IT Exports: Nepal Rastra Bank and entrepreneurs clash over true figures

KATHMANDU: Nepal’s Information Technology (IT) exports for the first seven months of the fiscal year 2081/82 (2024/25) stand at NPR 12.41 billion (about $92 million USD), according to the Nepal Rastra Bank (NRB). Yet, IT entrepreneurs insist the figure is closer to USD 1 billion (NPR 140 billion), exposing a glaring gap between official statistics and industry claims—and raising questions about how Nepal tracks its burgeoning digital economy.

The NRB’s data, released this week, breaks down the NPR 12.41 billion as follows: NPR 9.21 billion from software and computer-related exports and NPR 3.16 billion from telecommunications services like roaming. Meanwhile, the “Other Business Services” category logged NPR 32.53 billion in exports, including NPR 20.59 billion from business and management consulting—though much of this stems from educational consultancies, not IT. Technical and trade-related services added NPR 11.77 billion, and audiovisual earnings, such as from TikTok and YouTube, contributed NPR 1.98 billion under personal and recreational services.

IT industry leaders argue these numbers vastly underrepresent reality. “We’re exporting at least USD 1 billion annually,” claimed a prominent IT entrepreneur, speaking anonymously due to the sensitivity of the issue. The private sector’s estimate—over ten times the NRB’s tally—suggests Nepal’s digital potential is being obscured by flawed reporting, potentially costing the country recognition and revenue.

NRB officials point to two culprits behind the discrepancy. First, the bank adheres to the International Monetary Fund’s Balance of Payments manual, lumping IT earnings into a broad “Telecommunications, Computer, and Information Services” category without a distinct IT label. “There’s no separate slot for IT and IT-enabled services,” an NRB spokesperson explained. Second, freelancers and some companies may disguise IT income as remittances to dodge the 5% export tax—a workaround the NRB suspects but can’t quantify without a comprehensive remittance survey.

This misclassification has real stakes. Remittance inflows—officially NPR 1.1 trillion ($8.2 billion USD) last year—could hide millions in IT earnings, skewing economic data and depriving the government of tax revenue. “If they declare it as IT income, they pay tax. As remittances, they don’t,” the NRB official noted. The lack of a tracking mechanism leaves the true scale of Nepal’s IT exports a mystery.

The NRB relies on commercial banks for its figures, capturing SWIFT transfers from IT service exports. Of the NPR 12.41 billion recorded, software dominates—a sign of Nepal’s growing prowess in coding and app development. Yet, the “Other Business Services” category, at NPR 32.53 billion, muddies the picture, blending IT-adjacent work with unrelated sectors like education consulting. The NPR 11.77 billion from technical services abroad further blurs lines, as it may include IT but isn’t specified.

Entrepreneurs argue the NRB’s methodology misses the mark. Nepal’s freelance IT workforce—thousands strong on platforms like Upwork and Fiverr—often routes payments through personal accounts or digital wallets, bypassing formal export channels. “The central bank’s lens is too narrow,” said an IT startup founder. “We’re competing globally, but our earnings vanish into remittances or go unreported.”

The gap has sparked debate online. “Nepal’s IT exports are way bigger than NPR 12 billion—NRB needs to wake up,” one X user posted. Another quipped, “USD 1 billion sounds right; our coders are everywhere.” Analysts agree the sector’s growth—fueled by a young, English-speaking talent pool—outpaces official tallies, especially as remote work booms post-pandemic.

For Nepal, the stakes are high. A USD 1 billion IT industry would rival traditional exports like tea or carpets, bolstering a $40 billion GDP economy desperate for diversification. Yet, without accurate data, policymakers can’t capitalize on it—or tax it effectively. The 5% levy on IT exports, meant to fund development, may instead be driving earnings underground.

The NRB admits its limits. “We don’t have the tools to separate IT from remittances yet,” the spokesperson said, hinting at plans for future surveys. Until then, Nepal’s digital ascent remains half-seen—a success story obscured by outdated systems.