16th September 2025, Kathmandu
Based on Nepal Rastra Bank’s data for the first month of the fiscal year 2025/26 (mid-July to mid-August 2025), Nepal’s economy has had a strong start, characterized by subdued inflation, a robust external position, and a favorable fiscal situation.
NRB’s Macroeconomic And Financial Update
This positive performance is supported by strong growth in remittance inflows and a significant increase in exports.
Macroeconomic Performance at a Glance
Nepal’s macroeconomic and financial indicators for the first month of the fiscal year reflect a stable and promising start. The CPI-based inflation remained low at 1.68 percent year-on-year, indicating that consumer prices are largely stable. This low inflation rate provides a favorable environment for consumers and businesses alike, protecting purchasing power and supporting economic activities without the pressures of rising costs.
On the external front, the country’s position is particularly strong. The gross foreign exchange reserves stand at a healthy NPR 2,806.04 billion (approximately USD 20.03 billion). This is a critical indicator of economic stability, as it is sufficient to cover 16.6 months of prospective merchandise and services imports. This level of import coverage far exceeds the international benchmark of three to six months, giving the central bank significant flexibility to manage external shocks. The current account and balance of payments (BoP) both recorded substantial surpluses of NPR 78.14 billion and NPR 89.30 billion, respectively. These surpluses are a testament to the country’s solid external earnings, largely driven by a remarkable 29.9 percent increase in remittance inflows. The strong labor income from abroad has not only boosted the external balance but also injected much-needed liquidity into the economy.
Trade performance also paints a very positive picture. Exports saw a significant year-on-year increase of 95.7 percent, while imports grew at a much more modest pace of 11.4 percent. The fact that export growth is dramatically outpacing import growth is a key factor in the strong external balance and helps reduce the country’s trade deficit.
Fiscal and Monetary Conditions
In the fiscal sector, the government has started the fiscal year on a solid footing. With revenue mobilization at NPR 84.47 billion comfortably outstripping expenditure of NPR 46.31 billion, the government recorded a substantial fiscal surplus for the month. This strong fiscal performance provides the government with the necessary resources to fund its development projects and manage its financial obligations without resorting to excessive borrowing.
From a monetary standpoint, the data indicates a balanced and supportive environment. While broad money (M2) saw a slight month-on-month decrease of 0.7 percent, its year-on-year growth remains healthy at 12.5 percent. This suggests that while there might have been a minor seasonal contraction, the overall money supply in the economy is expanding at a robust rate. Similarly, deposits at banks and financial institutions (BFIs) were down 0.8 percent month-on-month but showed a strong annual growth of 12.5 percent. Private sector credit also experienced modest monthly growth of 0.1 percent and a healthy year-on-year expansion of 8.0 percent.
Interest rates remain at low levels, indicating adequate liquidity within the financial system. The weighted average inter-bank rate was 2.75 percent, while the 91-day treasury bill rate was 2.65 percent. The weighted average deposit and lending rates for commercial banks stood at 4.02 percent and 7.76 percent, respectively. These low rates make it more affordable for businesses to borrow and invest, which is crucial for stimulating economic growth. The spread between lending and deposit rates is also relatively narrow, which can be a positive sign for financial stability and efficiency.
Conclusion and Outlook
The macroeconomic and financial data for the first month of FY 2025/26 presents an overwhelmingly positive outlook for Nepal. The confluence of low inflation, a strong external position fueled by remittances and exports, and a favorable fiscal balance provides a solid foundation for the fiscal year. The low-interest-rate environment further supports economic activity and is conducive to private sector investment. This initial performance suggests that Nepal’s economy is on a path of stable growth and resilience. The central bank’s prudent monetary policy and the government’s strong fiscal management appear to be paying off, providing confidence to investors, consumers, and businesses.
For More: NRB’s Macroeconomic And Financial Update