The government has enforced Trade Policy 2025, aiming to boost the competitiveness of domestic products through the development of trade-related infrastructure. This move comes amid growing calls from experts and stakeholders to implement a robust foreign trade policy as Nepal prepares to graduate from the Least Developed Country (LDC) category in 2026. The new policy, which replaces the nine-year-old trade policy currently in place, comes at a time when the government has initiated the process of endorsing a new bill on imports and exports, citing the limitations of the existing Export and Import (Control) Act, 1957. The bill is currently under consideration in the House of Representatives. The government's initiative to bring new legislation including on trade is a step in the right direction. However, this effort alone is unlikely to tackle the soaring trade deficit Nepal currently faces. The government must simultaneously work on diversifying its exports—such as processed foods, herbal products, IT services, clean energy, and tourism—with a focus on value addition. Strengthening infrastructure, expanding markets beyond India and leveraging diaspora networks are among the measures critical to achieving these goals.
The new trade policy outlines six key measures to boost Nepal’s foreign trade. These include increasing the value addition of goods and services, improving quality standards, adopting innovative technologies to enhance production and productivity and strengthening bilateral and multilateral trade negotiations, among others. According to Ministry of Industry, Commerce and Supplies (MoICS) officials, the policy envisions reducing both the time and costs associated with foreign trade. Priority has been given to the construction of collection centers for export items from the agriculture, forestry, and manufacturing sectors. Additionally, the government plans to facilitate the installation of infrastructure for grading, quality control, modernized laboratories, and quarantine check systems. These hurdles have prevented Nepal from tapping into its full export potential, as pointed out by the latest World Bank report. The report, entitled Nepal Development Update, states that Nepal has an untapped export potential of around $9.20 billion. Meanwhile, data from the Department of Customs show that Nepal’s trade deficit reached Rs 987.39 billion in the first eight months of the current fiscal year (FY) 2024/25, with imports totaling Rs 1.14 trillion compared to exports of just Rs 158.17 billion. In FY 2023/24, the country’s total foreign trade stood at Rs 1.745 trillion, while the trade deficit was recorded at Rs 1.44 trillion. These figures highlight the urgent need to work towards realizing Nepal’s export potential to narrow the ballooning trade deficit.
Cooperation for trade
Realizing the export potential, as pointed out by the World Bank, is possible but requires concrete actions on the part of the government. Several structural challenges have held Nepal back, including the high import costs of raw materials, infrastructure and geographic constraints, the low value of export items, limited trade relationships and a lack of diversification. Traders continue to face excessive costs, largely due to inadequate infrastructure and limited transit routes. It is encouraging to note that the new trade policy, endorsed by MoICS, seeks to lower trading costs by addressing these underlying issues. Nepal must diversify into processed foods, herbal products, IT services, clean energy, and tourism with a focus on value addition in order to boost its export potential. Strengthening infrastructure, supporting SMEs, improving product standards, investing in branding, promoting digital trade, building export-oriented skills, and ensuring stable, coordinated policies are essential for sustained growth. It is high time the government demonstrated strong willpower to implement the policy provisions, rather than letting them languish on paper, in order to realize the goals envisioned by the new trade policy.
