The expected drop has been attributed to the global economic slowdown triggered by the coronavirus outbreak as well as fall in oil prices, according to the World Bank.
Remittance to Nepal is expected to drop by a whopping 14 percent this year, signalling an economic distress stemming from the Covid-19 pandemic, said a World Bank report released on Wednesday.
This drop in remittance roughly translates to a loss of Rs145 billion, based on the current exchange rate of $1=Rs120.
Nepali migrant workers sent home $8.64 billion in 2019, making the country one of the biggest beneficiaries of remittance in the world.
Remittances to the entire South Asian region are expected to decline by 22 percent to $109 billion, the report says, driven largely by the global economic slowdown triggered by the coronavirus outbreak as well as the fall in oil prices.
“The economic slowdown is likely to directly affect remittance outflows from the United States, the United Kingdom, and EU countries to South Asia. Falling oil prices will affect remittance outflows from GCC [Gulf Cooperation Council] countries and Malaysia,” the report said.
Since March 12, no Nepali has gone abroad to work. The entire foreign employment business has been halted indefinitely for the first time in over two decades.
“The projection by the World Bank regarding the decline in remittances to Nepal is in line with our own projection,” said Gunakar Bhatta, spokesperson for Nepal Rastra Bank.
Many Nepalis are expected to return home after losing their jobs due to the potential contraction of the economy in major destination countries.
India, Malaysia, and countries in the Persian Gulf are major destinations for Nepali migrant workers. Although the government does not have exact figures on how many Nepalis are working abroad, the number is estimated to be in the millions.
According to Migration in Nepal, a country profile’, a report prepared by the International Organization for Migration, an estimated 500,000 Nepali migrants are in Malaysia, followed by Qatar with over 400,000, Saudi Arabia 334,451, the United Arab Emirates 224,905 and Kuwait 70,000.
Although unofficial estimates vary widely, an estimated 3 to 4 million Nepalis live and work in India, according to the report.
“With the International Monetary Fund projecting a contraction in economies of the Gulf countries in 2020, many Nepalis are expected to lose their jobs. This will affect the inflow of remittance,” said Bhatta, who is also the chief of the bank’s research division.
Remittance is the lifeblood of Nepal’s economy as it is the primary source of financing its large import bill. Nepal’s foreign exchange earning through exports and tourism is minimal. Remittances are also the key sources of income for a large proportion of the country’s population.
The economic crisis induced by Covid‐19 could be long and pervasive, when viewed through a migration lens, said the World Bank. Lockdowns, travel bans, and social distancing have brought global economic activities to a near standstill.
“Host countries face additional challenges in many sectors, such as health and agriculture, that depend on the availability of migrant workers. Migrants face the risk of contagion and also the possible loss of employment, wages, and health insurance coverage,” said the bank in its report.
The report said that so far, governmental policy responses to the Covid‐19 crisis have largely excluded migrants and their families back home.
“But there is a strong case for including migrants in the near‐term health strategies of all countries, given the externalities associated with the health status of an entire population in the face of a highly contagious pandemic,” it said.
The bank has recommended that governments consider short‐, medium‐, and long‐term interventions to support stranded migrants; the remittance infrastructure; loss of subsistence income for families; and access to health, housing, education, and jobs for migrant workers in host/transit countries and their families back home.
The size of remittances in Nepal was equivalent to 27.3 percent of the Gross Domestic Product in 2019, the highest in South Asia, according to the World Bank.
As of the first eight months of the current fiscal year 2019-20 that began in mid-July, Nepal received remittances amounting to $5.19 billion, a slight increase of 1.7 percent compared to the same period last year, according to the central bank.
“But, inflow of remittances will be badly affected in the last four months of the current fiscal,” said Bhatta.
Last week, the government formed a task force headed by a member of the National Planning Commission, the primary planning body of the government, to study the potential impacts of the pandemic on labour migration and remittances.
Amid concerns over the possible impact on foreign exchange reserves due to a decline in remittance, the government, late last month, banned the import of peppercorns, betel nuts, peas, date fruits, and vehicles with price tags of over $50,000.
“Beside discouraging imports, we need to increase foreign aid and foreign direct investment in the country to offset the loss in remittances,” said Bhatta.