Nepal’s foreign exchange reserves have witnessed a remarkable surge, according to the latest data released by the Nepal Rastra Bank (NRB). In mid-April 2024, the gross foreign exchange reserves soared by an impressive 24.2 percent, reaching a staggering Rs. 1911.86 billion, a significant increase from the Rs. 1539.36 billion recorded in mid-July 2023.
In US dollar terms, the growth was equally robust, with the gross foreign exchange reserves growing by 22.7 percent to reach $14.36 billion in mid-April 2024, up from $11.71 billion in mid-July 2023. This remarkable growth in foreign exchange reserves is a testament to Nepal’s strong economic fundamentals and prudent economic policies.
Breaking down the reserves, those held by the NRB surged by 25.4 percent to Rs. 1688.21 billion in mid-April 2024, up from Rs. 1345.78 billion in mid-July 2023. Meanwhile, reserves held by banks and financial institutions (excluding the NRB) saw a 15.5 percent increase, reaching Rs. 223.65 billion in mid-April 2024, compared to Rs. 193.59 billion in mid-July 2023.
Notably, the Indian currency comprised 21.6 percent of the total reserves in mid-April 2024, highlighting the strong economic ties between Nepal and its neighboring country.
Foreign Exchange Adequacy Indicators:
The robust growth in foreign exchange reserves has positioned Nepal favorably in terms of foreign exchange adequacy indicators. Based on nine months of 2023/24 imports, the foreign exchange reserves of the banking sector are sufficient to cover prospective merchandise imports for 15 months and merchandise and services imports for 12.5 months.
Additionally, the ratio of reserves-to-GDP stood at 33.5 percent, reserves-to-imports at 104 percent, and reserves-to-M2 at 28.9 percent in mid-April 2024. These figures represent a significant increase from mid-July 2023, where the ratios were 28.8 percent, 83.0 percent, and 25.0 percent, respectively.
The surge in Nepal’s foreign exchange reserves is a positive indicator of the country’s economic resilience and stability. It not only enhances Nepal’s ability to weather external shocks but also bolsters investor confidence and paves the way for sustainable economic growth. As the country continues to navigate the global economic landscape, these robust reserves serve as a buffer against potential economic uncertainties, ensuring Nepal’s financial strength and preparedness for future challenges.
