Nepal targets exports worth 20 percent of GDP in two years, but experts call goal unrealistic

Nepal's government has set an ambitious goal to elevate its goods and services exports to 20 percent of the nation's gross domestic product within the next two years. This target represents a substantial leap from the 8.7 percent recorded in the last fiscal year, which itself was an increase from 6.3 percent in 2021-22.

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The 20 percent target within the next two years is highly improbable.

However, a significant portion of this recent growth is attributed to the re-export of edible oils, a commodity Nepal imports as raw material for minimal processing. Experts and exporters express strong doubts about the feasibility of the government's target. They argue that the goal is overly ambitious and may not be achievable even over two decades, pointing to persistent structural issues within Nepal's export sector.

The national trade strategy, updated after three years of implementation, aims to narrow the country's considerable trade deficit. Currently, Nepal's imports stand at 33.2 percent of GDP, creating a large imbalance with its export figures. The ruling Rastriya Swatantra Party has also proposed raising exports to $30 billion within a decade, focusing on information technology, energy, and value-added manufacturing to lessen reliance on remittances.

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If the benchmark is the export-to-GDP ratio, there has been little meaningful progress once vegetable oil exports are excluded from the calculation.

"The 20 percent target within the next two years is highly improbable," stated Paras Kharel, executive director of the South Asia Watch on Trade, Economics and Environment (SAWTEE). He highlighted that excluding vegetable oil re-exports reveals little meaningful progress in the export-to-GDP ratio. Hari Dhakal, vice-president of the Export Council of Nepal, added that a recent 13 percent value-added tax on imported raw materials has significantly increased production costs, further hindering export competitiveness.

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The government has imposed a 13 percent value-added tax (VAT) on imported raw materials over the past two to three years, significantly increasing production costs.