KATHMANDU, Jan 22: Nepal’s trade deficit has continued to widen as domestic production of commonly used goods fails to keep pace with rising demand. In the first six months of the current fiscal year (FY), the country’s trade deficit has climbed to nearly Rs 800 billion—up by Rs 74 billion compared to the same period last year.
Data released by the Department of Customs (DoC) on Wednesday shows that the trade deficit stood at Rs 797 billion by mid-January. During the corresponding period of the previous FY, the deficit was Rs 723 billion. Nepal’s annual trade deficit now stands at around Rs 1525 billion, with the country recording trade deficits with more than 100 nations.
With Nepal’s foreign trade structure still heavily skewed toward imports, the trade deficit has emerged as a persistent and long-term economic challenge. Although commercial activity has picked up in recent months, the economy’s continued reliance on imports has further deepened the trade imbalance.
Despite repeated government assurances that boosting domestic production of consumable goods would help narrow the gap, the trade deficit has continued to expand year after year. Policies such as export subsidies and incentives aimed at reducing the deficit have failed to generate meaningful momentum in export growth. Likewise, the government’s flagship “Made in Nepal and Make in Nepal” campaign—launched in partnership with the private sector to promote domestic production, marketing, consumption, and exports—has yet to yield visible results.
Nepal’s foreign trade declines, trade deficit reaches over Rs 1...
The scale of the imbalance is particularly striking: Nepal incurred a trade deficit of nearly Rs 800 billion while conducting foreign trade worth Rs 1081 billion during the six-month period. At the same time, overall foreign trade grew by 17.36 percent compared to last year.
In the same period of the previous FY, foreign trade stood at Rs 921 billion. Over the past six months, imports totaled Rs 939 billion, while exports lagged far behind at just Rs 142 billion.
Imports accounted for around 87 percent of total foreign trade, while exports made up only 13.14 percent. India remained Nepal’s largest trading partner, followed by China, with Nepal’s biggest trade deficit recorded with India.
Fuel imports alone exceeded total export earnings. During the review period, Nepal spent Rs 151 billion on petroleum product imports, surpassing total merchandise exports of Rs 142 billion. Diesel imports stood at Rs 58.27 billion, petrol at Rs 33 billion, and cooking LPG gas at Rs 27 billion.
Vegetable and animal oils and ghee ranked second among imported items, with imports worth Rs 76.33 billion. Iron and steel followed in third place at Rs 66.13 billion. Imports of electrical equipment and parts reached Rs 64.92 billion, machinery and mechanical equipment Rs 63.89 billion, and vehicles Rs 55.31 billion.
High imports of fuel, machinery, iron and steel, vehicles, and electrical equipment—largely driven by infrastructure development and rising consumption—underscore growing demand. However, exports have failed to keep pace due to the slower-than-expected expansion of productive sectors. While rising imports are not inherently negative, the inability to strengthen domestic production and export capacity remains the central concern.
Although the government has prioritized import substitution and export promotion in recent years, its impact has remained limited on the ground. The trade deficit persists as a structural problem, exacerbated by the absence of a clear and implementable strategy to link energy, agriculture, tourism, and small and medium enterprises with production and exports.
A commodity-wise breakdown of exports shows vegetable oils and fats leading the list, followed by coffee, tea, and spices in second place; synthetic fibers and yarn in third; carpets in fourth; and readymade garments in fifth. Raw soybeans topped the export list, generating Rs 56 billion in revenue. Cardamom exports stood at Rs 7.19 billion, carpets at Rs 4.87 billion, and crude sunflower oil at Rs 4.78 billion.
Nepal’s export basket continues to be dominated by primary and low value-added goods. While exports of raw or semi-processed products help bring in foreign currency in the short term, they remain insufficient to reduce the trade deficit sustainably. Without expanding industrial production, enabling technology transfer, and promoting value-added industries, Nepal’s export base is unlikely to strengthen in the long run.
