Remittances provide temporary cushion to Nepal’s troubled economy

Published On: November 26, 2020 11:53 AM NPT By: Bal Krishna Gnawali

KATHMANDU, Nov 26: At a time when the world economy was hard hit by the ongoing pandemic, improvement in Nepal’s remittances inflow has made it easier for the government to operate. Contrary to the projection of drop in the remittances flow, it has increased by 12.5 percent, helping the government in expanding its expenditure scope. The remittances flow was projected to drop by at least 15 percent after COVID-19 pandemic.

According to Nepal Rastra Bank (NRB), remittances reached Rs 258.86 billion in the first three months of this year. This is an increase of 12.6 percent, compared to last year. Remittances declined by 5.1 percent during the same period last year. Due to the improvement in remittances, the government has not seen problems in the stability of external sectors, including the balance of payments (BOP), foreign exchange reserves and current account balance. In the first three months of the current fiscal year, the BOP is in surplus of Rs 101.09 billion, and the foreign exchange reserves stood at $12.55 billion. Similarly, the current account has a surplus of Rs 34.36 billion. 

Now that the government has enough foreign exchange, there is little excuse in fulfilling the promises made in the budget.

Former NRB executive director Nara Bahadur Thapa said that the government won't have issues in increasing the expenditure this year as remittances guarantee the stability of the external sectors. “The government will be able to spend to implement the programs announced in the budget,” Thapa told Republica on Wednesday. He also added that the low income families will have less severe impact due to improvement in remittances.

As per the latest statistics, the country's 56 percent household is linked to the remittances ecosystem. Thapa stated that many Nepalis who are not connected to the remittances are in trouble. He said the government should do more.

Sishir Dhungana, secretary at the Ministry of Finance, said that the positive data seen in the external sector has made it easier for the government to do more work.  He said the government has no resource crunch as revenue collection is also close to the target. He said that the priority of the government bodies should be to win the trust of the private sector to spark economic growth, create more jobs and implement the programs set in the current budget.

The long-troubled trade deficit has also improved this year. Exports increased by 14.3 percent in the first three months of this FY, while imports declined by 12.7 percent, and so the trade deficit dropped by 15.1 percent.


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