Nepal's Service-Led Growth Strategy Faces Balance‑of‑Payments Deficit

Nepal is promoting a policy of leap‑frogging traditional manufacturing by expanding directly into a digital service economy. The Ministry of Industry, Commerce and Supplies has codified this approach in the National Integrated Strategy for Trade in Services 2083. Services already account for more than 62 % of Nepal’s GDP and over 21 % of foreign trade.

Despite the policy emphasis, Nepal’s service balance of payments has deteriorated sharply. Between FY 2015/16 and FY 2024/25, service imports grew at an average 11.9 % annual rate, outpacing export growth of 9.6 %. A surplus of NPR 9.85 billion a decade ago has turned into a deficit of NPR 90.94 billion. The shortfall is driven mainly by large foreign‑exchange outflows for outbound travel and education, which reached NPR 138.48 billion in FY 2024/25. Official exports of telecommunications, computer and information services remain modest at NPR 22.33 billion, and many freelancers operate through offshore accounts due to domestic banking frictions.

Analysts suggest Nepal should heed the experiences of India and Vietnam, whose service sectors have faced similar challenges, especially as generative AI erodes low‑margin outsourcing models.