Kathmandu: Nepal’s external sector strengthened during the first seven months of the current fiscal year, supported by a sharp rise in remittance inflows and a significant increase in foreign exchange reserves, according to the latest macroeconomic update released by Nepal Rastra Bank (NRB).

Gross foreign exchange reserves increased to Rs. 3.30 trillion (USD 22.76 billion) by mid-February, up from Rs. 2.68 trillion at the beginning of the fiscal year. According to the central bank, the current reserve level is sufficient to cover approximately 18 months of prospective merchandise and services imports, indicating a comfortable external buffer for the economy.

The improvement in the external position was largely driven by stronger remittance inflows. Remittances increased 39.8% year-on-year to Rs. 1.26 trillion during the review period, compared with 7.5% growth recorded in the same period of the previous fiscal year.

Nepal’s balance of payments (BOP) remained in surplus at Rs. 572.73 billion, more than double the surplus recorded during the corresponding period last year, reflecting robust external inflows and improved foreign exchange liquidity.

Inflationary pressure remained moderate during the review period. Consumer price inflation stood at 3.25% year-on-year in mid-February, compared with 4.16% a year earlier. However, wholesale price inflation increased to 6.21%, suggesting higher cost pressures in intermediate and capital goods.

Nepal’s trade sector continued to exhibit structural imbalance, with imports significantly exceeding exports. Merchandise exports increased 32.2% to Rs. 168.15 billion, supported by higher shipments of soybean oil, cardamom and jute products. Imports rose 13.6% to Rs. 1.12 trillion, resulting in a trade deficit of Rs. 955.34 billion during the review period. The export-to-import ratio improved to 15%, compared with 12.9% in the same period last year.

In the banking sector, deposits at banks and financial institutions expanded 14.9% year-on-year, reflecting continued liquidity in the financial system. Private sector credit increased 6.8%, indicating moderate credit expansion. The average base rate of commercial banks declined to 5.12%, down from 6.46% a year earlier, suggesting easing borrowing costs.

Meanwhile, the Nepali rupee depreciated 5.4% against the U.S. dollar between mid-July and mid-February, according to the central bank.

Overall, the latest data suggest that Nepal’s macroeconomic conditions remain stable, supported by strong remittance inflows, rising foreign exchange reserves and a sizeable balance of payments surplus, although structural trade deficits and moderate credit growth continue to shape the broader economic outlook.