The COVID-19 pandemic is having a severe impact on Nepal’s economy. During recent months, remittances have fallen considerably, tourist arrivals collapsed, and domestic activity has taken a hit amidst social distancing measures. As a result, immediate external financing and fiscal financing gaps have emerged of 3 percent of GDP and 2.6 percent of GDP, respectively. Given the ongoing uncertainty and still-large downside risks, it is crucial for Nepal to maintain a strong level of foreign reserves.