Nepal's Foreign Exchange Reserves & Balance of Payments Explained

Foreign exchange reserves are the pool of foreign-currency assets a country holds to pay for imports, service external debt, and defend its currency. In Nepal these are held by the banking sector — chiefly the central bank, Nepal Rastra Bank (NRB), plus commercial banks and financial institutions — and are made up of convertible foreign currencies (US dollars, euros and others), Indian currency (INR), gold, Special Drawing Rights (SDRs) and Nepal's reserve position at the International Monetary Fund (IMF). Because Nepal runs a large, persistent trade deficit, these reserves are the buffer that keeps the country able to pay foreign suppliers even when it exports far less than it buys.

The balance of payments (BoP) is the accounting record of all economic transactions between Nepal and the rest of the world over a period, usually a fiscal year. It has three main parts: the current account (trade in goods and services, primary income, and secondary income such as remittances), the capital account (capital transfers), and the financial account (foreign direct investment, loans and changes in reserves). By construction the accounts balance; what commentators call a 'BoP surplus' or 'BoP deficit' is the net change in the country's foreign exchange reserves for that year.

In plain terms: a BoP surplus means more foreign currency flowed into Nepal than flowed out, so reserves rose; a BoP deficit means the opposite, and reserves fell. NRB publishes these numbers in its monthly and annual 'Current Macroeconomic and Financial Situation' reports, which are the primary reference every time the media reports Nepal's forex reserve position.

According to NRB's annual macroeconomic report for fiscal year 2024/25 (2081/82), gross foreign exchange reserves rose 31.2 percent to Rs 2,677.68 billion in mid-July 2025 (Asar-end 2082), up from Rs 2,041.10 billion a year earlier. In US-dollar terms reserves increased 27.7 percent to USD 19.50 billion from USD 15.27 billion. Of this, NRB itself held about Rs 2,414.64 billion and banks and financial institutions held the remainder, and Indian currency made up roughly 23.1 percent of total reserves.

The balance of payments recorded a surplus of Rs 594.54 billion (USD 4.37 billion) in 2024/25, larger than the Rs 502.49 billion surplus of the previous year. The current account also stayed firmly in surplus at Rs 409.20 billion (USD 3.01 billion), nearly double the Rs 221.71 billion surplus of 2023/24. These back-to-back surpluses are why reserves climbed to record levels.

The surpluses were driven overwhelmingly by remittances. Money sent home by Nepali workers abroad reached Rs 1,723.27 billion (USD 12.64 billion) in 2024/25, up 19.2 percent in rupee terms. This inflow more than offset a merchandise trade deficit of Rs 1,527.09 billion, where imports of Rs 1,804.12 billion dwarfed exports of Rs 277.03 billion — even though exports themselves jumped 81.8 percent that year, partly on soybean-oil re-exports.

Note that provisional interim figures released with the Monetary Policy 2025/26 (for example a BoP surplus around Rs 491 billion and a current-account surplus around Rs 307 billion) differ from these final annual numbers. The annual report figures above are the revised, authoritative ones and should be preferred.

Import cover, or 'months of imports', is the single most-quoted forex indicator in Nepal. It answers a simple question: if all foreign earnings suddenly stopped, how many months of imports could the existing reserves pay for? It is calculated by dividing the stock of reserves by the average monthly import bill. A higher number means a thicker safety cushion.

NRB publishes two versions. One measures cover against merchandise (goods) imports only; the other against merchandise-and-services imports combined, which is the stricter and more commonly cited figure. At the end of 2024/25, reserves were sufficient to cover 18.2 months of prospective merchandise imports and 15.4 months of goods-and-services imports — an exceptionally comfortable position by both Nepali and international standards.

The internationally accepted rule of thumb is that a country should hold at least three months of import cover, and Nepal's own legal and policy benchmark requires reserves adequate to finance at least seven months of merchandise imports. With cover running well above 15 months in 2025, Nepal was holding far more than either threshold, which has prompted debate about whether some 'excess' reserves could be invested more productively, for example through a sovereign wealth fund.

