Nepal’s economy is heavily dependent on foreign currency remittances, which is equivalent to more than 20% of its GDP. However, remittances fell by nearly 6% in the first six months of the 2021/22 financial year, according to a recent report by Nepal Rastra Bank. This contraction in remittances was observed despite an increase in the number of people going abroad for work following an improvement in the situation related to Covid-19. Priyanjali Karn from ApEx spoke with Khilendra Paudel, CEO of IME, Nepal’s leading remittance company, to find out the current status of remittances.
What role do remittances play in Nepal’s economic well-being?
The signing of the Treaty of Sugauli in 1816 started the trend of Nepalese people migrating to foreign countries to find employment, and it still continues. At present, about 3.5 million Nepalese are working abroad, which is almost 14% of the total Nepalese population. The hard-earned money that the migrant population sends back to their families is a major contributor to Nepal’s foreign exchange earnings. The country receives around 900 billion rupees in remittances through formal channels. This represents about 25% of our gross domestic product (GDP). Remittances are therefore one of the main factors that contribute to maintaining macroeconomic stability and the general well-being of the country.
How do you think we can promote formal remittance channels?
There is an undeniable need to formalize the channels through which remittances enter the country. For this, the role of the government is essential. Policies relating to economic growth, interest rates and exchange rates are crucial determinants of remittances. To encourage the inflow of remittances through formal channels, the introduction of special incentive programs for the migrant population can serve as a mode of encouragement. This method is currently practiced by some of the SAARC countries like Sri Lanka, Bangladesh and Pakistan, whose economies, like that of Nepal, are highly dependent on remittances.
Despite their contribution to the country’s economy, many workers are still defrauded and exploited. What do you think needs to be done to ensure the safety of migrant workers?
Ensuring the safety and security of Nepalese who migrate abroad to find employment must be the top priority of relevant government agencies. The conclusion of a bilateral labor agreement with the destination countries plays an important role in ensuring the well-being and safety of workers. Nepal has labor pacts with only nine of the top 109 destination countries, namely the State of Qatar, United Arab Emirates, Republic of Korea, Kingdom of Bahrain, Japan, Hashemite Kingdom of Jordan, Malaysia and Mauritius. Thus, entering into labor agreements with other major destination countries can be the first step towards safe migration.
How has EMI been responsible and accountable to workers and contributed to inbound remittances?
For the past 20 years, IME Limited has served migrant workers involved in overseas employment by enabling them to return their hard-earned money to their families in the most safe, credible and secure manner. No matter how difficult the situation, IME has always strived to make remittance services affordable and accessible. The current situation of IME is solely due to the reliable service we provide to Nepalese migrant workers. As a pioneer in formalizing the remittance channel, IME today proudly brings in money from over 100 countries.
IME is not only a money transfer company, but also a business conglomerate. One of the key areas where the group works is the capital market. Why do you think Nepal should focus on connecting remittances to the capital market?
We are well aware of the public’s craze for the IPO (IPO) and stock market. This may be one of the best opportunities for Nepal to raise public interest by connecting remittances to the capital market. Allocating a quota for the migrant population can promote formal value chains and encourage investment in productive sectors.