In the last month of Chaitra alone, around 209 billion rupees of remittances were received. The increase in the exchange rate of the US dollar and the absence of the impact of the war in West Asia also contributed to the high remittance inflow.
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Remittance inflow is expected to increase significantly in Baisakh as well. While there is speculation that remittances entering Nepal will be affected due to the impact of the war in the Gulf countries, remittances are expected to enter Baisakh at around the same level as Chaitra. In a conversation with some remittance companies that bring a lot of foreign currency into Nepal, Kantipur Daily estimated that remittances of at least more than 200 billion rupees will enter Baisakh as well.
However, the National Bank has only made public the data on remittances entering Nepal till Chaitra on Monday. According to the National Bank, around 200.9 billion rupees of remittances entered the country in last Chaitra alone. This is the highest monthly amount so far. Previously, the highest remittance of 200.1 billion rupees was entered in last Asoj. Experts say that remittances will enter Baisakh at around the same level as Chaitra.
Former President of the Nepal Remittance Association Chandra Tandon estimated that remittances would reach more than 200 million in Baisakh. ‘Due to fluctuations in the exchange rate of the US dollar and public holidays abroad on the last day of the month, remittances decrease by 4/5 percent in the month. The last day of Baisakh is Thursday. That is why remittances are coming in a little more,’ he said, ‘Looking at the initial trend so far, at least more than 200 million remittances are coming in Baisakh.’
Tandon said that remittances have been increasing continuously in recent months due to the rise in the value of the dollar and the start of more remittances from the European region, and the same trend will continue in Baisakh as well. ‘Currently, about 35 percent of remittances come from the Gulf countries and the remaining 65 percent come from the European region and other countries,’ he said, ‘The impact of the war is not in Saudi Arabia and Kuwait at the moment. There is a little bit in Bahrain. It is unclear whether the service sector including hotels in the UAE will be affected for some time. However, as remittances from these regions are decreasing, more are coming from Europe, so the overall remittances are continuously increasing.'
Similarly, in the last nine months (from Shrawan to Chait), remittances of Rs. 1659.41 billion have been received. This is an increase of 39.1 percent compared to the same period of the previous fiscal year. In the same period of the previous year, remittance inflow had increased by 10.2 percent. In Chait 2082 alone, remittances of Rs. 2975 billion have been received. In Chait 2081, remittances of Rs. 139.54 billion had been received. From Shrawan to Chait of that year, remittance inflow in US dollars increased by 31.9 percent to Rs. 11.55 billion. Such inflow had increased by 7.5 percent until Chait of the previous year.
Suman Pokharel, former president of the Nepal Money Remittance Association, said that the impact of the conflict in West Asia had not been seen much on remittances until Chait. ‘If the war continues for a long time, some impact may be seen around Asar-Sharwan. But there has been no significant impact on remittances until Chait and Baisakh.’ In recent years (even before the war started), there has been an increase in the trend of many Nepalis from the Gulf countries going to Europe. He said that since the work and earnings in Europe are much better than in the Gulf countries, remittances coming to Nepal from Europe have also been increasing continuously in recent years. Pokharel said that the impact of this has been a high increase in overall remittances. ‘However, remittances coming from the Gulf countries were decreasing and from other countries including Europe were increasing,’ he said. ‘Therefore, even though remittances from the Gulf countries were moderately affected, total remittances are increasing.’
The increase in the exchange rate of the US dollar and the impact of the war in West Asia on the work of Nepalis in the Gulf countries have been decreasing, said Ritesh Mittal, President of the Nepal Money Remitters Association. ‘After the war in West Asia began, Nepalis working there seem to have sent home the money they have. Meanwhile, the value of the US dollar has also increased compared to the Nepali rupee,’ he said, ‘This has also encouraged Nepalis living abroad to send money home.’
