Migration, remittances inflow key factor behind poverty reduction in Nepal: World Bank

Kathmandu, March 24: The World Bank (WB) has stated that Nepal has achieved remarkable success in reducing poverty over the past three decades, virtually eradicating extreme poverty, and the speed and scale of Nepal’s success in this efforts are unparalleled among its peers.     

The key factor behind the poverty reduction and resilience in the wake of shocks has been migration and the inflow of remittances, the World Bank's Nepal Country Economic Memorandum: Unlocking Nepal's Growth Potential released today mentioned.     

As per different government sources and estimates over 7 percent of Nepal’s population had migrated abroad in search of employment due to limited domestic job opportunities by 2023.     

"Most of these migrants are young men, primarily seeking work in Gulf Cooperation Council (GCC) countries and Malaysia. This large-scale outmigration led to a substantial increase in remittances and the number of households receiving them. By 2023, remittances accounted for around a quarter of Nepal’s GDP, playing a crucial role in sustaining the economy and lifting many out of poverty. The direct impact of remittances on poverty has been significant and transformative," the report mentioned further.     

The report also stated that significant structural challenges constrain domestic economic growth and job creation.     

Exports have not contributed to real economic growth over the past decades, partly due to an appreciating real exchange rate and domestic trade policies, including high tariffs and excise taxes.     

“Nepal's success in poverty reduction is impressive, but its economic potential remains largely untapped,” said David Sislen, World Bank Division Country Director for Maldives, Nepal, and Sri Lanka. “Nepal has significant potential to drive stronger growth and create jobs by implementing key reforms to increase the returns from migration, boost exports, use hydropower efficiently, and boost digitalization.”     

The manufacturing sector has been in steady decline from an already low base, while the tourism sector, a key growth and job opportunity, remains underdeveloped.     

The development of hydropower has progressed slowly, restricting its potential to shape the economy and facilitate stronger growth. Limited infrastructure, regulatory challenges, and digital literacy gaps are holding back the country’s digitalization efforts. Because of these constraints, Nepal has struggled to ignite higher domestic growth and create sufficient jobs.     

The World Bank stated that the Nepal Country Economic Memorandum produced every five years, offers a roadmap for faster growth in key sectors. It recommends policy actions in four critical areas to unlock Nepal's economic potential.     

The report stated that unlocking opportunities for growth was the first step toward achieving Nepal’s development aspirations and policies must unlock the potential of high-promise sectors and support private sector development. "Facilitating firm creation, boosting export growth, and attracting domestic and foreign investment can open new pathways for growth. Targeted support for sectors such as hydropower, tourism, and digital services can generate significant economic and employment opportunities. Achieving this, however, requires addressing regulatory hurdles, improving infrastructure, and fostering a more competitive business environment."     

The World Bank has suggested that Nepal should strengthen workforce skills, enhancing institutional capacity, and improving firms’ competitiveness to boosting productivity and resilience. Without these efforts, potential growth could fall below 4 percent over the long-term, undermining national ambitions, it cautioned.     

Likewise, the World Bank has called for improving market competition in key sectors and addressing infrastructure deficits to boost exports.     

Similarly, developing a clear financing strategy to develop the hydropower sector will help mobilize much-needed investments and this strategy could include developing the domestic bond market and an effective framework for large-scale public-private partnerships, the World Bank's Nepal Country Economic Memorandum: Unlocking Nepal's Growth Potential added.     

The other recommendation from the World Bank include boosting the digital sector adding that updating the Telecommunications Act and the digital strategy and adopting key digital infrastructure faster would boost the development of the digital sector.     

On the occasion, Vice Chairman of the National Planning Commission, Prof Dr. Shiva Raj Adhikari said Nepal was committed to ensuring an enabling policy environment for sustainable growth and added that the 16th Plan for Nepal outlines a vision of good governance, social justice, and prosperity and prioritizes productivity and competitiveness, decent and productive jobs, social security, and ensuring a smooth transition from LDC status.(RSS)