflows (USD 1.26 billion) and a current-account surplus of USD 561 million.

Analysts say the surplus indicates a positive short-term liquidity position and reduced external vulnerability. However, the weak trend in FDI inflows and sluggish private-sector borrowing underscore ongoing challenges in attracting productive capital. Nepal’s “surplus without investment” pattern, experts warn, could limit long-term economic growth if the country relies solely on remittances and reserves instead of industrial development.

Economists recommend using this window of external stability to reform investment laws, simplify repatriation procedures, and strengthen investor confidence, especially in energy, tourism, and digital sectors.

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