Nepal to receive $8.5 billion in remittance: WB

Remittances to Nepal are expected to increase by a marginal 3.6 per cent to $8.5 billion in 2022, up from $8.2 billion in 2021, surpassing pre-pandemic levels, according to a report.

The main drivers are an increase in vaccinations and lifting of travel restrictions in the GCC, which is the main destination for Nepali migrants, paired with conducive conditions in the GCC, the Migration and Development Brief-37 (November 2022) titled 'Remittances Brave Global Headwinds', which has special focus on Climate Migration, and published on Wednesday by Migration and Remittances Team, Social Protection and Jobs of World Bank, in association with  Global Knowledge Partnership on Migration and Development (KNOMAD), reads.

While high global inflation did not spare Nepali households in Nepal, thanks to strong market price support policies in the GCC, Nepali migrants enjoyed low inflation and maintained a steady flow of remittances to Nepal in the year, it reads, adding that remittance growth was aided by high oil prices ($98 a barrel) and employment opportunities in the construction projects for the FIFA World Cup 2022 in Qatar. “Considering the centrality of remittances in the Nepali economy, the government offered an incentive for remittances of an additional 1 per cent in interest on remittance deposits, increased the daily threshold for money remitted from abroad from Rs 1 million to Rs 1.5 million, and allowed Non-Resident Nepalis (NRNs) to open foreign currency savings accounts in Nepal.”

Historically, the GCC countries have been the main destination for migrants from South Asia but a gradual structural shift is occurring in favour of higher-income countries for Indian migrants. For the majority of the migrants from other South Asian countries, the GCC is still the main destination. They have temporary contracts for low-skilled jobs mostly in the construction and other labor-intensive sectors (Ahmed and Bossavie 2022). In 2019, about 50 per cent of emigrants from Pakistan and 42 per cent from Bangladesh were in GCC countries. Saudi Arabia employed more than 25 per cent of Sri Lankan emigrants and 20 per cent of Nepali emigrants (UNDESA 2019). Every year 400,000 Nepalis leave for Kuwait, Saudi Arabia, and the United Arab Emirates. Since 2010, every fourth Nepali leaves for Qatar.

Nepal recently started checking those who leave as migrant workers and created job contracts and made salaries public information to prevent recruiters from scamming migrant workers. About 8 per cent to 10 per cent of the South Asian emigrants work in countries within South Asia, the report reads, adding that remittance flows to South Asia are expected to grow by 3.5 per cent to reach $163 billion in 2022, a notable slowdown from the 6.7 per cent gain of 2021, but benefiting from strong performance in India and Nepal. “Overall remittance growth in South Asia (3.5 per cent in 2022) masks a large disparity across country results, from India’s gain of 12 per cent, Nepal’s increase of 4 per cent, to an aggregate decline of 10 per cent for the remaining countries of South Asia.”

Nepal proposes updating labour agreement with Bahrain

Nepal proposed to update the existing memorandum of understanding (MoU) on labour and form the Joint Technical Committee with Bahrain.
Nepali ambassador to the Kingdom of Bahrain Padam Sundas proposed – in a meeting with the minister for Labour and Social Development of the Kingdom of Bahrain Jameel Bin Mohamed Ali Hamaidan – when the former paid a courtesy call on the Bahrain minister in Manama yesterday.
On the occasion, Bahrain minister for Labour and Social Development welcomed the ambassador to his office and highlighted on the policies and practices on labour and social development of the Kingdom of Bahrain.
Hamaidan noted the proposal positively and further underscored the need to revise the MoU in line with new provisions and requirements, the Embassy of Nepal in Manama. The minister said that Bahrain tries to be a model in the Gulf Cooperation Council (GCC) to fight any kind of discriminations, and to make sure that every person is treated well.
While highlighting on labour mobility and flexible provisions, he informed that Bahrain is committed to safeguard the labour rights.
During the meeting, ambassador Sundas also expressed his gratitude to the Government of Bahrain for cooperation and support extended to Nepalis in the Kingdom of Bahrain.
On the occasion, deputy head of Mission Khaga Raj Pandeya and Labour Attache Jagadish Chandra Shiwakoti were also present.

