Declines in remittance flow to affect overall economy, say economists

Kathmandu: Economists have said that the decline in remittance flow would adversely affect the remittance based economy of Nepal as it has been a pillar of the nation’s economy .

They said that the government should adopt effective measures to protect the country from the negative effect of the declining remittance inflow.

The money remitted by the Nepali migrant workers decreased by 1.4 per cent to Rs. 228.95 billion in the first four months of the current fiscal year against 7.8 per cent increase in the same period of the previous year.

Consequently, the net transfer receipt decreased by 0.3 per cent to Rs. 264.57 billion in the review period. Such receipt had increased by 6.7 per cent in the same period of previous fiscal year.

Economist Dr. Dilli Raj Khanal said that multiple effects would be seen in the country’s economy following the decline in remittance flow as the remittance has been contributing to accelerate Nepal’s economy.

The negative impact in references to the economic indicators— current account, balance of payment, and foreign currency reserve will be seen immediately due to the drop in the flow of remittance, he said, adding that the liquidity problem has already been noticed in the banking sector.

The decline in the remittance inflow would directly hit the balance of payment as the country’s trade deficit has been widening, he said and added that the government should promote export trade by providing subsidies to export business along with promoting tourism and other potential sectors.

Economist Dr. Chandra Mani Adhikari said the decline in the flows of remittance would pose a challenge to maintain the macroeconomic stability as the remittances has contributed substantially to maintain macroeconomic stability in the country at present.

He, however, said that the positive impact of the reduced remittance would exert pressure on the government and private sector to increase the domestic production and create more jobs opportunities inside the country.

“The government should focus on increasing fiscal budget and forward the mega projects to accelerate economic activities that would help mobilise cash in the market and create jobs,” he said.

The existing liquidity crisis will lead to an increase in interest in loans provided by the banks that will affect the overall industrial sector and reduce the competitiveness of the industries, he said.

Reduced in the flows of migrant workers and the increased cost of living abroad instead of increase in wages of labourers are major factors for the fall in remittance, he said.

According to joint spokesman at NRB Rajendra Pandit, there was no need to be worrying by the decline in the remittance during the first four months as growth of remittance has been in the declining trend for the last few years.

The flows of remittance had declined marginally in the three months of the last fiscal year and also in same period three years ago.

“We have to take it as an opportunity to reduce the numbers of migrant workers.  The government should provide jobs to youths inside the country which help accelerate the economic activities in long term,” he said.