#Depleting Foreign Currency Reserves

Remittance inflow improved slightly during mid-Feb and mid-March

Published On: April 12, 2022 07:30 PM NPT By: Republica  | @RepublicaNepal

KATHMANDU, April 12: Nepal’s balance of payments (BoP) stood at a negative Rs 258.64 billion in the first eight months of the current fiscal year, with an additional increase in net outflow of Rs 11.61 billion in one month during mid-February and mid-March.

The eight-month report on Current Macroeconomic and Financial Situation unveiled by Nepal Rastra Bank (NRB) on Tuesday shows that the BoP deficit deepened from Rs 247.03 billion to Rs 258.64 billion in one month. While the decline in remittance inflow has slowed, however, the import growth still is too high. The existing foreign currencies with the country are sufficient to finance import of goods and services for the next 6.7 months.  

Despite the government implementing various measures to check the outflow of foreign currencies, the country has been under a growing pressure of depleting foreign currency reserves. A drop in BoP amount means the country is sustaining an increasing pressure to manage the foreign currencies to carry out transactions with other countries.

NRB records show that Nepal’s BoP deficit in the first four months of the current fiscal year was Rs 150.38 billion. In the first five months, it reached Rs 195.01 billion, which further rose to Rs 241.23 billion during the one-month period of mid-December 2021 and mid-January 2022.

During mid-January and mid-February, Nepal faced the net drain out of its foreign currency only by Rs 5.80 billion, which had given a great respite to the landlocked country that is highly dependent on imported goods.

As of mid-March, the current account, one of the main components of BoP, remained at a deficit of Rs 462.93 billion. In the same period a year ago, the current account deficit was Rs 151.42 billion.

During the review period, the trade deficit widened by 34.5 percent to Rs 1,160.99 billion with an increase in the import expense by 38.6 percent. The NRB records show that the falling rate of remittance inflows has slowed in recent days.

As of mid-March this year, the remittance inflow declined 1.7 percent to Rs 631.19 billion. Until mid-February of the current fiscal year, remittance inflow declined by 4.9 percent while the figure was 5.5 percent as of the first six month in the current fiscal year. 


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