Export Prices Decline as Import Costs Rise, Weakening Terms of Trade

Recent data for the first four months of fiscal year 2082/83 (up to mid-November 2025) point to growing price-related pressure in Nepal’s foreign trade. Customs-based statistics released by Nepal Rastra Bank show a divergence between export and import prices, with export unit values declining while import prices continue to rise, adversely affecting the country’s terms of trade.

On a year-on-year basis, the export unit value index declined by 1.2 percent in mid-November 2025. This indicates that Nepali goods were sold at lower prices in international markets compared to the same period last year. Although export volumes may be increasing, the fall in export prices suggests weaker earnings per unit, limiting the overall benefit of export growth.

In contrast, the import price index increased by 1.5 percent during the same period. Higher import prices raise costs for both consumers and producers, particularly in an economy heavily dependent on imported raw materials, fuel and consumer goods. Rising import costs also intensify pressure on foreign exchange outflows.

As a combined result of falling export prices and rising import prices, Nepal’s terms of trade deteriorated by 2.6 percent in mid-November 2025. A decline in terms of trade means the country must export a larger quantity of goods to pay for the same volume of imports, reflecting a weakening external trade position.

Economists warn that a sustained deterioration in the terms of trade could pose medium- to long-term challenges for the economy. Without improvements in export competitiveness, value addition and product diversification, Nepal may struggle to offset rising import costs, keeping the external sector under strain.

Overall, the latest figures suggest that while trade activity is expanding, the price dynamics are unfavorable. Analysts emphasize the need for policies that focus not only on increasing export volumes but also on enhancing export quality, productivity and value addition, so that export earnings can grow faster than import costs and help stabilize the country’s external trade balance.