Sound Economic Indicators

The flip side of a small economy like ours is that it is prone to internal and external shocks. The negative repercussions continue to linger for a longer period, slowing the recovery process. Financial authorities still argue that Nepal has not come out of the impact of the COVID-19 pandemic. This sounds bizarre because many nations have already left the scars of the pandemic behind but Nepal has yet to deal with its effects. Before the formation of the present government, the country also suffered from frequent government changes, which have resulted in policy inconsistencies, incomplete development projects and low capital spending. With the September Gen Z revolt, the pace of economic growth has been further delayed. The ongoing conflict in the Middle East disrupted supplies of oil, causing fuel prices to soar. These factors impelled the World Bank to downgrade economic growth to 2.3 per cent in 2026, down from the previous 4.6 per cent. 

Although the economy at the micro level is not up to the mark, the current macroeconomic scenario is positive, according to the Nepal Rastra Bank's data for the first ten months of the current fiscal year 2025/26. It is boosted by soaring remittance inflows, expanding foreign exchange reserves and significant surpluses in both the current account and balance of payments (BoP). The gross foreign exchange reserves increased by 38.3 per cent to Rs. 3704.55 billion in mid-May 2026 from Rs. 2677.68 billion in mid-July 2025. In US dollar terms, the gross foreign exchange reserves increased by 24 per cent to 24.19 billion in mid-May 2026 from 19.50 billion in mid-July 2025. The foreign exchange reserves of the banking sector can cover the prospective merchandise imports of 22.6 months, and merchandise and services imports of 19.2 months. An increase in foreign reserves cushions global headwinds and ensures macroeconomic stability. They boost the confidence of investors and provide the NRB flexibility in exchange rate management. 

Nepal's economy is based on imports and remittances. Even if remittances are not a reliable means, the country has no other option but to utilise remittances in the productive sector. In the last ten months, remittance inflows have increased by 41.2 per cent compared to 13.3 per cent in the same period last year. Around Rs. 1,916.90 billion in remittances has flowed into the country. Altogether 335,510 Nepali workers have taken first-time approval for foreign employment while the number of renewed entries stands at 326,364. In the same period of the previous year, such numbers were 405,610 and 280,314, respectively. The surge in remittance indicates the people's attraction to foreign jobs while strengthening reserves and the import economy.

The NRB shows the surplus of BoP at Rs. 863.56 billion, while it was Rs. 438.52 billion in the previous year. Similarly, the current account remained in surplus at Rs. 729.28 billion, compared to a surplus of Rs. 272.53 billion last year. In yet another positive sign, foreign direct investment (FDI) inflows (equity only) have grown to Rs. 16.96 billion, up from Rs. 10.58 billion in the corresponding period of the previous year. FDI is critical to implementing big projects and employment generation. The FDI flow has not been satisfactory over the years. With the stable government in place, there will not only be growth in the FDI amount but the investors will fulfil their commitment to injecting money into the country. The present government has set out an ambitious economic agenda and the macroeconomic stability supports it in translating its vision into reality.