KATHMANDU: Nepal Rastra Bank (NRB) projects Nepal’s economic growth to rebound to 7% in the upcoming fiscal year 2026/27, driven by policy reforms and rising private sector confidence, despite a slowdown to 3.85% in the current fiscal year 2025/26.

While inflation hovered at 5.04% in May 2026 due to high food and energy costs, a steady inflow of remittances has pushed foreign exchange reserves to historic highs and maintained high banking liquidity.

However, credit flow remains sluggish, and commercial banks face rising pressure on asset quality and profits.

On the fiscal side, the central bank warned that while revenues cover regular administration, capital expenditure remains deeply suppressed, with the government using a significant portion of new loans simply to service old debts rather than investing in infrastructure.