Foreign Reserves Rise to USD 671M: Nepal’s Strongest External Cushion

Nepal’s external stability strengthened in the first month of FY 2025/26 as foreign exchange reserves rose to USD 671 million, marking the country’s strongest cushion in recent years. According to the Balance of Payments (BoP) data released by Nepal Rastra Bank, the surge in reserves was largely fueled by high remittance inflows and a surplus in the financial account.

The reserves rose from USD 316 million in the same period last year, showing more than a two-fold increase. A major driver was the USD 1.39 billion secondary income inflow, predominantly remittances from Nepali workers abroad. This helped offset Nepal’s large trade deficit (USD −883 million) and weak foreign direct investment, where net outflows continued.

Economists say the rise in reserves provides Nepal with a stronger shield against external shocks, such as oil price volatility, global interest rate changes, or pressure on imports. Higher reserves also improve Nepal’s creditworthiness, helping sustain essential imports like petroleum, medicine, and food during crises.

However, analysts warn that unless reserves are backed by growth in exports and productive domestic industries, Nepal’s dependency on remittances remains risky. Policymakers are being urged to use this period of stability to diversify the economy, attract FDI, and strengthen export competitiveness.