Nepal’s BoP surplus reaches USD 1.11 billion, forex reserves sufficient to finance imports for 11.3 months

Published On: December 15, 2023 09:00 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Dec 15: Nepal’s balance of payments (BoP) stood at a surplus of Rs 147.11 billion in the first four months of the current fiscal year, mainly due to the soaring remittance inflows and decline in import expenses.

The ‘Current Macroeconomic and Financial Situation’ unveiled by Nepal Rastra Bank (NRB) on Thursday shows that the BoP surplus jumped more than seven fold in the past one year. As of mid-November 2022, the country’s positive balance in the BoP stood at Rs 20.03 billion. In the US dollar terms, the BoP remained at a surplus of 1.11 billion in the review period against a surplus of 149.6 million in the same period of the previous year.

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 one of the major external sector indicators to show a country’s net balance in terms of foreign currency reserves.  

The current account, one of the major components of the BoP, also remained at a surplus of Rs 96.38 billion. In the review period last year, it was in a deficit of Rs 37.79 billion.

Merchandise trade balance, service trade, net income generation and transfers fall under the scope of the current account. The merchandise imports decreased 3.8 percent to Rs 512.50 billion, while remittance inflows increased by 26.4 percent to hit Rs 477.96 billion.

On the other hand, capital transfer declined 46.6 percent to Rs 1.59 billion. Last year, the amount under this heading was Rs 2.97 billion. Although the net inflows of foreign direct investment increased to Rs 3.64 billion from Rs 429.2 million, the figure was not encouraging. It shows that the country needs to implement notable reform measures in order to benefit largely from the foreign capital.    

With an improved BoP situation, the country’s foreign currency reserve increased 10.2 percent to Rs 1,696.78 billion. According to the NRB, the amount is sufficient to cover the prospective merchandise imports of 13.6 months and merchandise and services imports of 11.3 months.

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