Despite strong external economic indicators, Nepal’s internal economic activity remains sluggish, with slow government performance and delayed development progress. The current state of Nepal’s economy and finance for the first month of fiscal year 2082/83 (July 16–August 15, 2025) was revealed by Nepal Rastra Bank on Monday.
Foreign Exchange Reserves Reach Record High
The increase in remittances from overseas employment and a higher inflow of foreign currency compared to outflow has led to continuous savings, boosting Nepal’s foreign exchange reserves. At the end of Ashad 2082 (July 15, 2025), the total foreign exchange reserves were NPR 2.677 trillion, which increased by 4.8% to NPR 2.806 trillion in Shrawan (August 16, 2025).
In U.S. dollars, the reserves amounted to USD 2.03 billion. Of the total reserves, NPR 2.511 trillion is held by Nepal Rastra Bank and NPR 294.58 billion with commercial banks and financial institutions. Indian currency accounts for 23.4% of the total reserves.
With such strong reserves, Nepal’s capacity to import goods and services has increased significantly. Whereas the country could previously cover only 4–5 months of imports, the current reserves can sustain imports for 16.6 months.
According to the central bank, based on imports in the first month of FY 2082/83, the banking sector’s foreign exchange reserves can cover 20.4 months of goods imports and 16.6 months of goods and services imports. Ratios of total reserves to GDP, total imports, and broad money supply are 45.9%, 138.3%, and 36% respectively.
However, former executive director of Nepal Rastra Bank, Narbahadur Thapa, interprets this rapid accumulation of reserves as a sign that the domestic economy is not performing well. He said,
“Accumulating reserves without using them for development is harmful. It reflects inaction and inefficiency. Despite sufficient foreign currency, the lack of investment in development has caused this build-up.”
Government Spending and Revenue Collection Lag
Data also shows that government spending and revenue collection have not seen significant growth. In one month, the government spent only NPR 4.6 billion on development projects, while collecting NPR 8.447 billion in revenue. To meet the annual target of NPR 1.5 trillion, monthly revenue collection should reach NPR 12 billion, which has not been achieved.
External Sector Shows Strength, But Domestic Economy Faces Challenges
While external indicators appear strong, the overall economic activity remains slow, with development projects lagging. According to Nepal Rastra Bank data, the current account showed savings of NPR 7.814 billion and net savings of NPR 9.93 billion.
Remittances rose 29% in Shrawan, reaching NPR 177.41 billion, with a 25% increase in U.S. dollar terms (USD 102.7 million). Total goods exports surged 95.7% to NPR 23.93 billion, while total imports grew 11.4% to NPR 143.04 billion. Imports from India, China, and other countries increased by 7.5%, 14.1%, and 20.5% respectively.
Imported items that increased include raw petroleum, transport equipment, vehicles and spare parts, rice, coal, and chemical fertilizers. Meanwhile, imports of hot-rolled sheet in coil, edible oil, petroleum products, machinery and parts, and pulses declined.
Net capital transfer reached NPR 104 million, up from NPR 22 million in the same period last year. Direct foreign investment (equity only) amounted to NPR 69 million, compared to NPR 80 million in the previous year. Net service income recorded a deficit of NPR 1.339 billion, though tourism income rose 12.7% to NPR 5.38 billion while tourism expenditure fell 2.8% to NPR 21.7 billion. Educational expenses accounted for NPR 14.31 billion of this.
Declining Money Supply
In Shrawan, broad money supply decreased by 0.7%, contrasting with a 12.5% increase in the same period last year. The decline indicates limited liquidity in the market and slow government activity.
Banks continue to hold high liquidity due to low credit demand. Deposits with banks fell 0.8% and loans to the private sector declined 0.1%. On an annual basis, deposits grew 12.5%, and private sector loans increased 8%. Interbank weighted average interest rate stood at 2.75%, while the 91-day treasury bill rate was 2.65%. Commercial banks’ deposit and lending rates were 4.02% and 7.76% respectively.
Inflation Moderated, But Oil Prices Rise
Consumer price inflation remained under control in Shrawan, with annual inflation at 1.68%, down from 4.09% last year. However, the price of oil and ghee increased sharply. The annual consumer price index for ghee and oil rose 10.97%, non-alcoholic beverages increased 4.64%, and fruits rose 3.01%. Conversely, prices of vegetables dropped 18.56%, spices 4.81%, and fish and meat 2.41%.
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