A Double-Edged Sword -Remittance

Nepal’s economy is heavily reliant on remittances, which has become both a lifeline and a source of vulnerability for the country. For years, money sent home by Nepalese workers abroad has played a pivotal role in sustaining households, contributing to national GDP, and alleviating poverty. In fact, remittances account for over 25% of Nepal’s GDP, making it one of the highest ratios in the world. However, while this steady stream of foreign money has been vital for economic survival, it also underscores a deep-seated dependency that threatens long-term economic stability.

However, this reliance on remittances creates an economic structure that is overly dependent on external factors. The vulnerability of Nepal’s economy is evident, especially when there are downturns in the global economy or crises in countries where Nepalese migrants work. The recent pandemic, for instance, highlighted the fragile nature of this dependency, as the movement of migrant workers was restricted, leading to a temporary drop in remittance inflows. Additionally, any political or economic instability in countries hosting Nepalese workers can have a direct and severe impact on the remittance stream.

Furthermore, remittances do little to stimulate local industry or innovation. The flow of money from abroad often goes into consumption rather than investment. While this supports short-term household stability, it does not contribute significantly to the growth of the local economy or the development of domestic industries. Without a thriving industrial base, Nepal remains vulnerable to shifts in global economic conditions, as its economy lacks the diversification needed to withstand shocks.

The challenge for Nepal, therefore, lies in reducing its over-dependence on remittances while fostering a more diversified and sustainable economy. The government must work to create jobs within Nepal, especially in sectors like agriculture, manufacturing, and information technology. Creating an environment that encourages entrepreneurship, attracts foreign investment, and supports local industries will help curb the migration of youth seeking employment abroad.