The Nepali rupee (NPR) is not a freely floating currency. Since 12 February 1993 it has been pegged to the Indian rupee (INR) at a fixed rate of NPR 1.60 = INR 1 — that is, 100 Indian rupees equal 160 Nepali rupees. Because India is by far Nepal's largest trading partner and the two economies are deeply linked, this peg imports monetary stability from India and keeps cross-border trade and remittance flows predictable.

A fixed peg only works if the central bank can always supply foreign currency on demand at the official rate. That is exactly what reserves and import cover measure. When reserves are ample, NRB can comfortably meet every request to convert rupees into dollars or Indian currency, defend the peg, and keep inflation and interest rates aligned with India. When reserves shrink toward a few months of cover, confidence in the peg weakens and the central bank is forced to ration foreign currency.

This is why a falling import-cover number makes headlines: it is an early-warning gauge of whether Nepal can keep honouring the peg and paying its import bills. Strong reserves also give NRB room to run a supportive monetary policy at home without triggering a currency crisis, whereas thin reserves force tightening, import curbs and credit restrictions.

Nepal's healthy 2024/25 position is best understood against the stress of fiscal year 2021/22 (2078/79), when the external sector nearly tipped into crisis. As the economy reopened after COVID-19, imports surged while remittances softened, and the balance of payments swung to a deficit of about Rs 255.26 billion — a sharp reversal from the small surplus of the year before. The current account deficit ballooned to roughly Rs 623 billion.

Gross reserves fell to about USD 9.53 billion by mid-July 2022, and import cover dropped to around 6.9 months of goods-and-services imports (about 7.8 months for merchandise), brushing against the seven-month policy floor. With reserves draining, NRB and the government imposed emergency measures: in April 2022 they banned or restricted imports of luxury and non-essential goods such as ready-made liquor, cigarettes, high-end vehicles and certain electronics, and tightened letters of credit.

Those curbs, together with a rebound in remittances and tourism and cooling global commodity prices, restored the surpluses seen since 2022/23. The episode is a reminder that Nepal's reserves depend heavily on volatile remittance inflows and on disciplined import management, and that today's comfort can erode quickly if either weakens.

Beyond months of import cover, NRB tracks several adequacy ratios that put reserves in proportion to the size of the economy and the banking system. The reserves-to-GDP ratio expresses total reserves as a share of gross domestic product; in mid-July 2025 it stood at 43.8 percent, up from 35.8 percent a year earlier, signalling that Nepal held foreign assets equal to nearly half of its annual output.

The reserves-to-imports ratio reached 128.1 percent in mid-July 2025 (from 108.6 percent), meaning reserves exceeded a full year's import bill. The reserves-to-broad-money (M2) ratio, which gauges how much of domestic money supply is backed by foreign assets, rose to 34.1 percent from 29.3 percent. Rising values across all three ratios indicate strengthening external resilience.

These ratios are useful because import cover alone can be distorted by swings in the import bill. Read together, the 2024/25 figures confirmed that Nepal's external buffers were not just large in absolute rupees but also strong relative to the economy — the opposite of the fragile picture in 2021/22. Analysts nonetheless caution that reserves built on remittances and re-exports, rather than a competitive export base, remain structurally vulnerable.

Nepal's official external-sector data comes from Nepal Rastra Bank, not from private trackers. NRB releases a 'Current Macroeconomic and Financial Situation' report every month (based on cumulative data through each Nepali month) and a comprehensive annual edition after the fiscal year closes in mid-July. Each report carries the reserve stock in both rupees and US dollars, months of import cover, the BoP and current-account balances, remittances and trade figures.

When reading a headline, always check three things: the reference date (Nepali fiscal years run mid-July to mid-July, so mid-July 2025 corresponds to the end of 2024/25 / 2081/82), whether a figure is provisional (P) or revised (R), and whether import cover refers to merchandise only or to goods-and-services. Provisional monthly numbers are frequently revised in the annual report, which is why interim and final figures can differ.

For context, pair the forex and BoP data with related indicators — remittance inflows, the merchandise trade deficit, tourism earnings and the exchange-rate peg. This external-sector page complements amarnepal's currency hub, which explains the rupee, denominations and the day-to-day mechanics of the NPR–INR peg, rather than repeating them.