PRITHVI MAN SHRESTHA

Remittance has emerged as one of the biggest factors in poverty reduction. If the individuals that are currently receiving remittance had the payments cut, their poverty level would be at 35.3 percent, compared to 19.3 percent currently, according to the Nepal Millennium Development Goal Report (MDG) Report 2013.

However, the report showed concern, questioning if poverty reduction could be sustained given the dependency on the international labour market.

According to the Third Nepal Living Standard Survey 2010-11, 55.8 percent of households receive remittance , with each household receiving an average of Rs 80,436 per year. 

The scale of remittance in Nepal is 25 percent of the country’s gross domestic product (GDP), which is the highest among the South Asian countries, according to the latest ‘Migration and Development Brief’ published by the World Bank a few days ago.

Nepal received remittance worth Rs 434 billion in the last fiscal year 2012-13, according to the Nepal Rastra Bank (NRB).

However, there is a growing concern that remittance is being used heavily for consumption purposes, instead of investment for capital formation.

According to the Living Standard Survey, a significant portion (78.9 percent) of the remittance is being used in daily consumption, followed by loan repayments. Only 2.9 percent of the total remittance is used for capital formation.

Former vice-chairman of the National Planning Commission (NPC), Jagadish Chandra Pokharel, said that despite remittance being used for consumption, it’s used towards a better education for the children of the migrant workers should not be overlooked, as it would help future generations to prosper.

He said that migrant workers gain exposure and learn skills, meaning they will do things differently, which is an asset for the country.

“When they become engaged in economic activities within the country with the little savings they have made, it will heavily contribute to the country’s economic development,” he added.

He said since the trend of migrant workers returning home began; the government must have policies to guide them in properly utilising their savings.

Currently, the government has been issuing foreign employment bonds for the last few years to ensure the saving of incomes. However, the measure has not been successful, with little subscription to such bonds.

The budget negotiations for the current fiscal year also discussed creating appropriate arrangements to invest remittance incomes into the productive sector.

However, the government does not currently have any specific plan for the same issue. “No plan has been initiated at the moment, but I hope the new government to be formed after the new constituent election will introduce the necessary measures to utilise remittance into the productive sector,” said Charanjeevi Nepal, chief economic advisor at the Finance Ministry. Another former vice-chairman of the NPC, Dipendra Bahadur Kshetry, said that an over-dependence on remittance may not be sustainable in the long run, and measures to create rural employment must be taken. “Many migrant workers will definitely come back after the scheduled football World Cup 2022 in Qatar, and the country needs space to accommodate them and engage them in economic activities,” he added.

Besides helping to reduce poverty, remittance has become the lifeline for the country’s economy. It is because that remittance has been the source of sustaining surging imports when export size is very small. The country’s export can only sustain 12 percent of the exports, according to the NRB.

Even agriculture products that can be produced within the country, possessing huge market potential are being imported. Pokharel said that the best option for utilising the remittance in the productive sector is in the agriculture sector, where potential has not been harnessed. “This will contribute heavily to import substitution when meat import itself is worth Rs 22 billion,” he added.

Published on: 6 October 2013 | The Kathmandu Post