The NEPSE Journal
Market commentary, data deep-dives, and trading notes from the NEPSE Trading desk.
Nepal’s BOP surplus reached Rs. 594.5 billion in FY 2024/25 and Rs. 89.3 billion by mid-August 2082/83, backed by strong remittances and export recovery. While this ensures short-term stability and record reserves, it is not yet sustainable structurally, as the trade deficit remains large and the economy depends on external inflows rather than domestic production.
Nepal’s current account has turned into a surplus of Rs. 409 billion in FY 2024/25, driven by record remittances and stronger exports. While this has stabilized foreign reserves, it is more of a temporary relief than a structural shift, as the economy still depends on remittance inflows and import-heavy consumption. Long-term sustainability requires industrial growth, export diversification, and higher domestic investment.
Nepal’s remittance inflows crossed Rs. 1,700 billion in FY 2024/25, stabilizing households, boosting foreign reserves, and turning the current account surplus. While this lifeline sustains Nepal’s economy, overdependence on remittances risks long-term growth, as funds largely fuel consumption and imports rather than investment. The challenge ahead is to channel remittances into productive sectors for sustainable development.
Nepal’s trade deficit persists because imports (Rs. 143B) far exceed exports (Rs. 23.9B) despite strong export growth. The imbalance is driven by a reliance on high-value imports, remittance-fueled consumption, and a weak industrial base. While exports are improving, structural reforms in industry, energy, and trade diversification are needed to reduce the deficit sustainably.
Nepal’s imports have rebounded, growing 11.4% in early 2082/83 after two years of contraction. While this widens the trade deficit, the surge reflects recovering demand and investment momentum. Strong exports and record remittances are offsetting the imbalance, helping sustain a current account surplus and external stability.
Nepal’s exports nearly doubled (+95.7%) in mid-August 2082/83, driven by stronger foreign demand, hydropower exports to India, better trade logistics, and policy incentives. While challenges remain due to a narrow export base and rising imports, the surge has strengthened the current account and external stability, signaling a more optimistic outlook for Nepal’s trade sector.
Nepal’s inflation is shifting: food prices have turned negative (-2.28%), offering relief to consumers but hurting farmers, while non-food prices are rising (3.95%), keeping urban households under pressure. This marks a structural change in Nepal’s inflation pattern, requiring policies that balance consumer relief with rural income protection and urban cost-of-living management.
Nepal’s average inflation fluctuated sharply in the last five years—from 3.60% in FY 2020/21, surging to a peak of 7.74% in FY 2022/23, and then cooling to 4.06% in FY 2024/25, with mid-August 2082/83 data showing just 1.68%. While this decline signals relief for consumers, Nepal remains vulnerable to external price shocks due to its import dependency.
Salary growth in Nepal has not consistently outpaced inflation, meaning real wage gains remain limited. In FY 2024/25, salaries grew 2.63% vs. inflation at 2.20%, offering almost no real improvement in living standards. While inflation is cooling, rising non-food costs and weak wage momentum mean Nepali workers are not substantially better off and remain dependent on remittances to sustain household consumption.
In Nepal, CPI better reflects inflation for households, as it captures living costs like food, housing, and transport, while WPI serves as an early indicator of future price pressures at the production level. With CPI at 1.68% and WPI at 2.37% in mid-August 2082/83, both suggest price stability, but CPI is more relevant to consumers, while WPI guides long-term policy and investment signals.