In the Nepali month of Ashoj (mid-September to mid-October) this year, the remittance inflow has set a new record, with a staggering Rs 136 billion received in remittances for that month alone. This marks the highest amount ever received in a single month. In the current fiscal year 2023/24, up to the month of Bhadra (mid-August to mid-September), Rs 228 billion was received, and this amount increased to Rs 365 billion in Ashoj. According to the Nepal Rastra Bank (NRB), remittances in Ashoj alone reached Rs 136 billion. The NRB reports that remittances received up to this month have increased by 30 percent compared to the same period in the previous fiscal year 2022/23. In Ashoj of the previous year, the remittance inflow had increased by only 16.8 percent. While the immediate economic benefits of this influx are undeniable, it is crucial to emphasize the imperative for long-term economic sustainability. Remittances, constituting approximately 23 percent of Nepal's GDP, have become a significant lifeline for many households and communities. However, it is equally essential to redirect this windfall into productive sectors, ultimately reducing our heavy reliance on remittances for the nation's overall economic well-being.
Channelize remittances for sustainable economic growth
The steady rise in remittances over the years has indeed bolstered Nepal's current account, posting a three-year record surplus of Rs 12.99 billion in the review month. This surplus, while indicative of short-term economic stability, should serve as a catalyst for strategizing a comprehensive plan aimed at shifting the trajectory of our economic dependency. The excessive inflow of foreign currencies, driven primarily by remittances, needs to be redirected towards sustainable investments within the country. One critical facet of this necessary shift is a focus on employment generation and domestic job creation. The creation of a conducive environment for entrepreneurship, bolstering existing industries, and fostering new sectors will not only absorb the returning migrant workforce but also engage the burgeoning youth population within the nation. The government must formulate policies that encourage investment in key sectors such as agriculture, manufacturing, and technology, thereby laying the foundation for sustainable economic growth. Reducing our dependence on remittances is vital for shielding our economy against external shocks, as exemplified by the profound impact of the COVID-19 pandemic. The global health crisis revealed the vulnerability of an economy heavily reliant on remittances, exposing us to unforeseen risks. A diversified economy, with a reduced dependency on remittances, can withstand such shocks and ensure the welfare of its citizens even during turbulent times.
Furthermore, a decline in the trade deficit, coupled with prudent fiscal management, can further strengthen our economic foundations. The prudent utilization of remittances for capital investment, infrastructure development, and human capital enhancement can pave the way for a more prosperous and self-reliant Nepal. This strategic approach will not only elevate our global standing but also improve the quality of life of our citizens. While celebrating the short-term benefits of record-high remittances, it is incumbent upon us to envision a future where Nepal's economy thrives on diversified sources of income. The government must take a proactive role in formulating policies that channelize remittances into productive sectors, ensuring sustainable economic growth and reducing vulnerability to external shocks. While earning more foreign currency is a challenging task for countries like Nepal, its proper utilization is equally crucial. The government must devise policies to check excess consumerism based on imported goods. There is a growing call for utilizing remittances for social and economic infrastructures, for which very little effort has been made till date. Channelizing remittances for productive purposes, such as purchasing capital goods and high-tech devices, could bolster the country's real GDP and ensure the generation of more employment opportunities. It is imperative to focus on these strategic initiatives to secure a brighter and more resilient economic future for Nepal and its citizens.
