The country’s BoP surplus increased to Rs 20.03 billion in the first four months of the current fiscal year
Restriction on imports and increased remittance helped increase foreign currency reserves sufficient to finance imports for 8.4 months
KATHMANDU, Dec 16: Nepal added extra foreign currencies worth Rs 7.60 billion to its foreign currency reserves during the one-month period between mid-October and mid-November, mainly due to a decline in imports along with a notable rise in remittance inflows.
The ‘Current Macroeconomic and Financial Situation of Nepal’ unveiled by Nepal Rastra Bank (NRB) on Thursday, shows that the balance of payments (BoP) remained at a surplus of Rs 20.03 billion in the first four months of the current fiscal year. The figure was Rs 12.43 billion as of the first quarter of fiscal year 2022/23.
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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, which is an important factor for import-based countries like Nepal.
In US dollar terms, the surplus amount stood at 149.6 million, compared to the deficit of 1.27 billion during the review period, last year. Last month, the BoP was recorded positive after 14 months of the country facing continuous downfall in the net financial inflows. It has provided some cushion to the country that had been reeling under the pressure of depleting foreign currency reserves.
The positive balance in the BoP was mainly due to an improved current account balance along with a rise in capital transfers. The current account balance in the review period stood at a deficit of Rs 35.40 billion compared to a negative balance of Rs 220.91 billion in the same period last year.
Remittance, one of the major elements of the current account balance, increased 20.4 percent to Rs 378.04 billion. In the review period last year, remittance was downsized by seven percent.
The rise in remittance has been attributed to a significantly increased number of outbound workers. Over the review period this year, a total of 195,196 individuals took approval for foreign employment. The figure was double of the number last year.
Likewise, the net transfer also increased 20.2 percent to Rs 417.38 billion. The imports also decreased 18.1 percent to Rs 532.69 billion, preventing the country from heavy draining of the foreign currencies.
According to NRB officials, the import expense was downsized as a result of the government banning the inflow of 10 high-priced luxury goods. The import restriction, which was lifted just last week, was in place for over six months.
With an improved BoP, the foreign currency reserves increased 2.5 percent to Rs 1.246 trillion (USD 9.63 billion) in the first four months of the current fiscal year. The amount is sufficient to cover the merchandise imports of 9.7 months and merchandise and services imports of 8.4 months, according to the NRB report.
