Foreign Reserves to GDP Ratio Rises to 47.2% as NRB Strengthens External Position

Nepal’s external sector witnessed a notable improvement in 2025, with the country’s foreign exchange reserves-to-GDP ratio climbing to an impressive 47.2%, according to the latest Nepal Rastra Bank (NRB) Mid-September 2025 report. This marks a substantial rise from 43.8% in mid-July 2025 and 35.2% a year earlier, highlighting the central bank’s effective reserve management and the growing resilience of Nepal’s external financial position.

The NRB data shows that gross foreign exchange reserves surged to Rs 2.88 trillion, reflecting a 7.6% increase in just two months. This growth was primarily fueled by robust remittance inflows, a strong rebound in tourism income, and relatively controlled import demand. As a result, Nepal’s gross foreign assets—which include the reserves held by both NRB and commercial banks—hit a historic Rs 3.03 trillion, up by 7.7% from mid-July levels.

A closer look at the data reveals that convertible reserves—the portion of reserves readily available for international trade—rose sharply by 8.4% to Rs 2.23 trillion, while inconvertible reserves increased by 4.9% to Rs 648 billion. The import cover now stands at 16 months for total imports and nearly 20 months for merchandise imports, making Nepal one of the strongest economies in South Asia in terms of reserve adequacy.

The Net Foreign Assets (NFA) of the banking system reached Rs 2.88 trillion, marking an 8.2% year-on-year increase, while foreign liabilities remained stable at around Rs 157.5 billion. The data also indicates an improvement in reserves-to-imports ratio, which now stands at 133.1%, and the reserves-to-M2 money supply ratio at 36.6%, both of which reflect healthy external liquidity and macroeconomic strength.

Economists say this steady rise in foreign reserves and their share of GDP reflects a strong balance of payments, underpinned by consistent remittance inflows, growing tourism receipts, and cautious fiscal and monetary management by the NRB. However, they also warn that Nepal’s long-term stability depends on diversifying export earnings, enhancing domestic production, and ensuring sustainable capital inflows rather than relying heavily on remittances.

With foreign reserves now covering well over a year of imports, Nepal is in a much stronger position to withstand external shocks, currency pressures, and geopolitical uncertainties. The NRB’s proactive policies—ranging from prudent foreign exchange interventions to controlled liquidity expansion—have been instrumental in solidifying this external buffer.