Nepal’s goods and services exports could increase by up to 112 per cent over five years if major constraints facing the export sector are addressed, according to a new study. The study, titled “Constraints and Enablers of Nepal’s Exports of Goods and Services,” was jointly released on Tuesday by the Asian Development Bank (ADB), Society of Economic Journalists Nepal (SEJON), and South Asia Watch on Trade, Economics and Environment (SAWTEE).
The report highlights that high borrowing costs, taxes on imported raw materials, weak logistics infrastructure, and high transportation costs are significant barriers to Nepali products competing in international markets. However, it also noted that Nepal’s diaspora, duty-free market access, trade fairs, digitalisation, and the country’s positive image abroad have helped exporters access foreign markets. Opportunities for expanding services exports include growing hotel capacity, religious tourism, and emerging activities.
Key Constraints and Opportunities
Access to finance is a major challenge, identified by 84 per cent of surveyed firms, with 54 per cent considering it a major or serious constraint. Interest rates, their fluctuations, and collateral requirements are the biggest problems, disproportionately affecting small and medium-sized firms. Logistics, trade infrastructure, availability of affordable land, and difficulties in importing production inputs were also cited as significant issues. Firms exporting beyond India particularly struggled with logistics and trade infrastructure.
Emerging risks include limited government support, insufficient information on Nepal’s graduation from Least Developed Country (LDC) status, e-commerce barriers, and climate change. For the information technology sector, despite an estimated USD 515 million in IT service exports in 2022 (a 64.2 per cent increase from the previous year), challenges include gaps in data protection, cybersecurity, intellectual property rights, lack of an overall IT export policy, difficulties in obtaining foreign currency for software, weak digital infrastructure, and a shortage of skilled workers.
Policy Responses and Economic Context
Finance Secretary Dr. Ghanshyam Upadhyay stated that Nepal needs to make its export growth sustainable, boost private-sector confidence, and accelerate government capital expenditure. He emphasised a shift from a remittance-based development model towards one focused on private investment, export competitiveness, and job creation. The government plans to incorporate the study’s recommendations into its daily work and upcoming fiscal policies.
Arnaud Cauchois, ADB Country Director for Nepal, stressed the necessity for Nepal to adopt a competitive export-based development model to become a high-income country. He noted that Nepal’s goods exports have declined from 15.4 per cent of Gross Domestic Product (GDP) in 2000 to 5 per cent in 2025.
The ADB’s new Country Partnership Strategy for Nepal (2025-2029), released on June 17, 2025, prioritises inclusive, resilient, green, and job-rich economic growth, with a commitment of approximately USD 2.3 billion in aid. Nepal Rastra Bank, the central bank, also released its monetary policy for fiscal year 2082/83 (2025/26) on July 11, 2025, adopting a flexible and expansionary approach to stimulate the economy, including measures to lower interest rates and ease private sector credit.
Regional Disparities and Future Outlook
Nepal’s exports are highly concentrated, with approximately 71.9 per cent of its average merchandise exports going to India between 2022 and 2024, valued at around USD 958.7 million annually. The country’s overall economic growth for fiscal year 2082/83 (mid-July 2026) is estimated at 3.85 per cent, with per capita GDP projected to reach USD 1,513.
Madhesh Province, despite its agricultural potential contributing 36.7 per cent to its provincial GDP, faces challenges due to a lack of modern technology and market-oriented farming, resulting in the lowest per capita income of USD 934 and lowest economic growth of 1.31 per cent. The ongoing upgrade of the Hulaki Highway, expected to be completed by fiscal year 2082/83, is anticipated to boost trade and access in the region.
The detailed plan for how the government will incorporate the study’s recommendations into future fiscal policies remains unclear. Specific examples of “emerging activities” for service export expansion, beyond hotel capacity and religious tourism, were not detailed in the study.
