The country’s foreign exchange reserves are expanding as imports continue to decline and remittance surges persist. The Current Macroeconomic Situation report of the first seven months of fiscal year 2023/24 shows Nepal’s gross foreign exchange reserves surged by 19.9 percent and reached Rs 1,844.94bn in mid-February compared to Rs 1,539.36bn in mid-July 2023. In US dollar terms, the foreign currency reserves increased by 18.6 percent to $13.89bn, up from $11.71bn in mid-July last year.
While the foreign exchange holdings of the Nepal Rastra Bank (NRB) experienced a strong growth of 20.7 percent to Rs 1,623.92bn, up from Rs 1,345.78bn in mid-July, reserves held in banks and financial institutions (excluding NRB) surged by 14.2 percent to Rs 221.02bn compared to Rs 193.59bn in mid-July.
Based on the imports recorded over the first seven months of the fiscal year 2023/24, the foreign exchange reserves can cover prospective merchandise imports for approximately 14.7 months and merchandise and services imports for about 12.3 months.
The current account is in a surplus of Rs 161.69bn in the seventh month of 2023/24. This marks a significant improvement compared to the deficit of Rs 40.16bn recorded in the same period of the previous fiscal year. In US dollar terms, the surplus amounts to $1.22bn, contrasting with a deficit of $314.6bn reported as of mid-Feb 2023.
Capital transfers decreased by 29 percent to Rs 3.8bn during the review period, while net foreign direct investment (FDI) remained positive at Rs 5.18bn. In the corresponding period of the previous fiscal year, capital transfers amounted to Rs 5.35bn, with net FDI at Rs 1.04bn.
The balance of payments remained a surplus of Rs 297.72bn over the first seven months of 2023/24, compared to Rs 128.55bn surplus in the same period of the previous fiscal year. In US dollar terms, this surplus stands at $2.24bn in the current fiscal year review period, up from $975.7m in the same period of the previous fiscal year.
Balance of payments is the difference between all money flowing into the country in a particular period of time and the outflow of money.
Remittances inflow during the review period increased by 21.6 percent to Rs 839bn, compared to a rise of 27.1 percent in the corresponding period of the previous fiscal year. In terms of US dollars, remittance inflows increased by 19.1 percent, reaching 6.31bn.
The country’s merchandise exports saw a decline of 7.1 percent to Rs 86.83bn over the first seven months of 2023/24, compared to a 29 percent drop in the same period of the previous fiscal year. Data released by the central bank shows exports to India and other countries dropped by 11.3 percent and 2 percent, respectively, while exports to China surged by 338.8 percent. Noteworthy increases were observed in exports of zinc sheet, particle board, juice, and readymade garments, whereas exports of palm oil, soybean oil, cardamom, tea, and woolen carpet witnessed a decline.
Merchandise imports, on the other hand, decreased by 2.3 percent to Rs 897.94bn in the review period compared to a decline of 19.9 percent in the same period of the previous fiscal year. While imports from India and other countries declined by 2.8 percent and 23.8 percent, respectively, imports from China increased by 38.4 percent. Imports of products such as readymade garments, transport equipment, and electrical equipment increased during the review period, while imports of crude soybean oil, gold, and petroleum products decreased.
The country’s total trade deficit came down by 1.8 percent to Rs 811.11bn over the first seven months of the current fiscal year, compared to an 18.7 percent decrease in the same period of the previous fiscal year.
