Macroeconomic Summary of First 6 Months: Inflation at 2.42 %, Remittances Rises by 39.1%, Foreign Currency Enough to Cover 18.1 Months Import

Nepal Rastra Bank, the central bank of Nepal, has unveiled the current macroeconomic and financial situation of Nepal based on Six months of data for FY 2025/26.

Overall

Nepal Rastra Bank estimated that the inflation remained at 2.42 percent on y-o-y basis. The gross foreign exchange reserves stood at Rs. 3242.45 billion. Such reserve remained 22.47 billion in USD terms. The reserve is sufficient to cover the prospective merchandise and services imports of 18.1 months.

NEPSE index stood at 2641.44 in mid January 2026 compared to 2594.13 in mid-January 2025.

Inflation

The y-o-y consumer price inflation stood at 2.42 percent in mid-January 2026 compared to 5.41 percent a year ago.

The y-o-y wholesale price inflation stood at 5.17 percent in mid-January 2026 compared to 4.01 percent a year ago. The y-o-y wholesale price inflation of consumption goods stood at 2.58 percent while intermediate goods and capital goods stood at 7.07 percent and 2.58 percent respectively. The y-o-y wholesale price index of construction material increased 3.48 percent in the review month.

Import and Export

During the six months of 2025/26, merchandise exports increased 43.8 percent to Rs.142.02 billion compared to a growth of 31.8 percent in the same period of the previous year. Destination-wise, exports to India and other countries increased 57.0 percent and 10.7 percent respectively whereas exports to China decreased 66.7 percent. Exports of soyabean oil, cardamom, palm oil, jute goods, and shoes and sandals, among others, increased, whereas exports of zinc sheet, particle board, tea, woollen carpet, handicraft goods and other handicrafts, among others, decreased in the review period.

During the six months of 2025/26, merchandise imports increased 14.2 percent to Rs.939.02 billion compared to a growth of 7.1 percent a year ago. Destination-wise, imports from India, China, and other countries increased 5.9 percent, 22.1 percent, and 32.4 percent respectively. Imports of crude soyabean oil, chemical fertilizer, transport equipment, vehicle and spare parts, silver and gold among others increased whereas imports of hot rolled sheet in coil, edible oil, garlic, pulses and oil seeds products among others decreased in the review period.

Total trade deficit increased 10.1 percent to Rs.797.00 billion during the six months of 2025/26. Such a deficit had increased 4.4 percent in the corresponding period of the previous year. The export-import ratio increased to 15.1 percent in the review period from 12.0 percent in the corresponding period of the previous year.

Services and Remittance

Net services income remained at a deficit of Rs.41.55 billion during the review period. Such income had a deficit of Rs.29.47 billion in the same period of the previous year. 

Remittance inflows increased 39.1 percent to Rs.1062.93 billion in the six months of 2025/26 compared to an increase of 4.2 percent in the same period of the previous year. During mid December to mid-January (Poush month), remittance inflows stood at Rs. 192.62 billion. In the same period of the previous year, such inflows were Rs. 122.44 billion.

Inter-bank Transaction

In the review period, BFIs inter-bank transactions amounted Rs.470.29 billion on a turnover basis, including Rs.396.41 billion among commercial banks, and Rs.73.88 billion among other financial institutions (excluding transactions among commercial banks). In the corresponding period of the previous year, such transaction was Rs.837.98 billion, including Rs.745.91 billion among commercial banks and Rs.92.07 billion among other financial institutions (excluding transactions among commercial banks).

Price of Oil and Gold

The price of oil (Crude Oil Brent) in the international market decreased 16.7 percent to US dollar 68.87 per barrel in mid-January 2026 from US dollar 82.69 per barrel a year ago. The price of gold increased 72.6 percent to US dollar 4606.50 per ounce in mid-January 2026 from US dollar 2669.50 per ounce a year ago.

