Services Account Still in Deficit Despite Rise in Tourism Income

Nepal’s services account remained in deficit in the first month of FY 2082/83, even though tourism receipts showed encouraging growth. According to Nepal Rastra Bank, the net services income posted a deficit of NPR 13.39 billion in Shrawan, slightly lower than the NPR 15.06 billion deficit recorded in the same period last year.

One bright spot was tourism. Tourism receipts rose by 12.7 percent to NPR 5.38 billion in Shrawan, compared to NPR 4.77 billion last year. Analysts say the increase reflects a recovery in tourist arrivals, particularly from regional markets, after years of sluggish performance.

Despite rising income, travel expenditure by Nepalis abroad remained far higher, at NPR 21.70 billion, though it was down 2.8 percent from NPR 22.32 billion a year earlier.
Within this, education-related expenses alone accounted for NPR 14.31 billion, only slightly lower than last year’s NPR 14.96 billion. This underscores how overseas education continues to dominate Nepal’s service outflows.

Meanwhile, remittance inflows continued to strengthen. Remittances rose 29.9 percent year-on-year, reaching NPR 177.41 billion in Shrawan, compared to NPR 136.60 billion in the same month last year. Remittances remain the most crucial support to Nepal’s external stability and household consumption.

On the downside, net foreign direct investment (FDI, equity only) fell by 13.5 percent to NPR 690 million, compared to NPR 800 million last year. The decline indicates that investors remain cautious, despite stronger remittance and tourism inflows.

Economists view the growth in tourism receipts as a positive sign of recovery. However, the persistently high outflow for education-related travel continues to put pressure on the services account.
While remittances remain robust enough to balance Nepal’s external sector in the short term, the continuing weakness in FDI is a concern for long-term investment and growth. Experts argue that boosting tourism and attracting sustained FDI will be critical to reducing the chronic services deficit and achieving a more balanced external sector.