Nepal’s foreign currency reserves declined further in first four months of current FY

Published On: December 16, 2021 06:30 AM NPT By: Republica  | @RepublicaNepal

The country’s BoP deficit plunged further to Rs 150.38 billion

KATHMANDU, Dec 16: Nepal’s balance of payments (BoP) further plunged to negative Rs 150.38 billion in the first four months of the current fiscal year, thanks to falling remittance earnings and widening trade deficit. 

According to the ‘Current Macroeconomic and Financial Situation of Nepal’ released by the Nepal Rastra Bank (NRB) on Wednesday, the country’s BoP was in a surplus of Rs 110.65 billion during mid-July and mid-November in the last fiscal year. The NRB records show that the BoP figure further went down by around Rs 74 billion in one month between mid-October and mid-November.  

The BoP records a country’s financial transactions with the rest of the world under three subheadings — current account, capital account and financial account. It is a major indicator to show a country’s net balance in terms of foreign currency reserves.

According to NRB, the current account deficit as of mid-November stood at Rs 223.19 billion, a straight fall from Rs 151.70 billion in the previous month. While the country’s remittance inflows declined by 7.5 percent to Rs 312.42 billion, the trade deficit widened by 56.8 percent to Rs 568.17 billion. Likewise, the net services income also remained at a deficit of Rs 31.20 billion. 

In terms of capital account, capital transfer decreased 39.3 percent to Rs 2.52 billion whereas net foreign direct investment increased 77 percent to Rs 6.63 billion. 

With heavy outflow of foreign currencies amid slow growth in the country’s earnings from abroad, Nepal’s foreign exchange reserves declined 10.9 percent to US $ 10.47 billion. The amount now allows the landlocked country to fund imports of only 7.9 months. 

The NRB records show that Nepal is facing a freefall in its capacity to purchase foreign goods every successive month due to the worsening BoP deficit. As of mid-October, the foreign currency reserve was sufficient to manage imports for 8.6 months.


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