Recent global financial crisis practically showed us that the world is flat. The crisis that was triggered by the liquidity crunch in United States banking system and catalyzed by the demise of the Lehman Brother substantially impacted macroeconomic stability of Nepal. Many nations in the world were crisis contaminated due to their heavy investment in United States made subprime mortgage back securities but Nepal is suffering due its heavy dependence on remittances.
As the financial crisis cascaded to Southeast Asian and Middle Eastern countries demand for the Nepali labors decreased by 12 percent in 2009 in comparison with the demand of 2008.Lack of demand and major layoff of labors in the crisis hit countries resulted in the slow growth rate of remittances inflow.Nepali export front was also dented due to the global crisis as foreign markets were cutting back on their consumption. Despite the slow remittances inflow and dwindling exports Nepali continued their spending binge this resulted in the balance of payment deficit. As of March 2010 there was Nepal only had US$ 400 million worth of international reserves , just enough to cover 5 month of imports (only two months away from the IMF declared red zone,IMF consider reserves to cover 3month or less as a critical situation) . So solve its balance of payment crisis Nepal has just taken a loan of $42 million from International Monetary Fund through its Rapid Credit Facility.