Most of the income coming from migrant workers as remittance is spent on consumption — especially in imports — here in Nepal.

“Though in the short run, rise in remittance income leads to more investment, import and income than increasing consumption, eventually, in the long run more remittance has found to have led to higher amount of consumption,” according to a study conducted by International Migrants Remittances Observatory on ‘Assessment of Remittance Policies and Programme in Nepal’ .

The report prepared by Devendra Shrestha, Dutta Shree Duwadi and Min Raj Adhikari shows that an increment in remittance by Rs one million leads to additional consumption of Rs 300,000 and additional investment of Rs 710,000, and Nepal receives remittance equivalent to 23 per cent of its gross domestic product with more than two million people living and working abroad. However, the country has not been able to reap much benefit from the inflow of the vast monetary resources as it should have.

“Income from remittance which is mostly spent on short-term consumption needs to be invested in human capital development such as education which will reap more benefit later on,” said governor of Nepal Rastra Bank Dr Yubaraj Khatiwada during the dissemination of the findings.

“Thanks to remittance, Nepal has been able to achieve most of the Millennium Development Goals,” he pointed out, adding that households are able to spend money on education, health and immunisation due to remittance income.

Economist Dr Prithvi Raj Ligel also pointed out that 79 per cent of the remittance income is being spent on personal consumption.

“The government needs to promote transfer of the amount from personal consumption to investment for sustainable development,” he said. To acquire the maximum benefit from remittance income and to promote the use of formal channels for remitting money, the study has made a recommendation to make remittance through legal sources less expensive.

At present, 52.8 per cent of the total households have at least one absentee member who is away from home. The share of remittance is 31 per cent in household income.

Published on: 8 May 2013 | The Himalayan Times