The inflow of workers’ remittance dropped for the fourth straight month of the fiscal year 2021-22 despite an increase in the number of outbound migrant workers with major employment destinations reopening their doors to foreign job seekers.
Remittance sent home by Nepali workers abroad has been the mainstay of Nepal’s economic activities.
According to the latest central bank data, the amount of money sent home by Nepalis abroad shrank 7.5 percent to Rs312.42 billion in the first four months of the current fiscal year, against an increase of 11.2 percent in the same period of the previous year.
Nepali migrant workers sent home Rs961.05 billion in the last fiscal year 2020-21 ended mid-July, a record-high money transfer to Nepal since Nepalis started going off to work overseas more than two decades ago.
The amount grew by 10 percent year-on-year, which is equivalent to 22.5 percent of Nepal’s current gross domestic product of Rs4.26 trillion evaluated at current market prices.
The number of Nepali workers taking approval for foreign employment, however, increased sharply.
Number of Nepali workers (institutional and individual-new and legalised) taking approval for foreign employment increased significantly to 96,382 in the review period.
It had decreased 95.7 percent in the same period of the previous year. The number of Nepali workers (renew entry) taking approval for foreign employment increased 249 percent to 59,723 in the review period. It had decreased 78.9 percent in the same period of the previous year.
The drop in inflows of remittances, the largest source of foreign exchange earnings for the country, along with a surge in imports, have contributed to the depletion of foreign exchange reserves, leaving the government worried about an economic fallout.
Foreign exchange reserves also dropped for four consecutive months of the current fiscal year.
According to Nepal Rastra Bank, foreign exchange reserves decreased 11 percent to Rs1.24 trillion in mid-November 2021 from Rs1.39 trillion in mid-July 2021.
Depletion of foreign exchange reserves weakens the government’s ability to buy more from abroad and it may also discourage foreign investors from investing in Nepal as they would be concerned about dividend repatriation.
The central bank officials said remittance has decreased because the imports of gold through informal channels has thrived.
The gold bullion in large quantities is being brought informally and being seized every day at the Kathmandu’s Tribhuvan International Airport suggests that it is one of the reasons for the fall in remittance inflow, Prakash Kumar Shrestha, chief of the economic research department at the Nepal Rastra Bank, told the Post.
When workers spend their earnings to buy gold abroad, it leads to a reduction of money they send and bring home.
The Tribhuvan International Airport customs office on November 29 seized 21kg of gold brought in the form of jewellery by several people arriving from abroad.
The gold was seized from individuals because they were carrying more than the set threshold—50 grams of gold jewellery per person. Authorities were taken by surprise when they found out the seized amount of gold on a single day was more than what the commercial banks imported per day.
Only commercial banks in Nepal are allowed to import gold, and the limit for per day import has been fixed at 20kg.
Officials say Nepalis returning from Gulf nations are often persuaded into carrying gold jewellery for a certain amount of money. They say it’s mostly Nepalis who try to fix the returning compatriots as carriers.
On November 28, the Department of Customs said in a notice that people returning from abroad could only bring up to 50grams of gold jewellery without paying customs duty. Anyone carrying more than the set threshold—and up to 200 grams—will have to pay customs.
Gold jewellery above 200 grams will be confiscated, the department said.
Likewise, the notice also stated that any type of gold up to 100 grams can be brought from abroad by paying customs duty.