KATHMANDU, Nepal's gross foreign
exchange reserves rose 10.2% to $10.50 billion in mid-February,
boosted mainly by remittances from overseas, to a level that
will cover about nine months of imports, the central bank said
in a report released on Sunday.
Reserves rose from $9.54 billion in mid-July 2022, as
Nepalis working abroad sent money home, data showed. A large
part of the flows came from the Middle East, South Korea and
Malaysia.
Data from Nepal Rastra Bank (NRB) showed remittance inflows
increased 16.4% to $5.30 billion in the mid-July 2022 to
mid-February 2023 period against a decrease of 5.3% in the same
seven-month period in 2021/22.
Nepal typically follows a mid-July to mid-July fiscal year
based on a local calendar.
The central bank has stated in the past that its goal is to
maintain external reserves that are adequate to cover more than
seven months of imports.
"We are in a comfortable position in the external sector,
but there is pressure on internal front of the economy," Prakash
Kumar Shrestha, chief of the Economic Research Department of the
central bank, told Reuters.
DOMESTIC SECTOR CONCERNS
Nepal imports most essential commodities. A lack of
manufacturing facilities due to a shortage of power and reduced
fund flows to industries have been hurting the economy.
Businesses and industry officials have protested in recent
weeks against high lending rates, which have now risen to more
than 16% compared with around 12% a year ago.
Rates have risen after Nepal's central bank upped its
benchmark lending rate to 8.5% from 7% in July to tame
inflation, which hit a six-year high of 8.56% in June.
Annual inflation eased to 7.88% in mid-February, the bank
said.
Businesses want to see interest rates in single digits.
Many small borrowers from microlending institutions have
said they are unable to repay their loans due to high interest
rates and this could trigger a series of defaults.
Analysts said there are no "quick fixes" to the economic
problems in the real sector.
Source: ASEAN Exchanges