KATHMANDU: Nepal's foreign currency reserves surged to Rs 1.942 trillion as of mid-May this year, primarily driven by a significant increase in remittance inflows. According to Nepal Rastra Bank's (NRB) Current Macroeconomic and Financial Situation Report, the country collected Rs 403.04 billion in foreign currencies within the first 10 months of the current fiscal year, up from Rs 1.539 trillion in mid-July 2023.
In terms of US dollars, the gross foreign exchange reserves saw a notable 24.2 percent increase to $14.54 billion in mid-May 2024, up from $11.71 billion in mid-July 2023. This amount is deemed adequate to cover prospective merchandise imports for 15.1 months and merchandise and services imports for 12.6 months.
According to NRB, the rise in foreign currency reserves was attributed to the surge in remittance inflows coupled with a decrease in the country's import expenses. Remittance inflows increased by 19.2 percent to Rs 1.198 trillion in the first 10 months, compared to a 23.4 percent growth in the same time last year. Meanwhile, merchandise imports experienced a 2.4 percent decline to Rs 1.303 trillion, with imports from India and other countries decreasing by 3.4 percent and 20.8 percent, respectively, while imports from China increased by 34.4 percent. Notable drops were observed in the imports of certain commodities like crude soybean oil, gold, hot rolled sheet in coil, crude palm oil, and rice/paddy.
Despite these fluctuations, the current account maintained a surplus of Rs 193.25 billion compared to a deficit of Rs 63.74 billion in the corresponding period of the previous fiscal year. Capital transfers fell 17.2 percent to Rs 5.26 billion, whereas net foreign direct investment was positive at Rs 6.98 billion.
In the context of inflation, consumer price inflation fell to 4.4 percent in mid-May 2024, from 7.41 percent a year earlier. Food and beverage category inflation stood at 6.27 percent, while non-food and service category inflation was at 2.96 percent during the review month. Notably, within the food and beverage category, the price index of vegetables saw a significant increase of 23.11 percent, while pulses and legumes, spices, cereal grains and their products, and sugar and sugar products also experienced notable inflationary pressures.
