In the era of globalization, it is common for a citizen of one country to go to another country and earn money by engaging in employment based on his knowledge and ability. Similarly, earnings sent by an individual ranging from a migration destination to their home country or their place of origin are known as remittances. The term remittance is derived from the word ‘remit’, which means’ to send back. ’ It is a vital source of foreign income for developing countries like Nepal. Along with the policy of economic liberalization adopted by Nepal in the 1980s, people have been leaving Nepal for employment. As a result, the amount of remittances earned by Nepalese citizens has also increased significantly. During the time of the restoration of democracy in Nepal (in 2047 B.S), the share of remittances in Nepal’s GDP was only 1.74 percent, but now about 30 percent of Nepal’s GDP comes in the form of remittances which are sent home by Nepalese people working abroad. Remittances have a significant role in lifting the population out of extreme poverty. Until a few years ago, Nepal’s population below the poverty line was 21.6 percent, but now it has dropped to 16.67 percent, according to the economic survey Report 2019/20. The report also notes that remittances have become an important factor in reducing poverty.


The Department of Foreign Employment data stipulates that Nepalese labor migrants obtain a labor permit for employment in 153 destination countries. Malaysia, Qatar, Saudi Arabia, Kuwait, and the United Arab Emirates have had a larger number of permits granted than the entire migration. Malaysia is considered as the most attractive target or good destination for Nepali labor migrants. From mid-March of financial year 2018/19, out of the total number of workers migrated to work in foreign countries, 30.1 percent migrated to Malaysia, 20.2 percent to Saudi Arabia, 27.4 percent to Qatar, 13.1 percent to the United Arab Emirates and 9.2 percent to other countries. The lack of employment opportunities in Nepal is deemed to be the major push factor or driving force for the increased volume of labor migration.


Remittances have become one of the significant contributing factors to increasing household income as well as the country’s Gross Domestic Product. Due to remittances, the literacy rate in the country has increased and the quality of education has also improved. With the improvement in the economic situation, the demand for health facilities is also increasing in quality and quantity. Above all, remittances have been mostly used for domestic expenses, such as basic food expenses, children’s health care, managing land and building, entertainment, and so on.


Apart from this, Nepal will benefit from enhanced skilled manpower from foreign employment opportunities. The number of people who will create employment by using the skills learned from abroad after returning home is also increasing significantly. It may ultimately enhance investment in human capital. It helps to enhance productivity and bolster economic development, as an enormous amount of capital is needed for under-developed countries. Remittance income is regarded as one of the primary sources of capital formation in the context of Nepal. Likewise, our country is also expanding its international relations, economic growth, and balance of payments, disseminating information and propaganda about Nepal to the international community, bringing its art skills and culture to the world, and informing the world community about Nepal’s major tourist destinations. Foreign employment has also increased the arrival of foreign tourists and increased foreign exchange earnings.


However, excessive dependence on remittances exposes Nepal to the risk of external shocks. The fact cannot be denied that overreliance can also produce a dangerous dependency that may subsequently hinder long-term productive and economic growth. So, along with its positive sides, it has its negative side too.


As political instability remains a permanent problem in the country during the transition period, the government has not been able to adopt plans, programs and appropriate policies based on a clear blueprint and long-term thinking. The country’s economy is being affected by population growth. Due to globalization and liberalization, the impact of demonstrations is massive. Due to this, the living standards of Nepalese people have improved significantly, but they are not in a position to provide a permanent basis and continuity. The settlements have become young, old and childish. Due to this, youth power cannot be mobilized in the development of their own country and is being used by other countries. This is the dark side of the nation. This will have a long-term negative impact on the nation’s economy as a whole. On the other hand, labor migrants are exposed to various health risks, including accidents at the workplace and heatstroke. Nepalese migrants generally worked under challenging conditions, and did the most dangerous work, with a substantial risk of accidents. The fertile land of the country is becoming useless. Purchasing power is increasing even in the absence of productive work. This trend cannot sustain without improving the economy. The money earned is usually spent on repaying loans and purchasing consumables. The sustainability of the source of income has always been questionable. Even though such a large amount comes into the country every year, it has not been able to contribute to the improvement of employment opportunities, health, and education, economic growth, and political, social, and cultural change.


From the abovementioned facts and context, we can make a conjecture that remittances are not the only option to uplift the Nepalese economy. It definitely helps to operate the regular life cycle and provides a short-term solution to the unemployment situation. However, it is not a perpetual solution as it does not have more value to sustain the economy by increasing national productivity. It is necessary to take the existing facilitation of remittance inflow as an opportunity to make the country’s economy sustainable and save it from dependency. It is necessary to increase investment in promotion and protection of agriculture, hydropower and tourism which have more potential in the economy. Rather than directly coming into conclusion that remittances are not necessary for the country, we need to realize that the country’s economy cannot be strengthened by prioritizing remittances which cannot be used in the productive sector. In order to light beacon of hope amid people’s frustration, overall governance and administrative hindrances should be removed and political stability are to be created to develop a conducive business environment inside the nation. A master plan needs to be developed to channelize youths who have returned back to our nation due to pandemic. In a nutshell, it is necessary to take measures like encouraging self-employment, creating an environment for the production of agricultural products and cash crops, emphasizing on over-production of electricity and commercial production, linking import substitution policies even if exports cannot be increased, motivating young people who have learned skills from abroad to return home and utilize their skills to increase productivity and create employment opportunities, developing the necessary infrastructure for internal and external tourism, and making it sustainable.


Priya Thapa

Bachelor of Business Studies