For Nepal’s Prime Minister Sher Bahadur Deuba, the slowing inflow of remittances into Nepal is a cause for concern. After remaining strong even during the peak of Covid 19 pandemic, the flow has started to drastically drop.
According to Kathmandu Post, Nepal’s remittance inflow declined by 7.6 per cent to Rs 239.32 billion between mid-August and mid-October. However the number of Nepalese getting approval for employment outside the country increased.
In the year ago period, remittance inflow had increased by 12.7 per cent.
This is particularly worrisome as overall foreign exchange reserves in the Himalayan country have been falling. The overall reserves that Nepal now holds are only sufficient for imports of about eight months. In mid July—the country’s new financial year begins on July 16—the country’s forex reserves were at $11.75 billion. However, as on September, it decreased to $11.4 billion.
Remittances, the main source of the country’s economy, form an integral part of Nepal's economy contributing over 25 per cent to the country’s gross domestic product.
The World Bank in its report said that over the years, remittance inflows in Nepal have supported private consumption, poverty reduction, government revenues, and foreign exchange reserves.
The multilateral agency however said that over dependence on remittances has driven real appreciation of the exchange rate while undermining export competitiveness. It has also encouraged imports.
The Nepal government in a document pointed out that labour migration has become one of the defining characteristics of Nepal’s socio-economic landscape.