Foreign Exchange Reserves and Adequacy Indicator

Gross foreign exchange reserves increased 21.1 percent to Rs.3242.45 billion in mid January 2026 from Rs.2677.68 billion in mid-July 2025. In US dollar terms, the gross foreign exchange reserves increased 15.2 percent to 22.47 billion in mid January 2026 from 19.50 billion in mid July 2025.

Of the total foreign exchange reserves, the reserves held by NRB increased 19.4 percent to Rs.2884.08 billion in mid January 2026 from Rs. 2414.64 billion in mid-July 2025. Reserves held by banks and financial institutions (except NRB) increased 36.2 percent to Rs.358.37 billion in mid-January 2026 from Rs.263.04 billion in mid July 2025. The share of Indian currency in total reserves stood at 22.3 percent in mid-January 2026.

Based on the imports of the six months of 2025/26, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 21.4 months, and merchandise and services imports of 18.1 months. The ratio of reserves-to-GDP, reserves-to-imports and reserves-to-M2 stood at 53.1 percent, 150.7 percent, and 40.5 percent respectively in mid-January 2026. Such ratios were 43.8 percent, 128.1 percent, and 34.1 percent respectively in mid-July 2025.

Exchange Rate

Nepalese currency vis-à-vis the US dollar depreciated 4.9 percent in mid-January 2026 from mid-July 2025. It had depreciated 2.8 percent in the same period of the previous year. The buying exchange rate per US dollar stood at Rs.144.01 in mid-January 2026, compared to Rs.137 in mid-July 2025.

Nepal Government Expenditure and Revenue

According to the Ministry of Finance, Financial Comptroller General Office (FCGO), the total expenditure of the Nepal Government stood at Rs. 690.22 billion during the six months of 2025/26. Recurrent expenditure, capital expenditure, and financial expenditure amounted to Rs. 487.14 billion, Rs. 49.43 billion, and Rs. 153.65 billion, respectively, during the review period

Cash Balance of Government

Cash Balance at various accounts of the GoN maintained with NRB remained Rs.346.37 billion (including Provincial Governments and Local Government Account) in mid-January 2025. Such a balance was Rs. 149.83 billion in mid-July 2025.

Banking

Domestic credit decreased 0.3 percent in the review period compared to an increase of 1.2 percent in the corresponding period of the previous year. On y-o-y basis, domestic credit increased 4.2 percent in mid-January 2026.

Monetary sector's claims on the private sector increased 3.8 percent in the review period compared to an increase of 5.4 percent in the corresponding period of the previous year. On y-o-y basis, such claims increased 6.5 percent in mid-January 2026.

Deposits at Banks and Financial Institutions (BFIs) increased by 5.7 percent (Rs. 417.48 billion), reaching Rs.7,681.35 billion in the review period, compared to an increase of 3.7 percent (Rs.239.06 billion) in the corresponding period of the previous year. On y-o-y basis, deposits at BFIs expanded 14.8 percent in mid-January 2026.

Private sector credit from BFIs increased by 3.6 percent (Rs.197.47 billion) reaching Rs. 5,695.17 billion in the review period compared to an increase of 5.2 percent (Rs.265.56 billion) in the corresponding period of previous year. On y-o-y basis, credit to the private sector from BFIs increased 6.7 percent in mid-January 2026.

Interest Rates

The average base rate of commercial banks, development banks and finance companies stood 5.29 percent, 7.60 percent, and 7.98 percent respectively in mid-Jan 2025/26. The average base rate of commercial banks, development banks and finance companies were 6.65 percent, 8.61 percent, and 9.50 percent respectively in the corresponding month a year ago.

Balance of Payments

Balance of Payments (BOP) remained at a surplus of Rs.501.24 billion in the review period. Such surplus was Rs.249.26 billion in the previous year. In US Dollar terms, the BOP remained in a surplus of Rs. 3.54 billion in the review period, compared to a surplus of Rs. 1.85 billion in the same period of the previous year.