Drop in remittance will hit economy

If remittance entering the country were to drop by 10 per cent, Nepal’s annual economic growth could drop by up to 3 percentage points compared to baseline forecasts, says a report from the World Bank.
Focusing on ‘Remittances at Risk’, the World Bank report laundhed today highlighted the possibility of near-term risk of a slowdown in remittances. "Over the last 10 years, remittances have increased substantially and they play an important role in Nepal’s economy,” the report reads, "but the economy would be hit, if the remittance inflow were to drop."
Following two massive shocks which have resulted in two years of disappointing growth, economic activity is expected to rebound modestly, growing by 4.7 per cent in fiscal year 2016-17, according to the report that has warned of a third shock – drop in remittance – that could pull the economic growth downward.
"Should a slowdown in remittance occur, appropriate monetary and fiscal policy responses are required as well as enhanced supervision of the financial sector,” the World Bank’s senior country economist for Nepal and lead author of the report, Damir Cosic said.
Following the earthquake in April 2015, the outflow of migrant workers contracted for ten months in a row. In the first nine months of Fiscal Year 2016, the number of migrant workers declined by 25 per cent year over year.
This is the steepest and longest decline since 2009, notes the report. One reason for this is that potential migrant workers chose to stay home to support their families to rebuild homes and livelihoods, the report states, adding that a weaker demand for workers from oil- and commodity-producing countries – for example Gulf Cooperation Countries (GCC) and Malaysia – is likely to have contributed to this decline.
“A potential slowdown in remittance poses a significant near-term risk to Nepal because of its outsized role in the Nepali economy,” reads the twice-yearly Nepal Development Update.
Growth in remittance at a global level contracted in 2015 for the first time since 2009 as a result of a fall in oil prices which affected activity in remittance-sending countries, notes the report. Remittance inflows to South Asia declined as well but Nepal bucked the trend as remittance increased significantly in response to the 2015 earthquakes. However, a prolonged contraction in the departure of migrant workers is an early sign of a potential slowdown in remittance to Nepal.
Meanwhile, remittances have grown to more than 30 percent of the Gross Domestic Product (GDP), making Nepal among the highest remittance-recipient countries in the world, adjusted for size of the economy.
Quoting data from the Nepal Living Standards Survey (NLSS), the report further read that out of a total work force of 14 million, some 4 million Nepalis or 28 per cent of the workforce are working overseas at present.
"The reality is that remittances play a pivotal role in the Nepali economy,” the World Bank’s country manager for Nepal, Takuya Kamata, on the occasion said, adding that remittance is nearly 10 times larger than foreign aid and 2.5 times larger than total exports.
According to the report, the rebound in growth also hinges on stabilisation of the political process, effective mobilisation of post-earthquake rebuilding efforts and the full normalisation of supply of goods.
Nepal suffered devastating earthquakes in April and May of 2015, followed by a blockade along vital transit routes that brought trade and manufacturing to a near standstill between September 2015 and February 2016. “The overall impact of the trade disruptions has been nearly as large as the impact of the earthquakes resulting in the estimated growth rate for current fiscal year 2015-16 to be lowest in 14 years,” adds the report.
The trade disruptions have further affected poverty-reduction efforts which were already hampered by the earthquakes in 2015, the report notes. “Shortage of goods has pushed up prices with inflation inching into double-digit territory affecting welfare with significant impact on the poor in Nepal.”
Despite recovery in economic activity in the forecast period, the report highlights that fiscal and external environments are likely to be less favorable. Fiscal deficit is expected to widen, as reconstruction efforts take full shape.
The government’s expenditure is expected to grow substantially after fiscal year 2015-16 owing to increase in earthquake-related expenditures. Revenues, however, is expected to pick up, but at a slower pace, resulting higher fiscal deficit.

Nepal among highest remittance receivers

Nepal was one of the highest receivers of remittance on the basis of per cent to gross domestic product (GDP) in 2011.

The large remittance recipient countries as a share of GDP include Tajikistan (47 per cent), Liberia (31 per cent), Kyrgyz Republic (29 per cent) Lesotho (27 per cent), Moldova (23 per cent), Nepal (22 per cent), Samoa (21 per cent) and Tonga (20 per cent) in 2012, according to an estimation of the World Bank.

Nepal has also been witnessing significant outflow of remittance in last three years. In the year 2009, remittance worth $12 million went out, whereas the amount more than tripled in 2011 to $39 million, the report added.
Though the top recipients of officially recorded remittance in 2011 were India ($64 billion), China ($62 billion), Mexico ($24 billion), and the Philippines ($23 billion), remittance sent home by migrants to developing countries are three times the size of official development assistance and can have profound implications for development and human welfare, it added.

Remittance can contribute in lowering poverty and to the building up of human and financial capital for the poor, according to the latest issue of World Bank’s Migration and Development Brief.

Despite the current global economic weakness, remittance flows are expected to continue growing, with global remittance expected to reach $615 billion by 2014, of which $467 billion will flow to developing countries. Although remittance costs have fallen steadily in recent years, they still remain high in small nations where remittance provides a lifeline to the poor.

Reducing the cost of remittance transfers produces significant benefits to migrants and their families, and to receiving countries more broadly as the steady stream of foreign currency improves a country's creditworthiness for external borrowing.

The World Bank has made considerable strides in developing financial instruments for leveraging migration and remittance for national development purposes. Diaspora bonds can be a powerful financial instrument for mobilising diaspora savings to finance specific public and private sector projects, as well as to help improve the debt profile of the destination country.

