KATHMANDU: As of the end of Jestha 2082 BS (mid-June 2025), Nepal Rastra Bank’s report covering the first eleven months of the Nepali fiscal year 2081/82 (mid-July 2024 to mid-June 2025) highlights contrasting trends in global commodity markets influencing Nepal’s macroeconomic environment, with only the month of Asar remaining in the fiscal year.

Crude oil prices fell significantly due to declining global demand, while gold prices surged as investors sought safe-haven assets. Meanwhile, the Nepali rupee depreciated against the US dollar, influenced by inflation differentials and capital flows.

These shifts have mixed implications—lower oil prices ease domestic inflation, but rising gold prices may widen the trade deficit.

This explainer will help readers understand how these global trends affect Nepal’s economy and everyday financial decisions.

What’s the current inflation rate and what are the main drivers?

The annual consumer price inflation up to Jestha 2082 stands at 2.72%, a notable decrease from 4.17% in the same period last year. This moderation in inflation reflects subdued increases in both food and non-food items.

Specifically, the food and beverage sub-index rose only 0.54%, down dramatically from last year’s 5.85%—likely due to decreased vegetable prices (with vegetables showing a 7.04% year-on-year deflation). Meanwhile, non-food and service inflation is 3.94%, slightly above last year’s 3.07%.

Key contributors to inflation include staples like ghee and oil (+10.06%), non-alcoholic beverages (+5.13%), and fruits (+3.51%).

These upward pressures were partially offset by declining prices for vegetables, spices, and meat.

Regional variations show Koshi Province recording the highest inflation at 4.18%, while Bagmati sits lowest at 2.29%. Rural inflation is slightly higher (2.90%) than urban (2.66%). Overall, the subdued inflation reflects stable food supply, modest demand growth, and effective monetary control.

How have exports, imports, and the trade balance performed?

During the first 11 months of FY 2081/82, exports surged by 77.8%, reaching NPR 247.6 billion—recovering from last year’s contraction. India, the largest export destination, saw a staggering growth of 112.6%, followed by minor increases to China and other countries. Export growth was driven by pulses, polyester yarn, jute goods, tea, and hides. Meanwhile, items like palm oil, zinc sheet, juice, ready-made garments, and spices saw declines.

On the import side, imports increased by 13.1% to NPR 1,644.8 billion. Major increases came from China (+15.3%) and other nations. Imported goods included crude oil, rice, vehicles and spare parts, edible oils, and sponge iron; petroleum products, gold, electrical equipment, and fertilizer imports declined.

The trade deficit widened 6.3%, reaching NPR 1,397.2 billion. However, the export-to-import ratio improved from 9.6% to 15.1%, indicating progress in narrowing the imbalance. Despite a larger deficit, increased exports and remittances buffer external pressures.

What’s the status of remittances and services?

Nepal continues to rely heavily on remittances. In this period, remittance inflows grew by 15.5%, totaling NPR 1,532.9 billion. In US dollar terms, remittances rose 12.7%, reaching USD 11.25 billion. The increase reflects both a rising number of migrant workers and rising global wages.

Secondary income (mainly personal transfers) reached NPR 1,668.3 billion, which translates into substantial household income and helps fuel domestic consumption.

On the services front, while tourism earnings climbed 6.9% to NPR 82.2 billion, net service income remained in deficit at NPR 9.733 billion, worsening from last year. This suggests Nepal still pays more for outbound services than it earns. The deficit may be due to education, healthcare, or other service outflows. Additionally, overseas labor permits increased, with 452,324 new and 308,067 renewals, indicating sustained migration trends.

What’s the outlook on the balance of payments and foreign reserves?

Nepal’s current account recorded a surplus of NPR 30.731 billion, up from NPR 20.038 billion last year. Combined with remittances, foreign investment, and secondary transfers, the overall balance of payments surplus reached NPR 49.144 billion (USD 362 million). This strong surplus underscores Nepal’s external resilience.

As a result, foreign exchange reserves have grown substantially: 25.9% to NPR 2,569.4 billion (USD 18.65 billion). Notably, the Nepal Rastra Bank holds NPR 2,274.5 billion (+23%), while other banks hold NPR 294.9 billion (+53%). This covers 17.6 months of goods imports, 14.7 months of goods and services, and equates to 42.1% of GDP—a robust buffer.

What movements have occurred in commodity prices and the exchange rate?

Global commodity prices have exhibited mixed trends in recent months. Crude oil prices declined significantly by 12.5%, falling from USD 81.49 to USD 71.29 per barrel. This drop likely reflects a weakening in global demand and increased supply expectations. In contrast, gold prices surged by 47.4%, reaching USD 3,435.35 per ounce. This sharp increase indicates heightened investor appetite for safe-haven assets amid global uncertainties.

