Remittance inflow keeps increasing
By Laxman Kafle
Kathmandu, May 7: Appreciation of the US dollars against the Nepali currency, tightening of informal trade and presence of Nepali banks abroad are major factors that have helped increase remittance inflow in the nation.
The strong dollars, high interest rates provided by the banks and financial institutions and tightening of informal trade by the government has contributed higher remittance inflow despite the decline in the number of Nepali migrant workers going abroad, Dr. Gunakar Bhatta, executive Director of Nepal Rastra Bank (NRB) told The Rising Nepal.
“The strong dollar has led to the depreciation of the Nepali currency, which is caused mainly by its pegging with the Indian currency. Subsequently, the people holding money abroad have also sent the money back home. Owing to strong dollar, Nepali currency has been depreciated which has contributed to the increase in the inflow of remittance in the Nepalese economy,” he said.
Following the tightening of the informal trade, the migrant workers are sending their money through the formal channels instead of using informal ones, including Hundi, money transfer through illegal way, and gold purchase, he added.
The presence of the Nepali banks abroad, including Korea, Australia has gone up, which has seen remittance from these nations being sent through formal channels, he said.
The growth of middle economy countries has also a reason behind the increase of remittance inflow in Nepal as salaries of the workers in these countries increased significantly.
The role of remittance is vital to accelerate national economy as acceleration contributes in consumption, investment and revenue collection of the government, said Dr. Gunakar Bhatta, executive Director of Nepal Rastra Bank (NRB).
In the meantime, the annual remittance inflow has remained over 25 per cent of the Gross Domestic Products (GDP) in the last six years.
The remittance has not directly included in the GDP, but its contribution in the national economy has a multiplying effect as it has been contributing to revenue collection and poverty reduction in the country, he said.
“Remittance was 10.7 per cent of GDP in 2000/20011. It has constantly been increasing trend in subsequent years and it lagged pick up 29.6 per cent of GDP in 2015/16. Still in 2017/18, it stood 25.1 per cent of GDP. So remittance has a major share in the national economy,” he said.
The country received remittance of Rs. 755.05 billion in the fiscal year 2017/18 while it was Rs.47.21 billion in 2000/2001.
Remittance inflow stood at Rs. 695.45 billion in the fiscal year 2016/17, Rs. 665 billion in 2015/16 and Rs. 617.27 billion in the fiscal year 2014/15.
The remittance inflow directly contributes to revenue collection of the government following the increasing consumption of goods as government will collect revenue in customs and in VAT of imported goods.
“However, it will have negative effect in imports. The family members of the migrant workers are reside in urban areas where they survive on the remittance money and they have a tendency to give up their occupation,” Bhatta said.
Stating that the remittance was not a sustainable resource of the national economy, he said that the government should identify alternative resources mobilisation of remittance for national development.
“We have to promote the comparatively advantages areas including, agriculture, tourism for resources management,” he said.
Remittance which increased by 5 per cent in 2017/18, has gone up by 23.4 per cent in the first eight months of the current fiscal year 2018/19. Even though the number of Nepalis going abroad for work has gone down by 38.3 per cent, the remittance inflow has increased.
The remittance flow increased by 33.1 per cent in Shrawan, 33.4 per cent in Bhadra and 37.3 per cent in Ashoj compared to same period of respective months of last fiscal year.
The banks and financial institutions were offering higher interest rate on deposits in the beginning of the first five months current fiscal year. During that time they had provided around 12 per cent interests on deposit.
“But now, there is a cap on the bank interest rate and as such the interest rate on deposit has gone down. Because of this, some people working abroad have held back money there. They might be waiting for better returns in the subsequent months,” Bhatta said.