Remittance growth witnesses slowdown

Kathmandu, June 18

Remittance growth has slowed down over the last couple of months this fiscal as the rampant fall in oil prices since last year has adversely affected the spending of the government and private sector of oil exporting countries. Another factor has been the significant drop in outflow of foreign job-seekers from the country.

The country received Rs 538.87 billion in remittances in the first 10 months of the current fiscal, which is a growth of 10.2 per cent as compared to the corresponding period of the

previous fiscal year.

Remittance growth has slowed down after peaking at a pace of 27.5 per cent growth in the second month of this fiscal year.

Growth rate of remittances slowed down since last year as government spending in Gulf nations — the major labour destinations of the country — was held back, thus affecting job creation.

The country bucked the trend of slowdown in remittance globally as migrant workers from earthquake-hit areas sent more remittances to their families in response to the earthquakes of last year and also in the beginning of this fiscal.

Remittance growth was 23 per cent in October and a constant growth of 19.4 per cent was witnessed in November and December.

Remittance growth slowed down to 17.3 per cent in January and 16.9 per cent, 15.2 per cent and 13 per cent in February, March and April, respectively, according to Nepal Rastra Bank (NRB).

Outflow of foreign job-seekers also dropped by 22.2 per cent in the first 10 months of this fiscal, which is due to a rift between the government and manpower agencies after the police raided some manpower firms accusing them of swindling money from foreign job aspirants. Manpower firms shut down operations for almost a month.

On the other hand, Malaysia stopped hiring foreign labour (which has been opened recently) and also youths decided to stay with their families after the earthquakes, because of which there was a drop in the outflow of foreign job-seekers.

The slowdown in inward remittance has raised anxiety among policymakers.

The country had faced a similar situation back in fiscal years 2009-10 and 2010-11, following the global financial crisis.

As remittance has been the major source of foreign exchange earnings since long, slowdown in remittance had put pressure on the balance of payment (BoP) in fiscal 2009-10 and the government had utilised rapid credit facility (RCF) from International Monetary Fund to manage BoP crisis.

The government’s move to curb import of gold and other luxury goods in fiscal 2010-11 after facing BoP crisis hit revenue collection because the government is largely dependent on imports for revenue generation.

“Remittance has played a crucial role in making foreign exchange earnings robust and its slowdown affects every sector of the country’s economy,” said Keshav Acharya, a senior economist.

As per the NRB’s macroeconomic update of the first 10 months of this fiscal, BoP recorded a significant surplus of Rs 166.83 billion as compared to a surplus of Rs 101.15 billion in the same period of the previous year.

The country is in a comfortable position at the moment. However, continuous slowdown in the inflow of remittance will have an adverse impact on the economy, according to Acharya.