For the first time in nearly two years, Nepal saw contraction in remittance inflow during the first month of the current fiscal year 2016-17 that began in mid-July and it could hit the Nepalese economy hard, Nepal’s central bank has warned.
As the number of Nepalis leaving for foreign jobs decreased significantly over the last year, its impact has been clearly seen in remittance inflow whose size is around 30% of the national economy, according to Nepal Rastra Bank (NRB), the central bank of the country.
In its latest monthly Current Macro-economic and Financial Situation Report, released on Thursday, the NRB revealed that remittance inflow decreased by 6.8% to $484mn in the first month of the new fiscal, Xinhua reports.
“The anemic growth in remittances is likely to pose downside risk to overall economic activities in general and service industry in particular,” the report said. Earlier, Nepal had witnessed contraction of remittance inflow in October and
November 2014.
Decreased remittance resulted in deficit in Nepal’s balance of payment by $20mn as of first month of the current fiscal year compared to surplus of $47mn in the same period of last fiscal year, according to NRB.
Nara Bahadur Thapa, chief of research department at the NRB, said that the decrease in inflow of remittance was the direct impact of decreased outflow of Nepalese migrant workers in various countries, particularly in the Gulf countries and Malaysia. Nepalese workers departing for foreign employment slumped by 8.4% to 418,713 in fiscal 2015-16.
The departure to Malaysia, traditionally the largest work destination for Nepalese workers, slumped to 60,979 in fiscal 2015-16 against 202,828 in the previous fiscal. On the other hand, economic slowdown in Saudi Arabia as a result of decreased oil price has also been a cause of concern for Nepal because companies there have started to lay off foreign
workers.
Amid decline in outflow of migrant workers, Nepal started to see decreasing growth rate of remittance since September 2015 and remittance contracted finally in August 2016. As Nepal is heavily import-driven economy, remittance has remained as the most important source for financing of imports. In the last fiscal year, Nepal’s earning from exports stood at just 704 million US dollars while the country imported goods worth 7.09 billion US dollars. Nepal received a total of 6.25 billion US dollars in remittance in the last fiscal year.
“If the current trend of decline in remittance continues in the next few months, it may have serious repercussion on the economy because it will decrease the economic activities in various sectors,” Bishwombhar Phyakuryal, a senior economist, said, adding: “The economy which has been suffering from weak expenditure of government resources, decreased remittance will bring down expenditure from non-government sector affecting
economic performance.”