KATHMANDU, April 5: Nepal's balance of payments (BoP) surplus reached Rs 327.55 billion as of mid-March, driven primarily by a consistent increase in overall financial inflows compared to outflows from the country. This surge was predominantly attributed to the continuous rise in remittance earnings.

The Current Macroeconomic and Financial Situation Report of Nepal unveiled by Nepal Rastra Bank (NRB) on Thursday shows that the country’s BoP surplus increased more than double from the surplus of Rs 142 billion in the same period last year. In the US dollar terms, the BoP remained at a surplus of 2.46 billion, up from a surplus of 1.08 billion in the review period.

The BoP records a country’s financial transactions with the rest of the world under three subheadings — current account, capital account and financial account. It is a major indicator to show a country’s net balance in terms of foreign currency reserves, which is an important factor for import-based countries like Nepal.

Over the period, the current account balance has also improved, taking it to a surplus of Rs 166.87 billion in the first eight months from a deficit of Rs 55.28 billion in the same period last year. In the US dollar terms, the current account registered a surplus of 1.25 billion against a deficit of 429.3 million in the review period.

At a time when the capital transfer and foreign direct investment are not performing well, the inflow of remittance has mainly helped in the improvement in the BoP status of the landlocked country. According to the NRB, the capital transfer decreased from Rs 5.58 billion to Rs 3.89 billion, while net foreign direct investment increased from Rs 1.17 billion to Rs 5.63 billion in the review period.

During mid-July 2023 and mid-March this year, remittance inflows increased 21 percent to Rs 961.22 billion. The growth rate was however less compared to an increase of 25.3 percent in the same period last year.

Likewise, the net transfer increased 18.9 percent to Rs 1,041.96 billion in the review period. Such a transfer increased 23.9 percent in the same period last year.

With an improvement of overall BoP, the country’s gross foreign currency reserves increased 21.7 percent to Rs 1,872.82 billion as of mid-March 2024, up from Rs 1,539.36 billion in mid-July 2023. In US dollar terms, the country now has foreign currency reserve of 14.14 billion. According to the central bank, the amount is sufficient to cover the prospective merchandise imports of 14.8 months, and merchandise and services imports of 12.4 months.

Published on: 5 April 2024 | My Republica