Utilising Remittance For Economic Growth

 Kushal Pokharel


The onset of globalisation has turned the entire world into a single village, resulting in the unfettered flow of goods, services, ideas and people across the world. With the advancement in the communication and transporation system, migration has become a common phenomenon. The exchange of labour, capital and technology has become profound in the present era of liberalisation, privatisation and globalisation (LPG), and Nepal is not an exception.


Migrant workers

According to recent government estimates, everyday around 800 people leave Nepal in search of better employment opportunities (the number has slightly decreased in the aftermath of the devastating earthquake). Their destination mostly includes the Gulf countries where they have to work under extreme physical conditions including adverse weather.

Although it is distressing to note that Nepalese workers are engaged in dirty, difficult and dangerous jobs in foreign lands, the bitter reality is that the hard earned money of these migrant workers is  a major contributer to the Nepalese economy. Currently, remittance constitutes about one-third of the national GDP.

At a time when the contribution of major sectors like agriculture and industry to our GDP is decreasing, the flow of remittance has provided life blood to the economy. It is also a major source of foreign currency and has helped in maintaining a favourable balance of payment.

Moreover, the remitted income has been a boon in reducing the percentage of population living below the poverty line in the rural villages. While absolute poverty was around 42 per cent a decade ago, now it has come down to 23 per cent. Equally important is the fact that the living standard of the rural populace has improved with increased access to health and educational facilities.

Interestingly, various surveys of the government, including the Nepal Living Standard Survey (NLSS), also attribute the role of remittance to achieving this milestone. As per the Third NLSS, 56 per cent of the rural households in Nepal receive remittance.

On a sad note, most of the income is being spent on consumption and other unproductive expenses like buying land, a house among others. Less than 2 per cent is used for creating capital goods as per the NLSS report. This is, indeed, a matter of grave concern for the welfare of the macroeconomy.

In this scenario, the argument for curbing labour migration from Nepal for now is impractical  against the  backdrop of our underperforming economy. Empirical evidence suggests  that the average economic growth rate of Nepal has hovered around just 3 per cent in the last decade. One can easily imagine the vulnerability of our economy if remittance also stops coming in the country.

On the one hand, the relentless political transition and lack of visionary leadership in the country have adversely affected the performance of key economic  sectors. On the other, the absence of clear and consistent policies to unleash the potential of remittance has left the nation’s progress in jeopardy.

It is high time a concrete government policy and time bound action plans were adopted to wisely utilise the remittance for generating a mulltiplier effect in the economy. The beginning step would be to create an investment-friendly environment in the country with macro-economic stability and predictable policies. The emerging concept of ‘Remit Hydro’, which is still in its nascent stage, needs to be implemented in full swing to accelerate economic activities in the country.

Similarly, issuing other forms of bonds for labour migrants by providing them lucrative incentives will generate additional financial resources for the country, which can then be diverted into agriculture, industry and tourism, among others. More importantly, generating awareness through various campaigns and programmes to motivate the migrants to invest is very important because many  Nepalese working in the foreign employment sector are largely unaware about the government policies and strategies. Even those who are a bit aware have doubts in their minds. Thus, the state has the onus to clear such misunderstandings and gaps by establishing a robust communication and feedback system. 

Mobilising the skills, knowledge and investments of Non-Nepalese Residents (NRNs) for the overall growth of the nation needs to be prioritised by attracting investments in areas of comparative and competitive advantages for the nation. Channelising remittance towards   formation of capital goods in the field of education, health will be useful for improving the performance of the social sectors.

Having said that, in the long run, remittance should be discouraged because this will be an obstacle in the nation’s path towards self-reliant growth. But only carefully laid out plans and programmes based on evidence rather than wisdom can make it happen. Thus, it is the major responsibility of the state to create exciting educational and employment opportunities at home, a stable socio-cultural, political and economic environment, in which all people feel that they can live a simple and dignified life with a good standard of living at home.


Bold initiatives needed

Instead of merely providing lip service to generating more jobs in the country, the mainstream political leaders should take bold initiatives to really enhance our youth’s potentialities for better jobs and conduct youth empowerment programmes to build their confidence that they can live a happy life in their homeland.   




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