Exports Post Record Growth, but Rising Imports Keep External Pressure Intact

Nepal’s foreign trade performance in the first four months of fiscal year 2082/83 (up to mid-November 2025) presents a picture of strong momentum on the export front, tempered by a continued rise in imports that has widened the trade deficit. Latest figures released by Nepal Rastra Bank show that although exports have expanded at an unusually fast pace, the overall balance of trade remains heavily skewed toward imports, underscoring long-standing structural weaknesses in the economy.

Merchandise exports during the review period rose by 77.5 percent to Rs 93.50 billion, marking one of the strongest four-month growth rates in recent years. By contrast, exports had increased by just 4.2 percent in the same period last year. The sharp rebound suggests improved external demand for selected Nepali goods and a partial normalization of supply chains that had been disrupted in earlier years.

A closer look at export destinations reveals a heavy dependence on the Indian market. Exports to India more than doubled, rising by 113.9 percent, providing the bulk of the overall increase. Exports to other countries posted a modest 2.9 percent growth, while shipments to China declined sharply by 56.2 percent. The contraction in exports to China highlights persistent logistical, market access and competitiveness challenges, even as trade with India continues to dominate Nepal’s export landscape.

Commodity-wise, export growth was driven largely by soybean oil, cardamom, palm oil, jute products, footwear and slippers. At the same time, exports of zinc sheets, particle board, tea, woollen carpets and handicrafts declined. This uneven pattern indicates that export expansion remains concentrated in a narrow group of products, raising concerns about sustainability if demand for these few items weakens.

On the import side, the trend was far less encouraging for external balance. Total merchandise imports increased by 18.7 percent to Rs 609.45 billion, compared to a marginal 0.2 percent rise a year earlier. The sharp increase reflects both recovering domestic demand and higher imports of industrial inputs and consumer goods, signalling renewed pressure on foreign exchange outflows.

Country-wise data show that imports from India increased by 6.6 percent, while imports from China surged by 28.5 percent. Imports from other countries rose by 48.9 percent, pointing to Nepal’s growing reliance on a wider range of global suppliers. In terms of goods, imports of crude soybean oil, gold, chemical fertilizers, transport equipment, vehicles and spare parts, and silver increased significantly. Meanwhile, imports of hot-rolled sheets, edible oil, garlic, oilseeds and pulses declined, suggesting some substitution or lower demand for selected commodities.

Despite strong export growth, the widening import bill pushed the merchandise trade deficit up by 12.0 percent to Rs 515.96 billion during the four-month period. This is a reversal from last year, when the trade deficit had narrowed slightly. Still, there was a relative improvement in performance, as the export–import ratio improved to 15.3 percent, up from 10.3 percent a year earlier. Economists note that while this ratio indicates better export efficiency, the absolute size of the trade gap remains a serious concern.

Another notable development is the decline in imports from India settled through convertible foreign currency. During the review period, such imports amounted to Rs 54.98 billion, down from Rs 57.24 billion last year. This suggests a modest easing of pressure on foreign currency reserves in trade transactions with India.

Taken together, the data highlight a familiar dilemma for Nepal’s economy. The export surge is encouraging and signals potential for stronger external earnings, but it is still driven by a limited set of products and markets. At the same time, rising imports—particularly of high-value goods—continue to widen the trade deficit, offsetting gains from exports.

Analysts argue that sustaining export growth will require diversifying products, improving industrial competitiveness, and expanding access to non-traditional markets, particularly beyond India. Without parallel efforts to boost domestic production and reduce import dependency, the trade deficit is likely to remain a structural drag on the economy, even in periods of strong export performance.