At a recent function held to unveil the third Nepal Living Standard Survey (NLSS) report-2010/2011, Central Bureau of Statistics (CBS) officials, too, tried to prove this. 

They established remittance -- from within and outside the country -- as the single biggest reason for a significant decline of five percentage points in the number of people living below the poverty line. 

 

As per the NLSS report, Nepal´s absolute poverty has declined to 25.16 per cent in 2010/2011 from 30.85 per cent in 2003/2004. This means that only a fourth of Nepalis are currently unable to earn Rs 53 -- required to buy basic food calories every day. 

 

The decline in absolute poverty is largely due to a sharp rise in the number of remittance-receiving families. Today, 55.8 per cent of total households receive remittance from within or outside the country -- an impressive increment of 24 percentage points over the last seven years. 

In 2003/2004, when the second NLSS was held, only 31.9 per cent of households received remittance. In 1995/96, at the time of the first NLSS, the percentage of remittance-receiving families was just 23.4. 

 

“Higher the number of remittance-receiving households, lower the number of families below the poverty line,” said Dhundi Raj Lamichhane, survey section chief at the CBS. “Remittance has enabled many poor people to buy basic food calories and other essential non-food items.” 

According to a recently-published preliminary report of population census-2011, almost two million people are currently outside the country. A majority of them are believed to be working in several Gulf countries, Malaysia and India. They regularly send money to their families back home, which has caused a decline in absolute poverty. 

 

“Remittance has kept our economic activities vibrant,” says Dr Ganesh Gurung, who has conducted a number of studies on migration and remittance, adding, “For instance, look at the soaring sale of scooters. It is possible because those working in Gulf countries are sending money back home. In this way, remittance has kept our market alive despite negative economic indicators.”

 

Sadly, although it plays a vital role in fighting poverty, remittance has miserably failed to boost national economy, according to the same third NLSS report. The report shows the largest chunk of remittance is being spent on household consumption, which does not help national economy in the long run despite keeping economic activities smooth. 

 

“We are using much of remittance in fulfilling daily basic needs like food and clothes instead of making investment in productive sectors. It has, of course, reduced the number of people living below the poverty line, but not in any other way,” says Dinesh Bhattarai, a statistics official at the CBS, who was involved in the third NLSS. “This is not good for our future. If we keep on spending so much for fulfilling basic requirements, we can never reduce our dependency on remittance.”

Based on its one-year-long survey, the third NLSS report states that Nepal receives Rs 259.1 billion as remittance every year, though Nepal Rastra Bank (NRB) presents a slightly bigger figure. And, the largest pie of the total remittance, 78.9 per cent to be precise, goes for household consumption followed by 7.1 per cent used to repay loans. 

 

The third largest chunk of remittance, 4.5 per cent, is spent on purchase of household properties followed by 3.5 per cent on children´s education. The use of remittance in business activities and long-term savings are very nominal -- only 0.5 and 0.6 per cent, respectively. 

The undertone of the remittance-related figures presented by the third NLSS report is clear: Nepali migrants are desperate to repay their loans, lent by local moneylenders at high interest rates, besides helping their families eke out a living. Having spent much of their earnings in consumption and repaying loans, they get little to spend for other purposes like long-term savings and other business-activities. 

 

“This also shows the stratum of people who go overseas for work,” says Dr Gurung. “As almost all migrants working in Gulf countries, Malaysia and India belong to the lowest economic stratum of our society, it is natural that they spend much of their earnings in fulfillment of daily needs. In fact, though much of their spending is for daily needs, our independent study shows that they prefer to repay loans over everything else. The rest comes only after repaying loans.”

So, what are the pitfalls of spending much of remittance on household consumption? Dr Rudra Suwal, director at the CBS and an economist, explains, “If we fail to utilize our remittance in productive sectors, our national economy, arguably sustained by remittance, can crash any time in future. The recent wave of global recession, followed by the Arab uprising, has already proved how dangerous it would be to depend on remittance in the long run.” 

“The remittance-driven economy is not that good in the long run,” sums up Dr Suwal, adding, “It is bad especially when we fail to use it in productive sector. Unfortunately, this is exactly the case in Nepal.” 

 

Dr Gurung is of the view that migrant workers are not solely responsible for the use of remittance in unproductive sector. “Our government is equally responsible,” he says. “Several remittance-dependent countries like the Philippines have already started to teach their migrant workers to invest some of their hard-earned money in productive sector. In our case, the government´s effort to this effect is zero. How can almost uneducated workers know how and in which sector they can invest their earnings without government intervention?”