Crisis to hit remittance slowly
Kathmandu, December 15:
International Monetary Fund (IMF) believes that remittance earnings could be hit by recent global recession. While despite dependence on remittances Nepal won’t feel the heat so soon yet the recession will take its toll as Nepalis working in various countries — especially Gulf countries — will be forced to return, opined experts.
“Nobody can remain unaffected by such a global crisis,” said Prof Dr Bishwambher Pyakurel, an eminent economist addressing a programme on ‘Global Economic Recession: Impacts on Remmittance’ organised by Nepal Remitters’ Association (NRA) here today.
“Every dollar remitted will generate economic activities worth $3 in the receiving country,” he said adding, “Remittance in the most of the developing countries exceeds international aid.”
Empirical findings also show significant correlations of economic variables and remittances, implying the fact that long-term economic growth is occuring as remittance increases within developing countries. “Gulf countries have started feeling the heat, and that substantially hurts Nepali remittance,” he added.
According to Badri Pandey, member Non-Resident Nepali (NRN) co-ordination committee, “Big real estate companies in Gulf countries are slowly reducing the workforce as their business — hit by global crisis — have gone down by 40 to 50 per cent in recent days.” Around 90 per cent of out-sourced Nepalis work in construction sector in Gulf countries.
According to Nepal Rastra Bank (NRB) data, during the fiscal year 2007-08 of the total remittance generating countries, Qatar ranked first followed by Malaysia, UAE and Saudi Arabia. Since 2000, the real estate business started booming in Gulf countries making these lucrative destinations for Nepali migrant workers. There are around one million Nepalis in Gulf countries, at present. “Once the workers start returning, the remittance will come down,” he added. The figure will be reflected in next month’s report, he said.
NRB acting governor Krishna Bahadur Manandhar agreed, saying, “The report of the fourth month of current fiscal year shows decline in remittance though in the first three months remittance had gone up by 80 per cent in comparison to the same period last fiscal.”
Manandhar said that it was due to Dashain festival in Ashwin - the third month — of this fiscal year adding that last year Dashain fell in the fourth month — Kartik. “This fiscal’s fourth month’s data shows the remittance has gone down by 40 per cent in comparison to last year,” he said and pointed out that while there would be no dramatic impact of the recession, still the impact on the Nepali economy would be mild and slow.
According to IMF, “Remittances remain the primary source of foreign exchange and they have been growing very rapidly. What we expect is there will be slowdown of that growth rate and if it occurs, it will take place over several years. The present global crisis will have mild and slow impact on the economy as Nepal’s macroeconomic fuindamentals are considered to be better suited to external shocks.”
Dipendra Bahadur Chhetri, former member of National Planning Commission, and Chandra Prasad Dhakal, president of Nepal Remitters’ Association, also highlighted the impacts of decline in remmittance and its effect on the economy. The decline in remittance will reduce spending on basic necessities such as food, electricity, medicine, school fees, oil products and others.