By the 10th month of the current fiscal year, the total incoming remittance amounted to Rs 282 billion, according to macroeconomic data published by Nepal Rastra Bank. On average, remittance inflow per month stands at Rs 28.2 billion with an average growth rate of 33 per cent each month. 

 

In the previous year, remittance inflow had grown at a rate of 11 per cent on average with monthly average inflow of Rs 21 billion. Since the beginning of current fiscal year, the dollar has appreciated by more than 28 per cent as the Indian currency with which our currency is pegged to is taking a continuous beating against the dollar in the forex market. In mid-July, 2011, the dollar’s exchange rate stood at Rs 70.75 which has now crossed Rs 91 by the 11th month.

 

“Appreciation in exchange rate of the dollar is the major reason behind such an increase in remittance even though increment in the rate of outflow of migrant workers is not that high,” said economist Dr Chiranjibi Nepal. 

 

The increased remittance has not only substantially contributed to the income of migrant workers but the national balance of payments has also become surplus by Rs 100 billion –– first time in the economic history of Nepal. In addition, the foreign exchange reserve has reached Rs 405 billion which can support imports for almost 10 months. 

 

Though remittance has helped foreign reserves swell, there is no real boost to the economy from remittance as most of the income is spent on consumption. “Of the total remittance received, 79 per cent is consumed by the families and only three per cent goes for capital formation with the rest being spent on repaying debts and on education,” pointed out Nepal.

 

“If the government can initiate a mechanism that encourages savings such as the recently introduced pension plan for migrant workers in India, both workers and the nation will benefit,” he added. 

Economist Dr Biswambher Pyakurel also pointed out the importance of transferring remittance into productive channels instead of spending it on imported goods. 

 

“Due to the absence of a government policy that encourages the channelling of remittance into capital formation, if the movement of labour between countries goes through a temporary halt, Nepal has a lot to lose,” he pointed out. Moreover, such a huge dependence on a single sector as volatile as labour outsourcing is not sustainable in the long run, he added.

 

According to the Department of Foreign Employment, a little over 350,000 Nepalis have left for foreign employment by the 11th month of this fiscal year which is a 13 per cent increment in comparison to that of the previous year. 

 

At present, 52.8 per cent of the total households have at least one absentee member, according to the preliminary report of Nepal Living Standard Survey-III released by Central Bureau of Statistics. Of the total households, 32 per cent families have members away in foreign countries. Likewise, 55 per cent of the total households receive remittance from members abroad.