Exceeding tourism receipts, remittance has become the biggest foreign exchange earner for the country, according to a World Bank study.

“The country is the largest remittance recipient among countries — more than even Bangladesh and Philippines — with at least 10 million population, said Policy Cluster Leader of World Bank Hisanobu Shishido in his study.

The country received $2.5 billion — including India — in the fiscal year 2009-10 (Gulf — 48.9 per cent, others — 21.4 per cent, India — 19.2 per cent and Malaysia — 10.5 per cent), the study said, adding that among the 75 districsts of the country, six districts’ share of remittance in household income is over 30 per cent. “Migration and remittance both benefitted at household level and macroeconomic levels, though it has added cost too.” Family separation, abuses, trafficking and other abuses and expensive remittance services are some of the social cost apartfrom loss of external competitiveness, declining manufacturing and agriculture sectors due to lack of manpower, real estate bubble and cost of declining remittance isvery high at macroeconomic level,“ according to the study. “It has, however, helped reduce poverty from 42 per cent to 31 per cent, bridging gap between rich and poor, better education and healthcare to migrants' children at the household level and foreign exchange support, Balance of Payment stability, increment of imports and help in maintaining currency peg with India are benefits at the macroeconomic level.“

However, more income has led to more consumption and reduced labour supply by almost 15 per cent in the agriculture that will have impact on agriculture and manufacturing outputs as most of the migrants of 20 to 44 age have migrated.

The study revealed that almost half of Nepali households have at least one migrant abroad or returnee, remittances constitute one fourth of income of all households, and one third of working male population may be abroad remitting almost equal to 25per cent of GDP. Above all, the country will be at risk of plagued by Dutch Disease, he added. “Increase in demand will cause overall prices to go up, but as import and export prices are fixed by the exchange rates and foreign prices, relative prices of nontradable services and wages rise,” it said, adding that it will raise the cost of producing exportables or import substitutes, apartfrom loss of competitiveness.

Shishido has also suggested somemeasures to fight Dutch Disease. Prudent macroeconomic management — especially fiscal — and improvement of investment climate to increase job opportunities at home will help reduce risk,” he said, suggesting to ensure remittance flow to be invested productively and increased — incentive for — domestic investment and domestic job creation.

Last but not the least, the government should make migration an option rather than necessity for survival.

Published on: 4 July 2011 | The Himalayan Times