October 28, 2020 | DWAIPAYAN REGMI
Last week, Nepal Rastra Bank published a report showing an impressive growth of remittance by 8.1 percent. The report further indicated that remittance up to Bhadra summed up to 1 Kharba 65 Arba and 73 Crore in total. At the time when the foreign employment rate is lowering down, the pandemic is troubling around the globe, people abroad are getting jobless – the report must have confused a wide range of mass. After all, how can the remittance flow increase when youths applying for foreign employment has drastically reduced by 99.2%?
Here, in this piece, we try to analyze the key reasons why the remittance rate appears to be higher despite this COVID19 pandemic.
Nepal was always heavily dependent on remittance. A slight fall in this sector would impact the overall economy itself. A clear example of how real estate business is at these days proves it all. Remittance being the circulating blood of the nation has a lot to do with the economy as a whole.
Even the World Bank had predicted that Remittance flows will fall across the globe from Europe, Central Asia, Sub Saharan African to the Middle East. World Bank predicted that 22.1 percent of South Asian remittance will lower down. Here are the key reasons explaining why remittance rose despite everyone’s prediction.
Use of formal Channels
Always, the record was of those data who had a formal channel. But, the ignored side was that a large chunk of remittance flow was always done through Hundi, which was off the record. Pandemic troubled those people involved in Hundi in the meantime and then. As a result, people had to opt for formal and legal banking routes for the transfer of their hard-earned money, which drastically increased up the remittance flow record.
Nepalese culture does not allow people to restrict their expenses during Dashain and Tihar. So, no matter what – expenses will rise certainly during the time of this festival. This same theory is implied at this moment as well. Those, living abroad could not stop sending money at this particular point of time – after all love, affection equally matters; and despite being away during this festival time – they managed to send money to their family in Nepal one way or the other. Well, this could be through a loan, use of their saving, or anything, which ended up in showing higher flow over remittances.
Previous Quarter’s Decreased Rate
On the other side of the story, there also lies the fact that the drastic downfall of remittance flow was recorded in the previous quarter. So, a small rise could easily show an impressive rise in comparison to the previous time. A small proportion of the same thing happened this quarter as well. About the minimum rate that took place previously, a small rise took a portion of 8.1%, which is impressive. Although the total amount of more than 1.5 Kharba is indeed an impressive number, the rise in percentage is backed by the same reason too.
Getting to Normal World
Meanwhile, COVID19 halted the business activities for a pretty long time; but not as much as it was anticipated. The world is gradually getting into a normal routine. Business operations are functioning gradually, industries are increasing their production and things are gradually getting normal. People are learning to live with Covid19 in the meantime. And hence, those going for foreign employments are working with their suits on, earning again and sending back to Nepal.
Reduction in non-monetary gifts
This year, the new version of the iPhone is likely to enter into Nepalese hand pretty late. With reduced flights, the movement of people has been drastically reduced. There aren’t many scenes of people carrying TV sets and moving around in the airport region either. Physical gifts from foreign countries have lowered this year, all ending up in the rise of money flow from there to here – contributing to the rise of remittance.
An important lesson that COVID19 taught to nations like Nepal is that – the developing country can not make bold steps with the support of remittances. Remittances are a supporter, but not a sustainable solution in any means. How can the economy ever perform in absence of remittances? And, the state probably also learned how important those individuals flying abroad to carry bricks and sands are in the Nepalese economy.
From The Author:
[Mr. Dwaipayan Regmi is currently working as the Assistant Manager in Rastriya Banijya Bank]
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