Every day, around 1,500 Nepali migrant workers go abroad for employment and it is their remittance that keeps the Nepali economy afloat. So much so, that Nepal is one of the top five remittance-receiving countries, in terms of remittance to GDP ratio. Accounting for more than 20 percent of the GDP, migrant labourers brought in Rs 359 billion in the last fiscal year alone.

Nepal is the second largest remittance receiver among the Least Developed Countries (LDCs), according to a latest United Nations report. Of the total US $27 billion remittance received by LDCs in 2011, Nepal stands second only to Bangladesh.

Over the last two decades, remittance has emerged as a lifeline for the economy, sustaining it from a decade-long insurgency and through a protracted political transition. With the country’s manufacturing sector lagging far behind and external trade (mainly exports) not expanding satisfactorily, the inflow of remittance has been a major source of foreign exchange for the country’s finances. Remittance has contributed significantly to reducing poverty in the last 15 years. According to the Third Living Standard Survey, 25.16 percent of Nepalis live below the poverty line and a large part of this decline has been attributed to remittance.

The survey showed that around 55 percent of households in the country receive remittance from abroad. Echoing the survey, the National Population Census 2011 also showed a significant improvement in the purchasing power of the lower strata of society. The UNDP’s Human Development Report 2010 also stated that remittance was one of the major factors behind Nepal’s remarkable success in human development in the last 40 years. The latest Nepal Rastra Bank report states that the contribution of remittance to the country’s current GDP is around 25 percent, more than ten times up from a one digit figure of two to three in 2002. However, there are also flip sides to remittance. Despite contributing a lot to the GDP, remittance has not been utilised for the country’s development. With 80 percent of total remittance spent on consumption, it has not contributed to capital formation— a much needed requirement for increased investment and economic growth. Only two percent of remittance is being utilised for capital formation in the country.

Published on: 18 February 2013 | The Kathmandu Post