The NEPSE Journal
Market commentary, data deep-dives, and trading notes from the NEPSE Trading desk.
NRB’s liabilities growing by nearly one-third in a year marks a significant shift in Nepal’s monetary dynamics — one that reinforces external strength but also adds complexity to managing domestic liquidity and inflation expectations.
In essence, while the surge in deposit auction volumes reinforces Nepal’s financial stability, it also points to a deeper structural concern: money is staying inside the banking system rather than flowing into the real economy.
The government’s deposits at NRB have grown significantly, improving short-term fiscal stability but raising questions about the effectiveness of spending capacity. The trend signals better financial strength but also reflects persisting weaknesses in capital expenditure management.
Nepal’s reserve money grew by nearly 14%, largely fueled by cash in circulation and rising bank reserves at NRB. This signals improved liquidity conditions, but it also highlights risks of inflation and the country’s slow progress in reducing cash dependency.
government claims on NRB shrinking by 40.9% shows a deliberate shift away from direct central bank borrowing. The trend may improve monetary discipline but could raise future interest costs as borrowing shifts to commercial markets.
Nepal’s foreign reserves crossing Rs. 2.5 trillion is a historic achievement, reflecting the strength of remittance inflows and prudent reserve management by NRB. However, policymakers face the challenge of turning this external buffer into sustainable domestic growth.
NRB’s 42.8% surge in gold reserves highlights a prudent shift toward reserve diversification and financial security. This move strengthens Nepal’s external balance sheet, enhances its resilience to global volatility, and positions the country more securely against future economic shocks.
NRB’s foreign assets surge is a positive sign for external stability but highlights an internal liquidity crunch that policymakers must urgently address. Balancing foreign wealth with domestic credit flow will be key to maintaining economic growth in the fiscal year 2025/26.
Nepal’s broad money (M3) reached Rs. 7.87 trillion, growing 12.4% year-on-year. Strong remittance inflows and expanding foreign reserves remain the main drivers of liquidity growth, even as time deposits and credit demand show mixed trends.
Government deposits jumped 17.7% to Rs. 226.6B, while net claims on government fell 6.6%, showing stronger fiscal savings but potentially tighter liquidity conditions in Nepal’s economy.