Despite various challenges facing Nepal’s economy, the nation has recorded a remarkable increase in the inflow of remittance and fall in imports of goods in the first month of the current fiscal year. This has led the economy to a comfortable position. A freshly released monthly report of the Nepal Rastra Bank (NRB) shows that the inflow of remittance from mid-July to mid-August rose by 25.8 per cent to Rs. 116.02 billion as compared to a rise of 20.3 per cent to Rs. 92.21 billion in the same month last year. In the post-COVID milieu, the national economy had faced a huge external sector pressure. It was mainly because of depleting foreign currency reserves with a significant rise in imports of goods, including luxury items such as cars and liquors. In view of possible further depletion of foreign exchange reserves, the government had to put a ban on imports of such goods for several months.
The curb in imports contributed towards saving foreign currency reserves, to some extent, but it caused a reduction in revenue collection. Nevertheless, with a gradual improvement in foreign exchange earnings owing to the revival of remittance and tourism sectors, the government lifted the ban. The month of Shrawan (mid-July-mid-August) was the ninth month that constantly saw more than Rs. 100 billion in remittance inflow. In the US$ terms, remittance inflow increased by 21.5 per cent to 879.8 million in the first month of the current fiscal year as against a rise of 12.5 per cent in the same month last year. An inflation of Nepali rupee against the US dollars was one of the factors leading to a record growth in the remittance inflow. Besides, a steady rise in the number of Nepali workers working in different labour destinations, and an increase in their monthly salaries and allowances have been other reasons for the growth of remittance inflow. During the last fiscal year, around 800,000 Nepali workers aged 16-40 went abroad for employment.
As per the central bank’s report, net transfer to the country mounted by 26.1 per cent to Rs.128.21 billion in the first month of the current fiscal year against the growth of 18.4 per cent in the same period last year. It indicated that the number of new Nepali workers (institutional and individual) taking permission for foreign employment had increased by 75.4 per cent in the first month of the last fiscal year. The report, however, states that the number of such workers fell by 12.1 per cent to 39,152 in the review period. Likewise, the number of Nepali workers having approval for foreign jobs dropped by 19.5 per cent to 16,423 during the review period. According to the NRB report, decreased demands in the domestic market was responsible for checking imports in the month of Shrawan. The country saw a drop in merchandise imports by 1.6 per cent to Rs.129.24 billion in the first month of the current fiscal year compared to a decrease of 12.9 per cent a year ago.
As of mid-August, the country's foreign currency reserves have risen to Rs. 1573.12 billion, with an increase of Rs. 34 billion from the previous month. The central bank says that the existing foreign exchange reserves are adequate to cover imports of goods and services for 10.3 months. Meanwhile, the government's current account has witnessed a surplus of Rs.12.99 billion as compared to a deficit of Rs.15.13 billion in the same period of the previous year. However, since consumer price inflation has still remained high, the authorities need to focus on containing it.