Nepal External Sector Analysis Based on Latest Data (8M 2025/26)
Nepal's external sector — covering trade, remittances, BoP, and reserves — has shown remarkable resilience in FY 2025/26. The NRB's 8-month report reveals a current account surplus of Rs. 552,847.68M, powered by record remittance inflows despite a widening trade deficit.
External Sector Dashboard
| Indicator | 8M 2025/26 | YoY Trend |
|---|---|---|
| Current Account | +Rs. 552,847.68M surplus | +180.6% |
| Trade Deficit | Rs. 1,098,138.20M | +11.22% |
| Workers Remittances (net) | Rs. 1,440,950.83M | +37.71% |
| Total Exports | Rs. 191,112.03M | +20.83% |
| Total Imports | Rs. 1,289,250.23M | +12.54% |
| Export/Import Ratio | 14.82% | +1.01pp |
| Tourist Arrivals (Jan 2026) | 92,573 | +15.7% |
Key Themes
1. Remittance-Dominated External Balance: Remittances (Rs. 1.44T) are 7.6x total exports and single-handedly offset the trade deficit plus provide surplus.
2. Trade Deficit Widening but Manageable: The trade gap grew 11.22% but export growth (+20.83%) outpaced import growth (+12.54%), marginally improving the coverage ratio.
3. Tourism Recovery Continues: Tourist arrivals growing +15.7% (Jan) and +8.8% (Feb) contribute to service exports and foreign exchange.
4. India Trade Stabilizing, China Growing: India's share of the trade deficit fell from 57.09% to 51.67% while China's rose from 21.98% to 24.10%.
Risks
- Over-dependence on remittances — a single shock could destabilize the BoP
- Narrow export base — soyabean oil alone is 39.65% of exports
- Rising China deficit (+21.94%) with near-zero exports to China
Conclusion
Nepal's external sector is in its strongest position in years, but the foundation is fragile. Diversifying exports, developing hydropower as an export, and reducing import dependency on petroleum are critical for long-term sustainability.