The reserve was Rs 212 billion in mid-July 2008. Nepal Rastra Bank (NRB) has attributed the rise mainly to the strong inflow of remittances and sound growth of third country export earnings during the period.
During the period, net transfer of workers´ remittances had swollen by more than 60 percent touching Rs 150 billion.
The strong reserve growth of reserve in rupee terms can also be partly explained by depreciation of the Nepali currency vis-à-vis the US dollar. Nepali currency devalued by 18 percent during the period. Otherwise, in dollar terms, the reserve actually only grew by about 12 percent, totaling US$ 3.46 billion.
NRB data further shows that the reserve of convertible currency expanded by more than 37 percent during the period and touched Rs 249 billion, which made up 90.3 percent of the total reserve.
Reserve of inconvertible currency, meanwhile, shrank by more than 13 percent during the period and dropped at Rs 26.80 billion. As a result, the share of inconvertible currency dipped to about 9.7 percent in the total reserve.
The central bank attributed the drop in inconvertible currency mainly to soaring imports and a rise in the trade deficit with India. During the first nine months, Nepal´s imports from India had valued Rs 115.64 billion and the trade deficit widened with it to reach Rs 84 billion.
To meet Indian currency requirements, the central bank purchased over Rs 53 billion worth of Indian currency (IC) during the period. For the purpose, it sold US$ 1.11 billion.
Moreover, NRB data shows that of the total reserve, foreign currency holding with the central bank grew by 29 percent to Rs 219 billion during the period. Of that, convertible currency holding was Rs 195 billion, while inconvertible currency holding was about Rs 23 billion.
Likewise, foreign currency holding with the commercial bank also soared by almost one third over the first nine months of the current fiscal year.
According to NRB data, foreign currency holding of commercial banks totaled Rs 57 billion during the period, of which about Rs 54 billion was convertible currency and Rs 3 billion was inconvertible currency.
The central bank has reported that the present gross foreign currency reserve is sufficient to finance merchandise imports for more than a year.
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