Foreign employment and remittance [Updated 2024]

Foreign employment and remittance

Foreign employment and remittance

Nepal has a long history of labor migration, with Nepalese citizens seeking employment opportunities abroad for various reasons. This trend has significantly impacted the country's economy, particularly through remittances. Remittances have alleviated unemployment, reduced poverty, and contributed to the nation's Gross Domestic Product (GDP). 

Nepal continues to be a significant labor-exporting country, with a substantial portion of its workforce employed abroad. According to the latest data from the World Bank's Migration and Development Brief 2023, remittances to Nepal accounted for approximately 24% of its GDP in 2022, marking a slight increase from previous years. The primary destinations for Nepalese migrant workers remain the Middle Eastern countries, Malaysia, and South Korea.

The Nepal Rastra Bank (NRB) reports that remittances have been growing at an average annual rate of 8% over the past five years. Despite global economic uncertainties, remittance inflows have remained resilient, underscoring their importance to the Nepalese economy.

Trend of Remittance inflow in Nepal
Fiscal Year (B.S) Remittance inflow (in Rs. arab) Ratio to GDP
2072/73 665.3 29.6
2073/74 695.5 26.3
2074/75 755.1 24.9
2075/76 879.0 25.42
2076/77 875.0 22.4
2077/78 961.05 22.5

Source:
Economic Survey 2022/23

Importance of Remittances

1. Contribution to GDP

Remittances have a direct and significant impact on Nepal's GDP. The remittance-GDP ratio in Nepal is among the highest globally, reflecting the critical role these funds play in the national economy. The inflow of remittances helps maintain macroeconomic stability by bolstering foreign exchange reserves and supporting the balance of payments.

2. Poverty Reduction

Remittances have been instrumental in reducing poverty in Nepal. The Nepal Living Standards Survey 2022 indicates that the poverty rate has declined to 18.7%, partly due to the inflow of remittances. Households receiving remittances are better equipped to invest in education, healthcare, and housing, contributing to improved living standards and economic security.

3. Employment Opportunities and Economic Security

The foreign employment sector has created numerous job opportunities within Nepal. The demand for services related to labor migration, such as recruitment agencies, medical examinations, orientation and training centers, and money transfer services, has increased. The NRB estimates that the foreign employment sector generates approximately 350,000 jobs annually in Nepal.

4. Revenue for Government and Private Sector

Remittances contribute significantly to government revenue through various taxes and fees, including those levied on recruitment agencies, passport fees, and value-added tax. The private sector also benefits from the remittance economy, with businesses in travel, communication, and financial services thriving due to the demand created by labor migration.

5. Social Impact

Beyond economic contributions, remittances have social implications. They enable households to achieve greater social status, improve their living conditions, and invest in their children's education. The experience and skills gained by migrant workers abroad also contribute to human capital development when they return to Nepal, fostering a more productive and skilled workforce.

Policy Measures and Challenges

The Nepalese government has implemented various policies to maximize the benefits of remittances. These include encouraging remittances through official channels, providing support services for migrant workers, and promoting financial literacy to ensure effective utilization of remitted funds. However, challenges remain, such as ensuring the welfare and rights of migrant workers, managing the risks associated with volatile global labor markets, and addressing the economic dependency on remittances.

Conclusion

Foreign employment and remittances continue to be a lifeline for the Nepalese economy, contributing to GDP, reducing poverty, and creating employment opportunities. The government's efforts to support and regulate the sector are crucial in maximizing the benefits while mitigating the challenges. As global economic dynamics evolve, Nepal must adapt its policies to sustain and enhance the positive impacts of remittances on its economy and society.
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