KATHMANDU, Jan 11: The foreign exchange reserves of Nepal has increased to Rs 2.273 trillion as of mid-December, showing a notable improvement of 11.4 percent in the first five months of the current fiscal year.
According to the latest report of the Nepal Rastra Bank (NRB), the accumulated foreign reserves will be able to suffice imports to Nepal for around 14.6 months.
The Current Macroeconomic and Financial Situation Report published by the central bank on Friday shows that the foreign currency reserves, the foreign exchange reserves increased by 11.4 percent from Rs 2.041 trillion at the start of the current fiscal year to Rs 2.273 trillion at mid-December.
The foreign exchange reserves have increased by 25.9 percent annually, up from US $13.305 billion in mid-December 2023. As compared to the foreign exchange reserve of Rs 1.767 trillion in mid-December 2023, the reserves have improved by 28.6 percent in the current fiscal year.
The central bank’s report indicates that the existing foreign exchange reserves will be sufficient to cover the prospective goods imports for 17.6 months, and goods and services imports of 14.6 months.
Foreign exchange reserves reach Rs 2.255 trillion
According to economists, the amount of foreign exchange reserves is sufficient to shoulder Nepal’s imports which is a positive sign for the country’s economy. “Normally, foreign exchange reserves to suffice 7-8 months of imports is recommended to keep the economy steady,” Prof Dr Ram Prasad Gyawali told Republica, “Currently, we have foreign exchange reserves that can facilitate imports for more than 14 months, which is a positive sign.”
Economist Gyawali said that an increase in foreign currency reserves provides a cushion to the import-based economy of countries like Nepal. The landlocked country maintains an adequate supply of its majority of consumer goods including food items and equipment for its development projects via imports.
According to Economist Gyawali, the increase in foreign exchange reserves heavily fueled by increase in remittance without an improvement in Balance of Trade (BoT) exposes Nepal to the risk of negative fluctuation in the economic condition.
According to the NRB report, remittance inflows increased 4.4 percent to Rs 640.43 billion in the review period compared to an increase of 24.2 percent in the same period of the previous year. In the US Dollar terms, remittance inflows increased 2.5 percent to 4.73 billion in the review period compared to an increase of 21.1 percent in the same period of the previous year
Similarly, BoT, which is the net trade of goods and services to the country, has worsened in the first five months of the current fiscal year as compared to the same review period of the preceding fiscal year. As per the central bank, Nepal’s BoT stood at negative US $4.297 billion which fell even further to negative US $4.405 billion.
Exports up by 16.5 pc, imports by 3 pc
Nepal’s goods exports increased 16.5 percent to Rs 73.66 billion against a decrease of 6.1 percent in the corresponding period of the previous year.
According to the NRB’s report, exports to India and China increased 23.7 percent and 68.9 percent respectively whereas exports to other countries decreased 1.2 percent.
The central bank’s report also indicates that the exports of soybean oil, tea, polyester yarn and thread, particle board, woolen carpet, among others increased whereas exports of palm oil, zinc sheet, ginger, readymade garments, herbs, among others decreased in the review period.
Similarly, goods imports increased 3 percent to Rs 661.49 billion during the review period, against a decline of 3.4 percent a year ago. As per the report, imports from India and China increased 4.0 percent and 4.6 percent respectively, while import from other countries decreased 1.8 percent.
Imports of transport equipment, vehicle and other vehicle spare parts, crude soybean oil, sponge iron, garlic, edible oil, among others increased whereas imports of petroleum products, gold, crude palm oil, peas, bitumen, among others decreased in the review period.
