Nepal’s Foreign Exchange Reserves Near NPR 30 Trillion, Import Capacity Strengthens

According to the latest data published by Nepal Rastra Bank (NRB), the country’s total foreign exchange reserves have reached NPR 29.79 trillion by the end of Ashoj 2082. The reserves, which stood at NPR 26.77 trillion at the end of Asar, have increased by 11.3 percent in just three months. The central bank states that the continuous rise in reserves has further strengthened Nepal’s external sector stability.

Foreign exchange reserves have increased not only in Nepali currency but also in US dollars. The reserve, which stood at USD 19.50 billion at the end of Asar, rose to USD 21.21 billion by the end of Ashoj—an increase of 8.7 percent. This improvement indicates a stronger external liquidity position for the country.

NRB alone holds NPR 26.67 trillion of the total reserves, up from NPR 24.14 trillion in Asar. According to the central bank, higher remittance inflows, controlled imports and a surplus in the current account have contributed significantly to the rise in foreign exchange reserves.

Similarly, foreign exchange holdings of banks and financial institutions (excluding NRB) have also risen sharply. Their reserves increased from NPR 263.04 billion in Asar to NPR 312.10 billion in Ashoj—an increase of 18.7 percent. The share of Indian currency in the total reserves stands at 24 percent, NRB reported.

Key ratios comparing foreign exchange reserves to GDP, total imports and broad money supply (M2) have also improved. By the end of Ashoj, the ratios stood at 48.8 percent of GDP, 136.6 percent of total imports and 36.8 percent of broad money supply. In Asar, these ratios were 43.8 percent, 128.1 percent and 34.1 percent respectively.

Both the current account and balance of payments (BoP) remain in strong surplus during the review period. The current account recorded a surplus of NPR 237.59 billion, compared to NPR 115.36 billion in the same period last year. Likewise, the BoP remained at a surplus of NPR 264.03 billion, up from NPR 184.99 billion last year.

Foreign Direct Investment (FDI–Equity) has, however, declined. During the review period, Nepal received only NPR 1.74 billion in FDI-equity, compared to NPR 4.81 billion in the same period last year. But capital transfers have shown notable improvement, reaching NPR 5.55 billion, up from NPR 2 billion last year.

Based on imports of the first three months of FY 2082/83, the current level of reserves is sufficient to cover 19.9 months of goods imports and 16.4 months of goods and services imports. NRB notes that the improvement in import-cover capacity signals a stronger and more resilient external sector for Nepal.