Nepal's economy has been mainly dependent on remittances, i.e. income from foreign employment, for the last two decades. According to government data, about 22-25 percent of the gross domestic product (GDP) comes from remittances. According to the latest data from the Department of Foreign Employment, about 2,000 people from Nepal are going abroad for foreign employment every day.

Remittances have raised the living standards of millions of families. On the other hand, it is also raising serious questions about the long-term economic structure. For example, is such dependence safe and sustainable? Remittances have provided relief and facilities in the short term. But it has not been able to make Nepal's economic structure self-reliant, productive and sustainable. Therefore, the question of how safe and how long this dependence can be sustainable has become the most serious and strategic debate for Nepal today.

Remittances: The backbone of the economy

Due to the lack of sufficient employment opportunities in Nepal, young people are forced to go abroad. Nepali workers have reached the Gulf countries, Malaysia, South Korea, Japan, Europe and recently Australia and Canada. The money they send has increased consumption from villages to cities, reduced poverty, and increased spending on housing, education, health, and consumer goods. Remittances have strengthened Nepal's foreign exchange reserves. They have played a major role in paying for imports, repaying debt, and covering the current account deficit. The relatively stable nature of remittances, even during the pandemic, has made them a 'shield in times of crisis'.

Visible benefits, hidden risks

Along with the bright side of remittances, its dark side is also serious. The first risk is overdependence. An economy that is overly dependent on any external source is always vulnerable. If the global economy slows down, war escalates, or Gulf countries tighten immigration policies, millions of Nepalis' jobs could be in danger at once. The second risk is neglect of the productive sector.

Remittances increase consumption but do not increase production. Investment in agriculture, industry, and technology is declining. As many young people have gone abroad, fields in villages are starting to fall behind. There is a shortage of skilled manpower in the industry. Thus, remittances provide immediate relief, but in the long run, they weaken self-reliance and pose a major challenge to the country's development.

Labor export or brain drain?

Remittances are understood as 'labor export', but in reality, it is also 'human capital drain'. In Nepal, educated and skilled youth going abroad is a double loss for development. On the one hand, the manpower that the country has invested in and prepared leaves, and on the other hand, the country's productive capacity weakens. Skilled manpower like doctors, engineers, IT specialists, nurses, technicians have started settling abroad permanently. This is weakening the infrastructure that can provide quality services within the country. This is considered a serious problem of 'brain drain'.

Impact on social values ​​

Remittances have not only affected the economy but also the social structure. In many families, family relationships have become weak when the mother or father is abroad for a long time. There has been a negative impact on the mental health, education and behavior of children. Consumerism is increasing in society, and houses, cars, mobile phones, and branded lifestyles have started to be considered as the standard of success. It has developed a culture of spending rather than production. Many consider going abroad as a safer option than starting a business or enterprise. The entrepreneurial culture of taking risks is weakening.

Utilization of remittances: Opportunity or challenge?

Remittances themselves are not a problem, the problem is the pattern of their use. A large portion of the remittances coming to Nepal are spent on daily consumption, house construction, and imported goods. Only a very small portion is invested in the productive sector. If this amount had been invested in agricultural modernization, small industries, tourism, energy, information technology, and startups, today's economic structure could have been different. However, due to policy and institutional weaknesses, the mechanism for converting remittances into investment is weak. There is savings in banks, but the flow to long-term industrial projects is low.

The role of the government: There is a policy, no implementation

The government has repeatedly announced a policy of 'using remittances in productive sectors'. Various schemes have also been introduced. Such as soft loans for youth returning from foreign employment, skill-based training, entrepreneurship programs, etc. But in practice, these programs are limited to paper. The main problem is policy continuity and lack of trust. Young people who want to do business are reluctant to take risks due to administrative hassles, corruption, political interference and market instability. To avoid such problems, they go abroad again.

International context: Lessons to be learned from other countries

Countries like the Philippines, Bangladesh, and Sri Lanka also depend on remittances. But they have tried to transform it into a productive sector through the financial system. The Philippines has provided tax exemptions and concessional loans to migrant workers to start businesses after they return home. Bangladesh has increased investment in the garment industry and increased export production along with labor exports. Nepal should also learn from such models and move from ‘remittance-based development’ to ‘product-based development’.

How is long-term security possible?

Three main foundations are necessary to reduce dependence on remittances. First, create domestic employment. For example, there is great potential in agriculture, tourism, hydropower, information technology, construction, and small industries. If there is investment and policy stability in these sectors, millions of youth can be stopped in the country. Second, skill development. For example, a policy is needed to make young people who go abroad not unskilled workers, but skilled and highly paid workers. This will not only improve the volume of remittances, but also the living standards of workers. Third, Reforms in the investment of remittances. For example, special investment funds, bonds, cooperatives and startup funds should be established for overseas Nepalis to encourage them to invest their savings in production.

Conclusion

It is true that remittances are supporting Nepal economically today. Because they have directly helped millions of families to survive, significantly reduced the poverty rate, played an important role in importing foreign currency to pay for imports, maintain debt repayment capacity and monetary stability, and have become a major source of immediate relief to the nation even during times of epidemics, natural disasters and economic crises. However, despite this, it is not a sustainable basis for long-term development, but overdependence itself is a serious risk. 

which is weakening the country's internal production capacity, neglecting productive sectors such as agriculture and industry, encouraging educated and skilled youth to migrate abroad, and building a consumption-oriented and import-dependent economy, as a result of which Nepal is becoming more dependent on the external labor market and international conditions instead of becoming self-reliant.