Nepal Foreign Exchange Reserves (Mid-March 2026): Full Analysis
Nepal's foreign exchange reserves are a critical indicator of external economic health. With a current account surplus of Rs. 552,847.68M in 8 months of FY 2025/26, Nepal's reserves have been growing, backed by record remittance inflows.
Reserve Position Context
From the NRB's BoP data, Nepal's reserve assets for 8M 2024/25 showed Rs. 306,877.76M in reserve accumulation. With the current account surplus nearly tripling in 2025/26, reserves are estimated to have grown significantly.
Key factors supporting reserve growth in 2025/26:
- Current account surplus of Rs. 552,847.68M — nearly 3x the prior year
- Workers' remittances at Rs. 1,449,652.62M (+37.67%)
- Manageable trade deficit growth (+11.22%) relative to remittance growth (+37.67%)
What Do Forex Reserves Do?
Nepal's foreign exchange reserves serve several critical functions:
- Import cover: Reserves must cover at least 7 months of merchandise imports per NRB's monetary policy target. With 8-month imports at Rs. 1,289,250.23M (monthly avg ~Rs. 161,156M), Nepal needs adequate buffers.
- Currency defense: NRB uses reserves to prevent excessive rupee volatility against the Indian rupee (which is pegged) and other currencies
- Debt servicing: Ensures Nepal can meet external debt obligations
- Confidence signal: Higher reserves signal macroeconomic stability to foreign investors and rating agencies
Reserve Composition
Nepal's reserves are held by:
- Nepal Rastra Bank: The majority of reserves — currency, deposits, and securities
- Commercial banks (BFIs): A portion of reserves held by deposit-taking institutions
From 2024/25 8M data, NRB held Rs. 218,700.86M while commercial banks held Rs. 86,170.45M of the reserve assets.
Import Cover Calculation
With 8-month imports of Rs. 1,289,250.23M:
- Monthly average import: Rs. 161,156.28M
- If reserves are approximately Rs. 1.8-2.0 trillion (estimated based on BoP surplus accumulation), import cover would be approximately 11-12 months — well above the NRB's 7-month target
Risks to Reserves
- Remittance slowdown — the primary source of reserve accumulation
- Oil price spike — petroleum imports are Rs. 185,208M (14.37% of imports), highly sensitive to global prices
- Capital flight — any loss of confidence could trigger outflows
- Indian rupee depreciation — since NPR is pegged to INR, an INR decline affects Nepal's USD reserves
Conclusion
Nepal's forex reserves are in a comfortable position as of mid-March 2026, supported by the strongest current account surplus in recent years. The reserve adequacy exceeds NRB targets, providing a buffer against external shocks. However, the remittance-dependent nature of reserve accumulation remains a structural vulnerability.