Sunday, July 14, 2024

Remittance And Country’s Economy

Nepal is heavily dependent on remittances sent by migrant workers from many countries. The country’s remittance was NPR 1.007 trillion (USD 8.33 billion) in the last months of FY 2021/22 compared to NPR 961.05 billion (USD 7.51 billion) in the equivalent period of FY 2020/21. We all hope that this is promising and that it will help the Nepali economy. But is this the case? How much does remittance benefit the country’s economy?

Several programs are currently on plan to transfer this money into productive areas. Let’s have a look at where are these remittance helping the country’s economy.

Government Remittance Data

Government data show that over 92 percent of remittances received by the country go for personal and household needs, as well as debt repayments. This translates into only 8% of these funds turning into capital.

While there is no clear breakdown of how remittance money flows across other sectors. The Foreign Employment Board claims, based on a study, that 92 percent goes to individual and domestic spending, with the remainder going to other sectors. In other sectors, they are either going to save or invest in business ventures.

Further breaking down the consumption aspect, the allocation is as follows:
1. Loan repayment: 21.9% (including outbound flight loans at 14.6% and other miscellaneous loans at 7.3%)

2. Household expenses on a daily basis: 16.1%

3. Health and medical costs: 15%

4. Education: 13.6%

5. Real estate and housing: 12%

6. Holidays and jewelry: 9%

7. High-end items: 4.8%

Similarly, the distribution on the productive side looks like this:

1. 5.7% in savings

2. Business investment: 2%

farmer of Nepal


The consumption patterns provide useful insights into how remittance money is spent in Nepal. As we analyze this data, we must consider the broader impact on the economy and the potential for growth. Is it possible to encourage more corporate savings and investments? Can policies be set up to improve the balance of consumption and capital formation? These are the questions that policymakers, economists, and the general public should consider in order to ensure Nepal’s economic longevity.
Please share your thoughts and views to contribute to the ongoing discussion about remittances and their impact on Nepal’s economy.

Luzon Technologies

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