Mittal said that remittances have not decreased because the impact of the West Asia war has not reached the areas where there are many Nepalis in the Gulf countries, as was rumored outside. ‘There have been more attacks in the areas where there are American soldiers during the war, so it does not seem that many Nepalis have been affected,’ he said, ‘Although it seems to be a lot of danger from the outside, life has gradually returned to normal now.’ For these reasons, he said, there is a possibility that remittances will not decrease in Baisakh either, and will be around Chaitra. ‘Since the war in West Asia is not over, there is little chance of a decrease in the exchange rate of the US dollar. Therefore, remittances coming to Nepal will not decrease,’ said Chairman Mittal.
Currently, about 40 percent of remittances coming to Nepal come from West Asia. This share has been decreasing in recent months. Currently, there are about 1.9 million Nepali workers in the Gulf region. Of the 700,000 Nepalis who go abroad for employment every year, about 65 percent, or 450,000, go to the Gulf countries alone.
In the fiscal year 2081/82, 1.7 trillion 2 billion remittances were received. Of that, the Gulf countries' share was about 39 percent (673 billion). Similarly, the Gulf region's share was 38.9 percent in the fiscal year 2080/81 and 45.1 percent in the fiscal year 2079/80. In addition, the Rastra Bank has stated that India's share of the total remittances received in Nepal till last Chaitra, 10 percent, and about 6/6 percent of the remittances received from the UK, Australia and Malaysia have entered Nepal.
The impact of the West Asian war on remittances entering Nepal has not yet been felt, said Rastra Bank spokesperson Guru Prasad Poudel. He analyzed the rapid increase in remittance inflow for four reasons. First, despite the ongoing geopolitical tensions and wars in the West Asian region, the share of remittances coming to Nepal from there does not seem to have decreased as expected. The contribution of the West Asian region to the total remittances is still above forty percent. The Gulf countries that receive most of the remittances are the UAE, Qatar, and Saudi Arabia. The share of these three countries in the total remittances as of Chaitra is about 10 percent each. This indicates that the employment and income flow of Nepali workers is still concentrated in West Asia.
Second, from Asad to Chaitra of the current fiscal year, the Nepali rupee has depreciated by about 7.5 percent against the US dollar. This change in the exchange rate seems to have helped increase the monetary value of remittances as the amount received in foreign currencies is higher when converted into Nepali rupees.
Third, the trend of sending remittances through formal channels has increased in recent times. It can be assumed that the trend of shifting from informal channels to formal channels has increased with the expansion of the banking system, digital payment infrastructure, and access to remittance companies. However, it seems that the remittances from workers may also include income from information technology services, personal transfers and other private income, which can only be confirmed through a comprehensive analysis.
Fourth, the number of Nepali workers going for foreign employment is still high. During the review period, the number of Nepalis who received labor permits for the first time, both institutionally and individually, reached 294,186, while the number of those who received re-employment permits is 293,259. Although the number of those receiving labor permits for the first time has decreased slightly compared to the previous year, the number of those receiving re-employment permits has increased significantly. This indicates the continuity and stability of foreign employment of existing workers. Spokesperson Poudel argues that this has helped maintain the remittance flow at a stable and high level.
Overall, Poudel said that remittance inflow has increased significantly in the current fiscal year due to the effect of the exchange rate, continuous income flow from West Asia, expansion of formal channels and stability of foreign employment. This has made a positive contribution to Nepal's external sector stability, foreign exchange reserves and domestic consumption.
The government is also aware of how to utilize the increasing remittances in the productive sector. In its public policy and program on Monday, the government has put forward a policy to utilize the investment received through remittances in the productive sector. For this, the government is preparing to diversify the destination country that pays high wages through labor diplomacy and operate a 'Remittance Investment Fund' to transform remittances into productivity through consumption.
The increase in remittances has had a positive impact on foreign exchange reserves, balance of payments position, and current account surplus. Accordingly, as of last Chaitra, foreign exchange reserves have reached 3494.73 billion rupees. The Rastra Bank claims that this will cover 21.8 months of goods imports and 18.4 months of goods and services imports. While this year, the Rastra Bank has set a target of maintaining foreign exchange reserves to cover 7 months of imports. Similarly, as of last Chaitra, the balance of payments is in surplus by 731 billion rupees and the current account is in surplus by 618 billion rupees.
