KATHMANDU, June 18: Nepal’s latest macroeconomic report paints a contrasting picture of the country’s economy — while external sector indicators remain robust, internal economic performance continues to falter.
The Current Macroeconomic and Financial Situation of Nepal released by Nepal Rastra Bank (NRB) highlights significant improvements in foreign currency reserves, remittance inflows, and surpluses in both the current account and balance of payments (BoP). As of mid-April, the current account surplus stood at Rs 618.68 billion, up sharply from Rs 222.67 billion in the same period last year. Similarly, the BoP surplus more than doubled to Rs 731.16 billion compared to Rs 346.23 billion a year earlier. Foreign currency reserves also climbed to Rs 3.494 trillion from Rs 2.677 trillion in mid-July 2025.
However, the internal economy remains sluggish. Decline in agricultural output, low industrial capacity utilization, and weak domestic demand have weighed heavily on growth. The overall economy is projected to expand by just 3.85 percent in the current fiscal year, down from 4.43 percent last year. NRB attributes the slowdown to weak agricultural production, natural disasters, political uncertainty, and global geopolitical tensions.
Nepal’s domestic economic growth remains sluggish despite exter...
Agriculture, which remains the backbone of Nepal’s economy, is expected to grow by only 1.58 percent. Food crop production fell by 6.76 percent in the first half of the fiscal year, with rice, maize, and other staples hit hard. Vegetable output rose slightly by 1.02 percent, while fruit production increased by 6.51 percent. The livestock sector showed mixed results: milk production plunged by 25.74 percent, but meat and egg production rose by 7.37 percent and 6.43 percent, respectively. In forestry, firewood production dropped by 19.80 percent and timber by 2.90 percent.
Industrial performance has also been disappointing. Despite expectations of growth, average capacity utilization stood at just 42.11 percent. Although 30.82 percent of total bank credit flowed to the industrial sector, industries continue to operate below capacity, reflecting weak domestic demand despite ample liquidity and falling interest rates.
Government spending has further underscored the slowdown. Capital expenditure reached only 32.53 percent of the allocated amount in 11 months. Meanwhile, investor confidence has weakened, with the Nepal Stock Exchange index falling to around 2,700 points after weeks of decline.
