From the household level, the net proceeds from remittances support the broader economy, which has resulted in remittances gaining increasing importance to the economy of Nepal. As reported by the Nepal Rastra Bank, remittances were received in the order of Rs 1,723.27 billion, which resulted in a growth of 19.2% for the 2024/25 fiscal year. During the first 10 months of the said fiscal year after mid-July 2024, Nepal received the equivalent of Rs 1,356.61 billion in remittances, which was an increase of 13.2%. Data from previous decades clearly indicate the scale to which the economy of Nepal relies on employment opportunities offered to its citizens abroad to support families and maintain equilibrium of the economy.

Nepal has benefited from remittances for years, which indicates the positive effects of globalisation. The process of labour migration was facilitated by the signing of the Sugauli Treaty of 1815 and the subsequent allegiance of the Gorkhas to the British Army in the 19th century. As a result of the liberalisation embraced after the 1990s, migration for employment was common, and the receipt of remittances boosted the economy substantially. The increasing economic support from abroad has allowed for a decrease in poverty levels, health care and education to become widely available, and increased foreign exchange reserves.

As of today, remittances constitute almost 28% of the GDP of Nepal. This makes it one of the most remittance-dependent countries across the globe. In the remote areas of the country where employment opportunities are limited, remittance incomes tend to form the predominant source of income. People use the money for several purposes like construction of houses, paying tuition fees to private and public educational establishments, health care services, and buying other assorted consumable products. With the inflow of remittance, living standards have improved, reduced poverty, and local businesses have enjoyed a competitive edge from the enhanced demand for their products and services.

On the other hand, the pros are clear, however, living with the unforeseen cons of dependance on foreign remittances is a perilous path to be treading upon. Most of the money is used for buying consumable goods instead of being invested in the economy in productive activities. This improves short-term household welfare, however, does, in the long-term, very little in regard to employment opportunities and contributing to overall productive and sustainable economic growth. In Nepal, agriculture and industry are severely underdeveloped and, thereby, affects the economy negatively when other parts of the world are experiencing a growth in the financial sector and labour resources economy.

Managing remittance flows can facilitate great opportunities, provided the necessary conditions exist. One major area could be the use of remittances for self-employment and entrepreneurship. Building SMEs, through savings, under adequate government policies and credit financing, as well as technical assistance and mentoring, can help families create job opportunities and stimulate local economic development. Provided there is an appropriate environment, skilled and experienced return migrants can also help with business innovation and development.

Agriculture, on the other hand, still presents an area with potential gains. Although still the most important sector that employs most of the rural population, low productivity is attributed to poor infrastructure and primitive farming. Investment of remittance income into pivot irrigation and an able market for modern farming can help boost productivity, food self-sufficiency, and rural sustainable employment.

Equally important is the development of infrastructure. Improved roads and digital networks, as well as the construction of healthcare facilities and schools, improve the quality of life, stimulate local economic development, and attract investment. When coupled with adequate infrastructure, they can help reduce the necessity for people to migrate to other countries for work and the reliance on foreign employment.

Vocational training and focussed education will also be vitally important to the long-term resilience of the country. If structured training programmes are aligned to the training needs of the country, then certain industries will be strengthened and the structural dependency on remittances will be reduced. These programmes will also help migrate to other countries as they will have the necessary skills to earn higher wages.

As with any other country, Nepal's recent rise in remittances offers both comfort and worry. Supporting families and keeping the economy afloat can be attributed to the resilience and sacrifices of millions of Nepali migrants. However, there are global economic downturns, foreign labour policy changes, and political instability that can disrupt the inflow of payments, thus leaving Nepal vulnerable.

The focus of the country should not be on remittances but rather how to better utilise the inflow of cash. Increased investment in the country and reduced short-term expenditure, along with better infrastructure, border modification, and higher education will ensure that the country is not solely dependent on remittances.

By managing remittance and other sources of income the Nepal economy can become more self-reliant. The money sent back by the migrant workers should be used not only for survival but also for building the nation.

Adhikari is an Economic Development Officer at Dhankuta Municipality