Channelize remittances for sustainable economic growth

Published On: September 19, 2023 07:30 AM NPT By: Republica  | @RepublicaNepal

Nepal has witnessed an unprecedented surge in remittances, a vital component of the country's economy, reaching a staggering Rs 116.02 billion in the first month of the current fiscal year. 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. 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 of existing industries, and fostering of 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 elevate 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. Only through strategic planning and execution can we secure a future where Nepal's economic health is fortified and its citizens prosper on a sustainable and resilient path.

While earning more foreign currency is a challenging task for countries like Nepal, its proper utilization is equally crucial. Government must devise policies to check excess consumerism based on imported goods. There is a growing call for utilizing remittance for social and economic infrastructures, for which very little effort has put to effect till date.  Channelising it for the productive uses via purchasing of the capital goods and high tech devices could bolster the country’s real GDP. This ensures generation of more employment opportunities.     

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