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By Sandeep Chaudhary

Trade Deficit Still Above Rs. 109 Billion Despite Higher Exports: Can Nepal Fix It?

Trade Deficit Still Above Rs. 109 Billion Despite Higher Exports: Can Nepal Fix It?

Nepal’s external trade remains heavily imbalanced, with the trade deficit surpassing Rs. 109 billion in just one month (up to mid-August 2025/26), according to Nepal Rastra Bank’s Balance of Payments (BoP) report. This comes even as exports showed some growth compared to previous months.

Goods exports stood at Rs. 27.8 billion, a modest rise from last year’s Rs. 17.3 billion in the same period. However, imports ballooned to Rs. 137.4 billion, leaving a staggering deficit of Rs. 109.5 billion. Services trade also recorded a shortfall, with travel and transport outflows outpacing earnings.

Analysts argue that Nepal’s exports remain constrained by low production capacity, weak competitiveness, and over-reliance on a narrow range of goods, particularly agricultural products and handicrafts. Meanwhile, import dependency is entrenched across sectors, ranging from petroleum and vehicles to food and machinery.

Despite the trade gap, Nepal’s current account still showed a Rs. 78 billion surplus, thanks to record remittance inflows of over Rs. 176 billion. Yet, experts caution that using remittances to finance imports is not a sustainable solution. Long-term economic resilience requires expanding manufacturing, diversifying exports, promoting import substitution, and attracting FDI in productive sectors.

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