Current Macroeconomic and Financial Situation (First 5 Months, FY 2025/26, Ending Mid-December)

This report, "Current Macroeconomic and Financial Situation of Nepal," released by Nepal Rastra Bank (NRB), provides a comprehensive overview of the Nepalese economy for the first five months of the fiscal year 2025/26 (ending mid-December 2025). The data reflect an economy characterized by exceptionally low inflation, a robust external sector with record-high foreign exchange reserves, and a surge in remittance inflows, contrasted with sluggish credit growth in the private sector.

Current Macroeconomic and Financial Situation (First 5 Months, FY 2025/26, Ending Mid-December)

1. Inflation: Historical Lows

The consumer price inflation (y-o-y) plummeted to 1.63% in mid-December 2025, a dramatic drop from the 6.05% recorded during the same period last year.

Food Deflation: Prices in the food and beverage category actually decreased by 2.05%, driven by sharp price drops in vegetables, spices, and pulses.

Non-Food Inflation: This segment stood at 3.75%, with education and miscellaneous goods being the primary drivers of cost increases.

Regional Variation: Interestingly, while most of the country saw low inflation, the Mountain region experienced the highest rate at 4.18%, likely due to transport and supply chain costs.

2. External Sector: Remittance and Trade

The external sector continues to be the primary engine of Nepal's financial stability.

Remittances: Inflows surged by 35.6% to reach Rs. 870.31 billion. In US dollar terms, the growth was 29.0% ($6.50 billion).

Trade Dynamics: Exports grew by 58.2% to Rs. 116.51 billion, largely supported by soybean oil and cardamom. Imports increased by 15.8% to Rs. 766.19 billion.

The Trade Deficit widened to Rs. 649.68 billion, though the export-to-import ratio improved slightly to 15.2%.

3. Balance of Payments (BOP) and Reserves

Nepal’s foreign exchange position is currently at a record high.

BOP Surplus: The surplus reached Rs. 421.89 billion, a significant jump from last year’s Rs. 225.34 billion.

Foreign Exchange Reserves: Total reserves reached Rs. 3201.47 billion ($22.13 billion). This is sufficient to cover 18.2 months of imports—far exceeding the central bank’s usual 7-month safety target.

4. Fiscal and Monetary Status

Despite high liquidity, the government and private sector activity show signs of "cautious" movement.

Government Finance: Expenditure stood at Rs. 564.46 billion, while revenue collection was Rs. 406.30 billion, leading to a fiscal deficit.

Banking & Credit: Deposits at Banks and Financial Institutions (BFIs) grew by 13.9% (y-o-y), but private sector credit grew by only 6.6%. This indicates that while banks have plenty of money to lend, businesses are not yet borrowing aggressively.

Interest Rates: Weighted average lending rates have dropped to 7.38%, and deposit rates to 3.74%, making this one of the cheapest periods for borrowing in years. 

Indicator	Value (Mid-Dec 2025)	Change (y-o-y)
CPI Inflation	1.63%	Down from 6.05%
Remittance	Rs. 870.31 Billion	Up 35.6%
Forex Reserves	Rs. 3201.47 Billion	Record High
Import Cover	18.2 Months	Strong
BOP Surplus	Rs. 421.89 Billion	Up 87%
Lending Rate	7.38% (Avg)	Decreasing

The report highlights an economy that is "flush with cash" (high liquidity and reserves) but struggling with "demand side" issues. The extremely low inflation and high forex reserves provide a rare cushion for the government to push for more aggressive development spending in the coming months.