First 3-Month Macroeconomic Highlights: Inflation at 1.47%; Remittance Surges 35.4%, Foreign Currency Enough to Cover 16.4 Months Import

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

Overall

Nepal Rastra Bank estimated that the inflation remained at 1.47 percent on a year-over-year basis. The gross foreign exchange reserves stood at 2979.81 billion in USD terms, whereas the total imports and exports increased 19.8 percent and 89.6 percent, respectively.

The NEPSE index stood at 2,487.17 in mid-October 2025 compared to 2,742.88 in mid-October 2024.

Inflation

The y-o-y consumer price inflation stood at 1.47 percent in mid-October 2025 compared to 4.82 percent a year ago.

The y-o-y wholesale price inflation of consumption goods decreased 1.24 percent, while intermediate goods and capital goods stood at 2.71 percent and 2.40 percent, respectively. The y-o-y wholesale price index of construction material increased 3.88 percent in the review month.

Import and Export

During the three months of 2025/26, merchandise exports increased 89.6 percent to Rs. 72.78 billion against a decrease of 6.1 percent in the same period of the previous year. Destination-wise, exports to India and other countries increased 137.9 percent and 3.8 percent, respectively, whereas exports to China decreased 66.1 percent. Exports of soyabean oil, palm oil, jute goods, cardamom, and polyester, yarn and thread, among others, increased, whereas exports of zinc sheet, particle board, tea, woolen carpet, and oil cakes, among others, decreased in the review period.

During the first three months of the 2025/26 fiscal year, merchandise imports rose by 19.8 percent, reaching Rs. 468.08 billion, compared to a 4.2 percent decline in the same period last year. By destination, imports from India, China, and other countries increased by 7.5 percent, 33.4 percent, and 46.5 percent, respectively. Imports of crude soybean oil, chemical fertilizers, gold, transport equipment, vehicles and spare parts, and telecommunication equipment and parts saw a rise, whereas imports of hot-rolled sheet in coil, edible oil, garlic, oilseeds, and petroleum products recorded a decline during the review period.

The total trade deficit rose by 12.2 percent, reaching Rs. 395.30 billion during the first three months of 2025/26, compared to a 4.0 percent decline in the same period last year. Meanwhile, the export-import ratio improved to 15.5 percent in the review period, up from 9.8 percent in the corresponding period of the previous year.

Services and Remittance

Net services income recorded a deficit of Rs. 32.68 billion during the review period, compared to a deficit of Rs. 23.01 billion in the same period last year.

Remittance inflows rose by 35.4 percent, reaching Rs. 553.31 billion during the first three months of 2025/26, compared to an 11.9 percent increase in the same period last year. Between mid-September and mid-October (Ashoj month), remittances totaled Rs. 201.22 billion, up from Rs. 144.17 billion in the same period of the previous year.

Inter-bank Transaction

During the review period, BFIs’ inter-bank transactions totaled Rs. 295.43 billion on a turnover basis, comprising Rs. 242.79 billion among commercial banks and Rs. 52.64 billion among other financial institutions (excluding commercial bank transactions). In the same period last year, total inter-bank transactions amounted to Rs. 402.45 billion, including Rs. 371.25 billion among commercial banks and Rs. 31.2 billion among other financial institutions.

Price of Oil and Gold

The price of crude oil (Brent) in the international market fell by 17.1 percent, reaching $61.08 per barrel in mid-October 2025, down from $73.65 per barrel a year earlier. Meanwhile, the price of gold rose by 59.3 percent, climbing to $4,261.95 per ounce from $2,675.25 per ounce during the same period last year.

Foreign Exchange Reserves and Adequacy Indicator

Gross foreign exchange reserves rose by 11.3 percent, reaching Rs. 2,979.81 billion in mid-October 2025, up from Rs. 2,677.68 billion in mid-July 2025. In US dollar terms, the reserves increased by 8.7 percent, totaling $21.21 billion in mid-October 2025, compared to $19.50 billion in mid-July 2025.

Of the total foreign exchange reserves, those held by the NRB rose by 10.5 percent to Rs. 2,667.7 billion in mid-October 2025, up from Rs. 2,414.64 billion in mid-July 2025. Reserves held by banks and financial institutions (excluding NRB) increased by 18.7 percent, reaching Rs. 312.1 billion in mid-October 2025 from Rs. 263.04 billion in mid-July 2025. The share of Indian currency in total reserves was 24 percent in mid-October 2025.

Based on imports during the first three months of 2025/26, the banking sector’s foreign exchange reserves are sufficient to cover 19.9 months of merchandise imports and 16.4 months of combined merchandise and services imports. In mid-October 2025, the reserves-to-GDP, reserves-to-imports, and reserves-to-M2 ratios stood at 48.8 percent, 136.6 percent, and 36.8 percent, respectively, compared to 43.8 percent, 128.1 percent, and 34.1 percent in mid-July 2025.

Exchange Rate

The Nepalese currency depreciated by 2.3 percent against the US dollar in mid-October 2025 compared to mid-July 2025, while it had fallen 0.6 percent during the same period last year. The buying exchange rate per US dollar was Rs. 140.22 in mid-October 2025, up from Rs. 137 in mid-July 2025.

Nepal Government Expenditure and Revenue

According to the Ministry of Finance, Financial Comptroller General Office (FCGO), the total government expenditure of Nepal amounted to Rs. 364.59 billion during the first three months of 2025/26. During the review period, recurrent expenditure totaled Rs. 256.81 billion, capital expenditure reached Rs. 19.18 billion, and financial expenditure stood at Rs. 88.60 billion.

Cash Balance of Government

The cash balance in various accounts of the Government of Nepal maintained with the NRB (including Provincial and Local Government accounts) stood at Rs. 174.92 billion in mid-October 2025, up from Rs. 130.73 billion in mid-July 2025.

Banking

Domestic credit rose by 0.5 percent during the review period, compared to a 1.7 percent increase in the same period last year. On a year-on-year basis, domestic credit grew by 4.9 percent in mid-October 2025.

The monetary sector’s net claims on the government fell by 4.9 percent during the review period, compared to a 3.3 percent decline in the corresponding period of the previous year. On a year-on-year basis, such claims decreased by 4.9 percent in mid-October 2025. Monetary sector claims on the private sector rose by 1.5 percent during the review period, compared to a 2.8 percent increase in the same period last year. On a year-on-year basis, these claims grew by 6.8 percent in mid-October 2025.

Deposits at Banks and Financial Institutions (BFIs) grew by 3.0 percent (Rs. 218.72 billion), reaching Rs. 7,482.59 billion during the review period, compared to a 2.6 percent increase (Rs. 170.00 billion) in the same period last year. On a year-on-year basis, deposits at BFIs expanded by 13.0 percent in mid-October 2025.

Private sector credit from BFIs rose by 1.5 percent (Rs. 82.93 billion), reaching Rs. 5,580.64 billion during the review period, compared to a 2.5 percent increase (Rs. 128.65 billion) in the same period last year.

Interest Rates

The average base rates of commercial banks, development banks, and finance companies stood at 5.56 percent, 7.92 percent, and 8.48 percent, respectively, in the third month of 2025/26. In the same month a year earlier, the average base rates were 7.29 percent, 9.13 percent, and 10.35 percent, respectively.

Balance of Payments

The Balance of Payments (BOP) recorded a surplus of Rs. 264.03 billion in the review period, compared to a surplus of Rs. 184.99 billion in the same period last year. In US dollar terms, the BOP showed a surplus of $1.88 billion, up from $1.38 billion in the corresponding period of the previous year.