Kathmandu. KATHMANDU: Nepal Rastra Bank (NRB) and Bank of Korea (BoK) have jointly released a detailed report on foreign currency liberalization and capital flow management for 2025. The report has suggested that Nepal should gradually open its capital accounts and further strengthen the regulatory safety net. <\/p>\n
The study also pointed out the opportunities for investment to come in from the liberalization of capital flows as well as the risks of instability in the economy if precautions are not taken. <\/p>\n
1. Current Account Status: <\/p>\n
Nepal has maintained full volatility in the current account since 1993. This has resulted in uninterrupted remittance flow, merchant payments, and tourism-related transactions. The report suggests that it should be kept in place. <\/p>\n
2. Capital Account Liberalization and Guideline: <\/p>\n
The study has recommended a phased liberalization of the capital account rather than opening it abruptly. The report states that a clear roadmap is needed to attract foreign investment and stop capital flight. Priority has been given to create an environment conducive for non-resident Nepalis to invest in the domestic capital market. <\/p>\n
3. Risks and Protective Measures: <\/p>\n
There have been warnings that hasty liberalisation could lead to sharp exchange rate fluctuations and financial instability. The need for macro prudential tools and stringent prudential regulations for such risk management has been pointed out. While initiating reform works, it has been suggested to first give priority to long-term foreign direct investment and only then open up short-term capital flows. <\/p>\n
4. Policy Suggestions: <\/p>\n
The report has proposed a 5-step process for opening a capital account. It emphasizes transparency and phased implementation. The NRB has also urged the NRB and the government to strengthen foreign exchange reserve management and increase coordination between monetary and fiscal policies to avoid external shocks. g. <\/p>\n
Party<\/strong><\/span><\/td>\n<\/p>\n| Current state of Nepal <\/strong><\/span><\/td>\n<\/p>\n | }<\/p>\n Suggestion<\/strong><\/span><\/td>\n<\/p>\n | }<\/p>\n<\/tr>\n<\/thead>\n \nCurrent Account Variability<\/td>\n<\/p>\n | Fully retroactive since 1993<\/td>\n<\/p>\n | Maintaining the status quo<\/td>\n<\/p>\n<\/tr>\n | Capital Account<\/td>\n<\/p>\n | Restricted Status<\/td>\n<\/p>\n | Gradual Liberalization<\/td>\n<\/p>\n | }<\/p>\n<\/tr>\n Non-Resident Nepali (NRN) Investment<\/td>\n<\/p>\n | Limited Access<\/td>\n<\/p>\n | to facilitate access to the capital market <\/td>\n<\/p>\n<\/tr>\n | Risk Management<\/td>\n<\/p>\n | Basic Database Management<\/td>\n<\/p>\n | Strengthening macroprudential devices<\/td>\n<\/p>\n | }<\/p>\n<\/tr>\n Improvement Strategy<\/td>\n<\/p>\n | Ad-hoc measures<\/span><\/td>\n<\/p>\n | }<\/p>\n Clear and step-by-step roadmap <\/span><\/td>\n<\/p>\n | }<\/p>\n<\/tr>\n<\/tbody>\n<\/table>\n Impact on Nepalese Economy<\/span><\/h4>\n<\/p>\n |