Remittance & Nepalese Economy: Why Nepal Should Break Out The Dependency On Remittance?

February 20, 2020 | SOM THAPA 

In developing countries like Nepal, remittance plays a major role in sustaining the economy. Remittance helps to increase the living standard of the people that receive income from abroad. With higher income, the consumption of the people also increases, thereby improving the quality of life. If we look into the short term, remittance plays a positive role in enhancing financial stability, health, education, and other necessary needs of the families.

However, in the longer term, it might have an adverse effect on the economy. The country dependent on remittance for the sustainability of the economy finds it rather difficult to get out of this dependency. The major resource of any country is its population. The remittance, providing lucrative income, lures the people into foreign destinations in search of higher-paying jobs. Family members that receive remittance have a single viewpoint that they would be better off migrating to developed countries to earn more money. Hence, this encourages more migration of labor. With its active manpower abroad, the country finds difficulty in executing its targeted development.

Remittance In Nepal

Nepal is a classic example of the nation facing this difficulty. With higher remittance income every year, the living standard of the Nepalese people has inclined. However, the country itself is poor with insufficient infrastructure and a lack of development. We have become a consumer nation. We do not create anything. Neither do we build or produce. WE CONSUME. From luxurious automobiles to iPhones to expensive clothes to high-priced education and health services, there is no such thing that we have not enjoyed. This was made possible by the income earned by our family members working in foreign countries.

If we are strong inside, the support from outside, will add to our strength. However, if we are weak inside, once the outside support is withdrawn, we will fail to survive.

Nepal, being a nation highly dependent on remittance income has become its slave. Remittance still occupies almost one-fourth of the total GDP of our country. In the last fiscal year 2075/76, remittance income was 25.40 percent of the GDP of Nepal. This number has increased from 11 years ago when the remittance was 21.20 percent of the GDP. The figures for the last 11 years are shown in the table and the chart below:

Table : Remittance ( in percent of GDP)
Fiscal Year Remittance (% of GDP)
2065/66 21.2
2066/67 19.4
2067/68 18.5
2068/69 23.5
2069/70 25.6
2070/71 27.7
2071/72 29
2072/73 29.6
2073/74 26.3
2074/75 24.9
2075/76 25.4
CHART: Remittance (in percent of GDP)

The above numbers are not encouraging. Instead of the declining contribution of remittance to GDP, we have seen growth from the last 11 years. This indicates that other internal sectors of the economy have been unable to generate higher growth in income and production. This can’t be an ideal situation. The data of the past 11 years reveal that we are in a vicious circle from which there seems to be no escape. Remittance is providing higher income to the people, which in turn has induced more manpower to go abroad.


With an active working population away from the country, how can we envision a prosperous nation? Too much reliance on income from abroad will lead to our eventual destruction of the economy. We need to be financially sound from within. If we are strong inside, the support from outside, will add to our strength. However, if we are weak inside, once the outside support is withdrawn, we will fail to survive. It is high time we forget thinking about higher income and focus on rebuilding our nation. We need companies/factories/businesses that build goods or provide services. We now need builders, creators, innovators, risk-takers more than ever.

Remittance has both positive as well as negative impacts, as discussed earlier. However, for the long term sustainable growth of the economy, other sectors should put the pedal on the accelerator and take the load of the economy as remittance has done for several years.



Investopaper is a financial website which provides news, articles, data, and reports related to business, finance and economics.

Leave a Reply

Your email address will not be published.

error: Content is protected !!