February 6: There has been a significant improvement in the external sector indicators of the economy during the first half of the current fiscal year.

According to the Current Macroeconomic and Financial Situation Report of the country published by the Nepal Rastra Bank on Tuesday, the country’s foreign currency reserves can support the import of goods and services for one year till the end of January of the current year.

The report states: “Based on the imports of six months of 2023/24, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 14.5 months, and merchandise and services imports of 12.1 months.”

According to the NRB, the gross foreign exchange reserves increased 18.0 percent to Rs 1816.57 billion in mid-January 2024 from Rs 1539.36 billion in mid-July 2023. In the US dollar terms, the gross foreign exchange reserves increased 16.9 percent to 13.69 billion in mid-January 2024 from 11.71 billion in mid-July 2023. This is the highest foreign exchange reserve recorded till date. The foreign currency reserve is larger than the size of Nepal's annual budget.

Of the total foreign exchange reserves, reserves held by NRB increased 18.9 percent to Rs 1600.23 billion in mid-January 2024 from Rs 1345.78 billion in mid-July 2023. Likewise, the reserves held by banks and financial institutions (except NRB) increased 11.8 percent to Rs 216.35 billion in mid-January 2024 from Rs 193.59 billion in mid-July 2023. The share of Indian currency in total reserves stood at 22.5 percent in mid- January 2024, according to the report.

The ratio of reserves-to-GDP, reserves-to-imports and reserves-to-M2 stood at 33.8 percent, 100.9 percent and 27.7 percent respectively in mid-January 2024. Such ratios were 28.6 percent, 83 percent and 25 percent respectively in mid-July 2023.

The current account remained at a surplus of Rs 161.62 billion in the review period against a deficit of Rs 35.57 billion in the same period of the previous year. In the US Dollar terms, the current account registered a surplus of 1.21 billion in the review period against a deficit of 279.6 million in the same period last year.

In the review period, capital transfer decreased 30 percent to Rs 3.11 billion and net foreign direct investment (FDI) remained a positive of Rs 4.53 billion. In the same period of the previous year, capital transfer amounted to Rs 4.43 billion and the net FDI amounted to Rs 749.4 million.

Balance of Payments (BOP) remained at a surplus of Rs.273.52 billion in the review period against
a surplus of Rs.92.15 billion in the same period of the previous year.