Nepal | June 25, 2019

Forex reserve swells to over Rs 1 trillion

Himalayan News Service

Source: Nepal Rastra Bank

Kathmandu, March 16

The country’s gross foreign exchange reserve swelled to Rs 1.01 trillion in the first seven months of the current fiscal, as money sent by Nepalis working abroad continued to increase, while imports bill fell.

The country’s remittance income jumped 16.9 per cent to Rs 375.16 billion in the seven-month period between mid-July and mid-February, shows the latest Macroeconomic Report of Nepal Rastra Bank (NRB), the central bank. Merchandise imports, on the other hand, fell by 21.6 per cent to Rs 345.83 billion in the same period.

Since foreign income, in the form of remittance, increased significantly, while expenses on imports tapered, the foreign exchange reserve ballooned to a level never seen before.

“The foreign exchange holdings of banking sector are sufficient to cover prospective merchandise imports of 20.9 months, and merchandise and services imports of 17.2 months,” says the NRB report.

Although a healthy foreign exchange reserve helps the country to cushion external shocks, there is nothing to cheer about this achievement as it was the upshot of over four-month-long blockade along Nepal-India border points, which not only reduced imports of essential goods but those of raw materials and capital goods as well.

Due to supply-side constraints, the economy is expected to expand by just two per cent this fiscal, while consumer prices rose by 11.3 per cent last month.

The problems in supply situation have also affected Nepal’s exports, which fell by 27.1 per cent to Rs 36.60 billion in seven-month period. A bigger fall in imports than in exports helped Nepal to bridge trade gap by 20.9 per cent in review period. Yet, trade deficit still stands at Rs 309.23 billion.

Despite a huge trade gap, Nepal managed to register a current account surplus of Rs 154.78 billion in the seven-month period on the account of surge in remittance inflow.

Also, Nepal received capital transfer amounting to Rs 8.60 billion and foreign direct investment (FDI) inflow of Rs 2.26 billion in the review period, shows NRB report. The capital transfer and FDI inflow stood at Rs 6.26 billion and Rs 1.55 billion, respectively, in the same period last fiscal year.

All these helped the country to post a balance of payments (BoP) surplus of Rs 154.40 billion in the seven-month period, which is higher than the surplus registered by the country in 12 months of last fiscal year. A BoP surplus indicates higher inflow of money into the economy than outflow.

Inflation at 11.3pc

KATHMANDU: Inflation moderated to 11.3 per cent in February, indicating deceleration in price hike of goods and services. In January, consumer prices had shot up by 12.1 per cent, the highest in the last 80 months. “Going forward, inflation rate is likely to moderate gradually, as supply situation has normalised along the trade routes in the southern parts of the country,” says the latest Macroeconomic Report of Nepal Rastra Bank (NRB). Prices had started going up in Nepal as protests in the Tarai and blockade on Nepal-India border points choked supply of various goods, including, petroleum and food products, raw materials and other essentials. Following this, NRB had revised inflation target for the current fiscal to 9.5 per cent from 8.5 per cent in the past.

A version of this article appears in print on March 17, 2016 of The Himalayan Times.

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