South Asia comes second to Sub-Saharan Africa in the cost of sending money that is one of the obstacles to growth of remittance flows, it said. "The cost of sending remittance is a key driver of remittance flows."

Cost of sending remittance to South Asia stood at 6.5 per cent — in the third quarter of 2012 — though average cost masks variation across countries, it said, adding that Sub-Saharan Africa is the most expensive region to send remittance to, with a transfer costing about 12.4 per cent of the amount transferred.

The average cost, however, stood at 7.5 per cent in the third quarter of 2012 for the top 20 bilateral remittance corridors and nine per cent for all countries for which cost data are available, it added.

The global average remittance price — average based on all countries for which price data is available — has declined over the same period from 9.81 per cent in 2008 to 8.96 per cent in the third quarter of 2012.

Russia is, by far, the cheapest source country with a weighted average remittance cost of two per cent.

Likewise, in many large remittance source countries like Gulf Cooperation Council (GCC), US and UK, the average cost is around five per cent. By contrast, Japan ranks among the highest cost corridors. As of the third quarter of 2012, the weighted average cost of sending remittance from Japan to its five top remittance receiving countries was about 17 per cent of the remittance amount.

Similarly, Germany is the next most expensive country, among the top remittance source countries, with the transfer costs consuming, on average, about 14 per cent of the remittance amount.

Likewise, the report noted that regions and countries with large numbers of migrants in oil exporting countries continue to see robust growth in inward remittance flows, compared with those whose migrant workers are largely concentrated in the advanced economies, especially Western Europe.

Thus, South Asia, MENA and East Asia and Pacific regions, with large numbers of workers in GCC countries, are seeing better-than-expected growth in remittance.

For South Asia, remittance in 2012 is expected to total $109 billion, an increase of 12.5 per cent over 2011. Remittance to developing countries is estimated to have reached $372 billion in 2011, an increase of 12 per cent over the previous year. Global remittance flows, including those to high-income countries, were an estimated $501 billion in 2011.

 

Remittance inflow and outflow to and from Nepal

Year — Inflow — Outflow

2007 — $1,734 million — $4 million

2008 — $2,727 million — $5 million

2009 — $2,986 million — $12 million

2010 — $3,469 million — $32 million

2011 — $4,217 million — $39 million

(Source: World Bank)

Developing countries to receive over $400 billion in remittances in 2012: World Bank

Remittance flows to the developing world are expected to exceed earlier estimates and total $406 billion this year, an increase of 6.5 per cent over the previous year, according to a new World Bank (WB) brief on global migration and remittances.

Remittances to developing countries are projected to grow by 7.9 per cent in 2013, 10.1 per cent in 2014 and 10.7 per cent in 2015 to reach $534 billion in 2015.

Worldwide remittances, including those to high-income countries, are expected to total $534 billion in 2012, and projected to grow to $685 billion in 2015, according to the latest issue of the Bank’s Migration and Development Brief, released today.

However, despite the growth in remittance flows overall to developing countries, the continuing global economic crisis is dampening remittance flows to some regions, with Europe and Central Asia and Sub-Saharan Africa especially affected, while South Asia and the Middle East and North Africa (MENA) are expected to fare much better than previously estimated.

The top recipients of officially recorded remittances for 2012 are India ($70 billion), China ($66 billion), the Philippines and Mexico ($24 billion each), and Nigeria ($21 billion). Other large recipients include Egypt, Pakistan, Bangladesh, Vietnam, and Lebanon.

As a percentage of GDP, the top recipients of remittances, in 2011, were Tajikistan (47 per cent), Liberia (31 per cent), Kyrgyz Republic (29 per cent), Lesotho (27 per cent), Moldova (23 per cent), Nepal (22 per cent), and Samoa (21 per cent).

“Although migrant workers are, to a large extent, adversely affected by the slow growth in the global economy, remittance volumes have remained remarkably resilient, providing a vital lifeline to not only poor families but a steady and reliable source of foreign currency in many poor remittances recipient countries,” said director of the Bank’s Development Prospects Group Hans Timmer.

Regions and countries with large numbers of migrants in oil exporting countries continue to see robust growth in inward remittance flows, compared with those whose migrant workers are largely concentrated in the advanced economies, especially Western Europe.

Thus, South Asia, MENA and East Asia and Pacific regions, with large numbers of workers in the Gulf Cooperation Council (GCC) countries, are seeing better-than-expected growth in remittances. For South Asia, remittances in 2012 are expected to total $109 billion, an increase of 12.5 percent over 2011; East Asia and Pacific region, is estimated to attract $114 billion, an increase of 7.2 per cent over 2011; while MENA is expected to receive $47 billion, an increase of 8.4 per cent over the previous year.

