“Around 30 to 35 per cent of remittance is suspected to flow through non-banking channels,” said Chandra Prasad Dhakal, president of Nepal Remitters Association (NRA) during an interaction organised here in the capital jointly by NRA and Society of Economic Journalists-Nepal (Sejon).
Since the beginning of this financial year, the inflow of remittance has started slowing down to around 10 per cent against the growth rate of 40 per cent in the last financial year, said the remitters.
Nepal has seen a boom in inflow of remittances due to increased number of Nepali workers going abroad for work. “However the number of migrant workers has not come down in the current fiscal year,” he said adding that it has gone up by 23.7 per cent. “But the remittance inflow has slowed down to an average of 10 per cent,” Dhakal added.
He also suggested the government to exempt tax on remittances and bring a new policy to refund the taxes collected from workers to discourage non-banking channels and an increase in remittance inflow through banking channels.
Nepal received Rs 209 billion through remittances alone in the last fiscal year. In this fiscal year, by the end of first nine months, Nepal has received Rs 1,164.93 billion. “It shows that the inflow in monetary terms has not decreased,” said Bhasker Mani Gyawali, Executive Director of the Forex Department of the central bank. But he did not deny the slowdown.
“It’s not possible to register 50 per cent growth every year,” said former governor of the central bank Krishna Bahadur Manandhar.
“In the last one decade, remittances have become the lifeline of the national economy as its slowdown has pulled the Balance of Payment (BoP) into a deficit of Rs 22 billion,” said economist Dr Chiranjeevi Nepal.
“The slowdown of remittance can be felt badly in the foreign currency reserve,” he said adding that the forex reserve has depleted in the recent months.
“Nepal Rastra Bank’s data of the first nine months reveals that the forex reserve is enough to pay for imports for six months only wheres it was enough for a year during the same period last year,” Nepal added.
“However, the other side of story has been completely ignored. A remittance-dependent economy cannot attain high growth rate,” he pointed out, “In the remittance-fuelled economy, employment generation and productivity take a beating as the money will be pouring in even without much efforts by the citizens. “
The political instability might have contributed to people loosing faith in banking channels and they are resorting to the informal channels for remittance.
The banking sector is feeling the heat of the slowdown in remittances as they are facing the liquidity crunch.
“The government has taken the problem seriously,” assured revenue secretary Krishna Hari Baskota. “Awareness among workers can also help solve the problem,” he said adding that the remittance should be used in the productive sector as the remittance economy can not last long.
“Around 40 per cent of the remittance goes in the savings and 60 per cent is spent on consumption, which in turn fuels imports,” said secretary. “The trend has to be reversed.”
There are around 52 remittance companies in the country. Remittance contributes 23.6 per cent to the GDP and 30 per cent of the population depends on remittance for their livelihood. It has also helped reduce poverty level.