In the foreign exchange market, the Nepali rupee depreciated by 2.97% against the US dollar, with the exchange rate moving from NPR 133.36 to NPR 137.44 per USD.

This depreciation is broadly consistent with prevailing inflation differentials and ongoing capital flow dynamics. Despite the weakening of the currency, the simultaneous decline in international oil prices is helping to moderate imported inflationary pressures, thereby supporting domestic price stability.

However, the sharp rise in gold prices could influence investment behavior and increase the demand for imported gold, potentially affecting the trade balance. Overall, these global commodity and currency movements present both opportunities and risks for Nepal’s macroeconomic outlook.

How is the government’s fiscal position looking?

Nepal’s central government spent NPR 1,282.94 billion, funded by NPR 1,016.09 billion in revenue (including central, provincial, and local government shares). Expenditures split as NPR 851.58 billion current, NPR 143.39 billion capital, and NPR 287.97 billion financial allocations.

Revenue comprised NPR 918 billion in taxes and NPR 98.8 billion non-tax receipts. The resulting cash balance improved significantly to NPR 339.98 billion (from NPR 93.96 billion last year), signaling strong fiscal discipline or liquidity management.

Provincial governments also performed well, with NPR 124.90 billion in expenditures and NPR 182.60 billion in revenue (incl. central transfers), underscoring effective intergovernmental fiscal flow.

What does the monetary sector data reveal?

The broad money supply (M2) grew 8.2% over 11 months, with a YoY rate of 12.0%. Narrow money rose 6.4% (11-month) and 12.1% YoY, reflecting healthy liquidity and financial deepening. Foreign assets in the banking system increased 24.7% to NPR 491.44 billion, which includes forex holdings—an important reserve component.

Domestic credit expanded modestly by 3.4% (11-months) and 6.0% YoY. Central bank claims on the government declined sharply (–22.1%) due to increased government cash balances, while private sector claims rose 8.7%, supporting economic activity.

How are bank deposits and lending evolving?

Total bank and financial institution deposits increased 8.0% (NPR 517.6 billion) over 11 months, with a 12.0% annual growth. Deposit composition shifted: current 5.7%, savings 36.2%, fixed accounts 50.2%. Institutional deposits represented 35.5%.

Private sector lending also grew, with total credit at NPR 407.62 billion (+8.0% over 11 months, +8.7% YoY). Corporates received 63% of this, households 37%.

Lending by banks rose: commercial banks (+8.4%), development banks (+4.7%), finance companies (+6.9%). Collateral usage included working capital (14.5%) and real estate (65%).

Loan instrument-wise, term loans grew 5.1%, margin lending 42.8%, import trust receipts 62.2%, hire purchase 5.5%, cash credit 0.6%, and real estate loans 5.0%. Overdrafts declined 13.2%.

What’s the situation with liquidity and interbank operations?

The central bank infused a total of NPR 21,343.5 billion in liquidity (via repo auctions) and disbursed NPR 270 million in overnight facility—an increase over last year’s NPR 1,900A billion interventions. It also purchased USD 5.01 billion, injecting NPR 673.25 billion in liquidity; sold USD 3.46 billion to buy INR soft currency instruments.

Interbank market turnover reached NPR 1,681.5 billion (commercial banks: NPR 1,531.2B; other institutions: NPR 150.3B), indicating active market depth and smooth liquidity distribution.

How are interest rates and financial access shaping up?

Interest rates in Nepal continue to remain favorable, indicating a supportive monetary environment for economic activity. The 91-day Treasury bill rate slightly decreased to 2.94% from 2.99%, while the interbank rate stood at 2.99%. Base rates have dropped across the board, with commercial banks reducing their base rate to 6.09% from 8.17%, development banks to 8.29% from 9.96%, and finance companies to 9.02% from 11.46%.

Deposit rates currently average 4.29% at commercial banks, 5.02% at development banks, and 6.09% at finance companies. Lending rates also reflect this downward trend, recorded at 7.99% for commercial banks, 9.40% for development banks, and 10.22% for finance companies. This continued decline in interest rates has improved the affordability of credit, thereby encouraging private sector investment and household consumption.

Financial inclusion indicators remain stable, with 107 financial institutions operating 11,519 branches nationwide, ensuring a wide sectoral reach. Meanwhile, Nepal’s capital market has shown strong momentum.

The NEPSE index climbed to 2,655.4, and total market capitalization reached NPR 4,423.0 billion. A total of 272 companies is currently listed, with new listings amounting to NPR 63.5 billion—underlining the resilience and growth potential of the capital market.