Nepal’s External Sector Indicators Strengthens in First Month of Current Fiscal Year

Nepal’s external sector indicators strengthened at the start of the new fiscal year, with the current account and balance of payments both posting large surpluses and foreign exchange reserves rising amid sharp rise in remittance inflows.

The country’s current account recorded a surplus of Rs 78.14 billion in the first month of the current fiscal year (FY 2025/26), more than double the Rs 33.08 billion surplus logged in the same period last year, according to the latest data from Nepal Rastra Bank (NRB).

Releasing its Current Macroeconomic and Financial Situation of Nepal report based on data till mid-August, the central bank said the balance of payments (BOP) also remained positive, posting a surplus of Rs 89.30 billion compared to Rs 40.90 billion a year earlier.

Remittance inflows increased 29.9 percent to Rs 177.41 billion in the review month against an increase of Rs.136.60 billion in the same period of the previous year.

Gross foreign exchange reserves climbed 4.8 percent to Rs 2,806.04 billion in mid-August from Rs 2,677.68 billion in mid-July. Of this, NRB’s holdings increased 4 percent to Rs 2,511.45 billion, while reserves with banks and financial institutions jumped 12 percent to Rs 294.58 billion.

The central bank noted that the current foreign exchange stock is sufficient to cover 20.4 months of prospective merchandise imports and 16.6 months of combined merchandise and services imports.

Foreign direct investment (equity only) totaled Rs 691.5 million during the review period, down from Rs 799.8 million in the same month of the previous fiscal year. Net capital transfer rose sharply to Rs 1.04 billion from Rs 223.2 million a year ago.

On the downside, Nepal’s trade deficit increased 2.5 percent to Rs 119.11 billion during the first month of the current fiscal year. Such a deficit had increased 0.4 percent in the corresponding period of the previous year. The export-import ratio increased to 16.7 percent in the review period from 9.5 percent in the corresponding period of the previous year, added the central bank.