Remittances to Latin America and the Caribbean are supported by a recovering economy and an improving labor market in the US but moderated by a weak European economy. The region will, thus, see a modest growth of 2.9 per cent in 2012, totaling an estimated $64 billion.

In contrast, remittances are expected to remain flat to Europe and Central Asia and Sub-Saharan Africa regions, mainly because of the economic contractions in high-income European countries. Remittance flows to Europe and Central Asia are estimated at a virtually unchanged $41 billion and $31 billion to Sub-Saharan Africa this year, although both regions are projected to make a robust recovery in remittance flows in 2013.

“Migrant workers are displaying tremendous resilience in the face of the continuing economic crisis in advanced countries,” manager of the Bank’s Migration and Remittances Unit and lead author of the Migration and Development Brief Dilip Ratha said, adding that their agility in finding alternate employment and cutting down on personal expenses has prevented large scale return to their home countries.

Going forward, the Bank expects continued growth in remittance flows to all regions of the world, although persistent unemployment in Europe and hardening attitudes towards migrant workers in some places present serious downside risks.

Another obstacle to growth of remittance flows is the high cost of sending money, which averaged 7.5 per cent in the third quarter of 2012 for the top 20 bilateral remittance corridors and nine per cent for all countries for which cost data are available. The average remittance cost for Sub-Saharan Africa was 12.4 per cent, the highest amongst all developing regions.

The Migration and Development Brief also notes that the promise of mobile remittances has yet to be fulfilled, despite the skyrocketing use of mobile telephones throughout the developing world. Mobile remittances fall in the regulatory void between financial and telecom regulations, with many central banks prohibiting non-bank entities to conduct financial services. Central banks and telecommunication authorities, thus, need to come together to craft rules relating to mobile remittances.

The Brief also discusses the implementation of the new remittance regulations in the US and Europe and concludes that these regulations are likely to lower remittance costs in the long run by increasing competition and improving consumer protection.

“The global community has made progress in three out of four areas of the global remittances agenda – data, remittance costs, and leveraging remittances for capital market access for countries. Progress, however, has been slow in the area of linking remittances to financial access for the poor. There is great potential for developing remittance-linked micro-saving and micro-insurance schemes and for small and medium enterprise (SME) financing,” said Ratha.

As a key player in the migration and remittances arena, the World Bank  is working on a new initiative, the Global Knowledge Partnership on Migration and Development (KNOMAD), which is aimed at facilitating multidisciplinary debate and discussion on migration issues, developing policy options, and assisting sending and receiving countries implement pilot policies.

The Bank also continues to make considerable strides in developing financing instruments for leveraging migration and remittances for national development purposes. Diaspora bonds can be a powerful financial instrument for mobilizing diaspora savings to finance specific public and private sector projects, as well as to help improve the debt profile of the destination country.
The Bank has also set up a Diaspora Bond Task Force to provide technical assistance to countries interested in implementing diaspora bonds for financing development projects.

Demand for workers in Gulf rises

Despite the regional political turmoil and the continuing global economic slowdown, demand for foreign workers remains high in the Gulf region, according to a study.
"Despite the political uprisings and civil unrest in some parts of the Middle East and North Africa, the region is still witnessing moderate growth, and in the Gulf countries there is an even stronger imperative to sustain economic growth and meet social needs," stated the study 'The Economic Impact of the Uprisings in the Middle East North Africa (MENA) Region,' sponsored by Western Union, a leader in money transfer and global payment services.
"We expect opportunities for international workers to remain strong and with that remittance flows from host to home countries," said Western Union’s senior vice president for the Middle East and Africa Jean-Claude Farah, adding that the Asia Pacific region has been a significant source of labour for Gulf countries –– led by Nepal, India, Philippines, Bangladesh, Indonesia, Sri Lanka, Malaysia and Thailand.
"The study should instill greater confidence in global workers seeking employment in these countries," said managing director and senior vice president of Asia Pacific Drina Yue.
The study added that economic forecasts for the Gulf Cooperation Council (GCC) countries are much better that those for the Middle East North Africa region as a whole, and in fact have been positive. The GCC countries comprise of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.
The study’s lead author Dr Ahmed Farouk Ghoneim, who is a professor of economics at Cairo University, said that real gross domestic production growth in the Gulf Cooperation Council was expected to remain strong despite short-term disturbances, from a base of 3.1 per cent to 20 per cent in 2011.
"The region’s countries have limited exposure to the international financial crisis," said Dr Ghoneim, adding, "In relative terms, the financial crisis and oil and food price increases have had only mild effects on Middle East North Africa economies, owing to their limited integration into the world economy."
"However, Gulf countries did face modest inflationary pressures from increased social spending," he said, "Within the Middle East North Africa region, labour markets are facing different types of problems, but migration and remittance constitute a common cure for high unemployment in some countries of the region and the need for workers to sustain growth in others."