Domestic Slump and Ballooning Trade Deficit Strain Economy

Nepal’s economy continues to grapple with weak domestic demand, a deepening trade gap, and sluggish industrial activity, even as external sector indicators touch record highs. Data analyzed by Himal Khabarpatrika shows foreign exchange reserves reached 25.31 billion US dollars and remittances climbed to Rs 2.36 trillion in fiscal year 2082/83. However, commercial banks hold over Rs 1.5 trillion in unutilized lendable funds amid poor borrowing appetite. Manufacturing facilities are running at roughly 42 percent capacity, while private sector credit growth expanded by only 6.5 percent, missing Nepal Rastra Bank’s 12 percent goal.

The domestic downturn is exacerbated by external trade pressures and low public policy execution. Nagarik News reported that the trade deficit widened 26 percent to Rs 324.93 billion during the first two months of fiscal year 2083/84, led by hefty imports of fuel, food, and machinery. Industry leaders, including Confederation of Nepalese Industries President Birendra Raj Pandey, cite shifting tax rules, poor budget execution, and eroded consumer purchasing power for the ongoing private sector stagnation.