KATHMANDU: Nepal’s foreign exchange reserves have surged to an all-time high, yet economists warn that the funds remain underutilized in driving the country’s broader economic development.
According to the latest figures released by Nepal Rastra Bank (NRB), the country’s foreign currency reserves increased by 31.2 percent in the last fiscal year (2024/25), reaching Rs 2.67 trillion. At this level, Nepal can finance up to 15.5 months of goods and services imports, far exceeding the International Monetary Fund’s (IMF) guideline that countries should hold reserves sufficient for only three to four months of imports.
Revati Prasad Nepal, head of NRB’s Foreign Exchange Management Department, noted that the IMF recommends five to six months of import cover for countries like Nepal, which face uncertain income flows. “Currently, Nepal’s reserves are well above the comfort zone, which means the government and private sector have an opportunity to spend and invest,” he said.
The contrast with neighboring countries is stark. As of June, India’s reserves exceeded USD 700 billion, enough to sustain around 10 months of imports. Pakistan, despite having a population nearly eight times larger than Nepal, holds just USD 14.51 billion, while Sri Lanka’s reserves stand at only USD 6 billion. Bangladesh’s reserves cover imports for about five months.
The main driver of Nepal’s record reserves is remittance inflows. In the last fiscal year, Nepal received Rs 1.72 trillion through formal channels from migrant workers, alongside Rs 88.66 billion in tourism earnings and more than Rs 277 billion from exports. NRB expects remittances to remain steady this fiscal year as labor migration shows no sign of decline.
Despite this financial cushion, experts say the reserves are being spent largely on importing consumables rather than supporting productive sectors. Customs Department data show Nepal imported goods worth Rs 1.8 trillion in the last fiscal year, a 13.25 percent increase from the previous year. Much of the import bill was for consumables, many of which could be produced domestically, while capital goods and industrial equipment imports remained low.
Economists argue the reserves should be deployed to accelerate stalled national pride projects and infrastructure development. National Planning Commission member Dr. Prakash Kumar Shrestha said this is the right time for the government to issue cheaper bonds and mobilize funds for hydropower, transmission lines, and other long-delayed projects. “If the government and private sector act now, we can lock in financing at lower costs before interest rates rise again,” he said.
However, Shrestha criticized both the government’s slow implementation and the private sector’s lack of innovation. “The government has been too weak in execution, and the private sector hasn’t brought forward large, creative projects despite favorable policies,” he said.
Economic analyst Arun Kumar Subedi suggested exploring new avenues, such as legalizing cryptocurrency trading or opening the stock market to foreign institutional investors, to mobilize reserves. He also argued that Nepal should consider shifting its currency peg from the Indian rupee to the US dollar while reserves are strong, saying it would strengthen the currency and ease inflationary pressures.
“Right now, reserves are abundant and interest rates are at historic lows. This is the right time for Nepal to rethink how it anchors its currency and deploys foreign funds more productively,” Subedi said.
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